According to the Laffer Curve, Increases in the Tax Rate

question 155

Multiple Choice

According to the Laffer curve, increases in the tax rate will lead to a(n)

• A) steady decrease in tax revenues.
• B) steady increase in tax revenues.
• C) initial decrease in tax revenues and then an increase in tax revenues.
• D) initial increase in tax revenues and then a decrease in tax revenues.

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life.

Bond Coupon Rate

The interest rate stated on a bond when issued, which represents the annual interest payment divided by the bond's face value.

Unrealized Profit

A profit that has been generated on paper through an investment but has not yet been realized through a sale.

Intercompany Sale

Transactions of goods, services, or assets between divisions, subsidiaries, or companies controlled by the same parent company.