The Laffer Curve Studies the Relationship Between

question 6

Multiple Choice

The Laffer curve studies the relationship between

• A) open market operations and the interest rate.
• B) taxes and the real interest rate.
• C) tax rates and tax revenues.
• D) monetary policy and tax revenues.

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Definitions:

Economic Model

A theoretical construct representing economic processes by a set of variables and a set of logical and/or quantitative relationships between them.

Simplified

Made easier to understand or do; reduced in complexity.

Reality

The state of things as they actually exist, as opposed to how they may appear or may be thought to be.

Invisible Hand

A metaphor introduced by Adam Smith to describe how individuals pursuing their own interests unintentionally benefit society as a whole.