Refer to the Laffer Curve Above

question 92

Multiple Choice

Refer to the Laffer Curve above. A cut in the tax rate from T₂ to T₁ would:

• A) Decrease tax revenues and support the views of supply-side economists
• B) Increase tax revenues and support the views of supply-side economists
• C) Increase tax revenues and support the views of mainstream economists
• D) Decrease tax revenues and support the views of mainstream economists

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Definitions:

Accounts Payable

The liabilities a company has to its vendors or lending parties for products and services it has received but for which payment has not been made.

Net Method

A way of recording purchases or sales of goods that directly factors in any discounts or allowances at the time of the transaction.

Gross Method

An accounting method for recording purchases at the full invoice price without deducting any cash discounts offered.

Cash Discounts

A reduction in the amount owed by a customer if payment is made within a specified time frame.