The Interest Rate Effect Is Part of the Reason

question 270

Multiple Choice

The interest rate effect is part of the reason

• A) the short-run aggregate supply curve is upward sloping.
• B) the long-run aggregate supply curve is vertical.
• C) the aggregate demand curve is upward sloping.
• D) the aggregate demand curve is downward sloping.

---

Definitions:

Laffer Curve

A theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation, suggesting an optimal tax rate for maximizing revenue.

Tax Revenue

The income that is collected by the government through the imposition of taxes on goods, services, and income.

Marginal Tax Rates

The rate at which the last dollar of income is taxed, indicating how much tax will be paid on an additional dollar of income.

Laffer Curve

A theoretical representation of the relationship between tax rates and the amount of tax revenue collected by governments, suggesting that increasing tax rates beyond a certain point is counter-productive for raising tax revenue.