If an Economist Recommends That the Government Reduce the Tax

question 108

Multiple Choice

If an economist recommends that the government reduce the tax rate in order to increase tax revenues (based on the Laffer curve) ,she is implicitly assuming that the economy is currently operating at a point

• A) inside the Laffer curve.
• B) outside the Laffer curve.
• C) on the upward-sloping portion of the Laffer curve.
• D) on the downward-sloping portion of the Laffer curve.
• E) where tax revenues are maximized.

---

Definitions:

US$1.00

The monetary unit equal to one United States dollar, the official currency of the United States of America.

C$ Weakens

When the Canadian dollar decreases in value compared to another currency, making it less valuable in foreign exchange markets.

€0.0211

A monetary value representing a little over two cents in Euro currency.

C$ Per €

The exchange rate showing how many Canadian dollars (C$) you need to purchase one Euro (€).