If the currency in circulation is $100 million, checkable bank deposits are $500 million, savings deposits are $300 million, and
1 answer:
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Answer:
A. There is a tax rate at which tax revenues are maximized.
Explanation:
By Laffer Curve definition we can easily understand the relationship between tax rate and tax revenues. It was developed by Arthur Laffer. The Laffer Curve describes that:
- with an optimal tax rate government maximizes total tax revenues
- there is no tax revenue collection at the two extreme tax rates of 0% and 100%
- at the left side of the curve higher tax rates decrease the incentive to work and invest. As a result this leads to to decrease in total tax revenue.
