Question

Draw a Laffer curve. Label it. Draw a point on the curve at the tax rate that generates the maximum tax revenue. Label it ​T*. Draw a point on the curve that shows the approximate location of the United States on the curve. Label it United States. Choose the correct statement. A. A lower tax rate brings greater tax revenue. B. Tax cuts can increase tax revenue. C. A higher tax rate brings in more revenue per dollar​ earned, so a higher tax rate brings in greater tax revenue. D. For tax rates below T​*, a decrease in the tax rate increases tax revenue.

Answer 1

Answer: Theoretically A

Explanation:

One implication of the Laffer curve is that reducing or increasing tax rates beyond a certain point is counter-productive for raising further tax revenue.

. In the United States, conservatives have used the Laffer Curve to argue that lower taxes may increase tax revenue. However, the hypothetical maximum revenue point of the Laffer curve for any given economy cannot be observed directly and can only be estimated – such estimates are often controversial.