Refer to the information provided in Figure 32.1 below to answer the question(s) that follow. Figure 32.1
-Refer to Figure 32.1. If the economy is at a point such as C on the Laffer curve, a(n) ________ in tax rates will ________ tax revenue.
A) increase; increase
B) decrease; decrease
C) decrease; increase
D) change; not change

Question

Refer to the information provided in Figure 32.1 below to answer the question(s) that follow.  Figure 32.1
-Refer to Figure 32.1. If the economy is at a point such as C on the Laffer curve, a(n) ________ in tax rates will ________ tax revenue.
A) increase; increase 
B) decrease; decrease 
C) decrease; increase 
D) change; not change

Quizplus · Accepted Answer

At point C on the Laffer curve, tax revenue is at its maximum. If tax rates are increased from this point, it would lead to a decrease in tax revenue as people would be discouraged from working and investing due to high taxes, thus reducing taxable income. On the other hand, if tax rates are decreased from point C, it would lead to an increase in tax revenue as people would be encouraged to work and invest more due to lower taxes, leading to increased taxable income. Therefore, the correct answer is C.

Refer to the Information Provided in Figure 32