If the _______ effect is greater than the _______ effect, a tax cut will increase revenue.

Question

Quizplus · Accepted Answer

The correct answer is D) quantity; price. This is based on the Laffer Curve concept, where if the tax rate is on the decreasing side of the curve, a decrease in tax rate (tax cut) can lead to an increase in total tax revenue. This happens because the incentive to work, invest, or engage in economic activities increases (quantity effect), outweighing the loss in revenue per unit of tax (price effect).

If the _______ Effect Is Greater Than the _______ Effect

If the _ Effect Is Greater Than the _ Effect