The higher a country's tax rates, the more likely that country will be:
A)on the top of the Laffer curve
B)on the positively sloped part of the Laffer curve
C)above the Laffer curve
D)on the negatively sloped part of the Laffer curve

Question

Quizplus · Accepted Answer

The Laffer curve depicts the relationship between tax rates and government revenue. The curve is shaped like an upside-down U, with the peak representing the tax rate at which revenue is maximized. If a country's tax rates are too high, it will be on the negatively sloped part of the Laffer curve, meaning that further increases in tax rates will actually lead to a decrease in government revenue as a result of decreased economic activity and tax base erosion.

The Higher a Country's Tax Rates, the More Likely That