Based on the Laffer Curve, a cut in the tax rate from 100 percent to a rate lower than the maximum-revenue rate will:
A) Decrease real GDP
B) Increase tax revenues
C) Decrease tax revenues
D) Have no effect on tax revenues

Question

Quizplus · Accepted Answer

The Laffer Curve suggests that cutting tax rates from a prohibitive level (like 100%) can increase tax revenues by encouraging more economic activity and reducing tax evasion.

Based on the Laffer Curve, a Cut in the Tax