The Laffer curve shows a relationship between
A) government spending and real Gross Domestic Product (GDP).
B) interest rates and investment spending.
C) the price level and real Gross Domestic Product (GDP).
D) tax rates and tax revenues.

Question

Quizplus · Accepted Answer

The Laffer curve depicts the relationship between tax rates and tax revenue. It shows that as tax rates increase beyond a certain point, the incentive to work, invest, and innovate decreases, which ultimately leads to a decline in tax revenue. This curve is often used to argue for lower tax rates to boost economic growth and revenue.

The Laffer Curve Shows a Relationship Between