Suppose that in a certain nation the flat income tax rate of 40 percent is reduced to 35 percent and as a result taxable income rises from $400 billion to $600 billion.Tax revenues __________,indicating the nation is on the __________ portion of its Laffer curve.

Question

Quizplus · Accepted Answer

Tax revenues rise because the increase in taxable income ($200 billion) more than offsets the reduction in the tax rate, indicating the nation is on the downward-sloping portion of the Laffer curve where lower tax rates can lead to higher tax revenues.

Suppose That in a Certain Nation the Flat Income Tax