Question

the graph above shows the relationship between the size of the tax and the government revenue from the tax. there are also three points: point a is on the increasing portion, point c is on the decreasing portion, and point b is at the top, connecting the increasing and the decreasing portions. refer to the graph to answer the following questions: 1. this relationship is called the select 2. suppose that economists in a select level of taxes is such that cutting taxes would select nt revenue. then they must be implying t select (all possibilities). dwl curve laffer curve tax - revenue curve tax curve

Explanation:

The Laffer curve illustrates the relationship between tax rates and government tax revenue. Initially, as tax rates increase from zero, government revenue also increases. But after a certain point (the peak of the curve), further increasing tax - rates leads to a decrease in revenue due to reduced economic activity. If cutting taxes would increase revenue, the current tax level is on the downward - sloping part of the Laffer curve.

Answer:

1. Laffer curve
2. The economy is at a point like C on the Laffer curve (where cutting taxes would increase revenue).