Question

Q. Consider the following statements with reference to the Laffer Curve:

Select the correct answer using the code given below:

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is A 1 only

Explanation:

Statement 1 is correct: Laffer curve is used for the argument that high or increasing tax rates will not yield additional tax revenue because members of the workforce will opt to work less in such circumstances, substituting earned income with leisure.

Statement 2 is incorrect. The curve supports the notion in supply-side economics that tax and regulatory burdens can impede growth.