The Laffer curve illustrates the relationship between:
Correct answer: A. Tax rates and tax revenue
- A. Tax rates and tax revenue
- B. Interest rates and public debt
- C. Government spending and exports
- D. Inflation and unemployment
Explanation
The Laffer curve shows that tax revenue may rise with tax rates up to a certain point, but excessively high rates can reduce the tax base and discourage economic activity. It does not directly describe the relationship between inflation and unemployment.
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About Public Finance
Government revenue and expenditure are analysed through taxation, public borrowing, budgets, subsidies, transfers and public debt. The topic explains how fiscal policy affects resource allocation, income distribution, economic stability and growth, while distinguishing direct from indirect taxes, progressive from regressive taxation, and public goods from goods supplied by private markets.
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