Macroeconomics Year2 Flashcards
1
Q
what is the Laffer curve
A
a supposed relationship between economic activity and the rate of taxation
suggests there is an optimum tax rate
2
Q
why might total tax revenue fall if the tax rate increases
A
- greater tax avoidance (legal)
-greater incentive to evade tax (illegal) - disincentive effect on labour market
- possible brain drain effects where highly skilled workers move away
