The laffer curve indicates a. an inverse relationship between tax rates and tax revenues. b. a positive relationship between tax rates and tax revenues. c. by how much the aggregate demand curve shifts when tax rates are changed. d. both options a and b.

The correct answer is D. both options A and B.

Explanation:

The Laffer curve represents the relationship between tax revenue and tax rates, showing how tax collection varies when rates are modified. The curve, which was disseminated by economist Arthur Laffer, states that raising the tax rate does not necessarily increase revenue, because the tax base falls. At the point where the tax rate is zero, the tax revenue will be zero, since no tax is applied. While, on the contrary, if the

Tax rate is 100%, tax revenues will also be null, since no one would accept to produce a good whose income generated was intended to pay taxes.

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