Question

Which reflects the truth about taxing? * a. People seem to work less in Europe due...

Which reflects the truth about taxing? *

a. People seem to work less in Europe due to higher taxes (People respond to incentives).

b. People seem to want to work more in Europe to overcome high taxes.

c. The Laffer curve shows why a tax and spend economy never works

d. The lower the tax rate, the lower the incentive to work.

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Answer #1

The laffer curve shows what is the relationship between tax levels and government revenue and and it is sort of elasticity of tax rate. If the tax rate is lower, then people get to be motivated and this means that it will be the incentive for them to work. Therefore (c) and (d) are wrong. European countries usually have a high tax rate and that is the reason why people seem to work less in Europe as there is very little incentive for them.

Therefore option (a) is the answer.

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