The 'Laffer Curve' illustrates the theoretical relationship between tax rates and total tax revenue, suggesting that beyond a certain optimal point, excessively high tax rates will actually ___ total revenue by discouraging work and encouraging evasion.
- NaBFID (or National Bank for Financing Infrastructure and Development)
- NPCI (or National Payments Corporation of India)
- decrease (or reduce / lower)
- Solow (or Solow-Swan)
Answer: decrease (or reduce / lower)
Arthur Laffer's curve starts at zero revenue (0% tax), rises to a peak (the revenue-maximizing rate), and then slopes back down to zero (at 100% tax, no one would work). It is a foundational concept in supply-side economics, arguing that if an economy is already on the downward-sloping side of the curve, cutting tax rates can paradoxically stimulate so much new economic activity that total government revenue actually increases.