What is the Laffer curve and why is it unlikely that the United ...

[CharlieWard]

What is the Laffer curve and why is it unlikely that the United States is on the wrong side of it?
 
  What will be an ideal response?

Question 2

A bond's coupon payment divided by the bond's current price is equal to the bond's
 
  A) price-earnings ratio. B) dividend yield.
  C) current yield. D) maturity value.

[Joy Chen]

Answer to Question 1

The Laffer curve is the relationship between the tax rate and the amount of tax revenue collected. The amount of tax revenue collected increases with the tax rate only up to a certain tax rate, after which, further increases in the tax rate cause tax revenue to fall. When tax rates are higher than the tax rate that maximizes tax revenue, a country is said to be on the wrong side of the Laffer curve. It is unlikely that the United States is on the wrong side of the Laffer curve because U.S. tax rates are among the lowest in the industrial world and past changes in U.S. tax rates have produced changes in tax revenues in the same direction.

Answer to Question 2

C

[CharlieWard]

Excellent

[nyrave]

Gracias!