20.We argued that cutting the corporate income tax will have supply side effects in that cutting the corporate income tax can potentially increase the pace of technological change with the implication being the aggregate supply will shift to the right.
21.According to the Laffer curve, increases in tax rates always result in less tax revenue.A) TrueB) FalseCorrect Answer(s):False
22.One reason that tax revenue may fall when tax rates are increased is due to tax evasion, that is, the higher the tax rate, the higher the probability of the tax evasion and thus, lower tax revenue. The example I used was when Canada quadrupled the tax rate on cigarettes Canadian citizens sought out to buy illegally smuggled in US cigarettes to evade the tax on Canadian cigarettes.
Points Earned:1.5/1.5Correct True