Consider the following statements 1 According to L...........

Economic Affairs Growth and Indicators

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Consider the following statements:

1. According to Laffer curve, tax revenues always increase with increase in tax rate.

2. According to Philips curve, there exist inverse relationship between rate of unemployment and rate of inflation.

3. Lorenz curve is a graph showing the degree of inequality in income in a given population or an economy.

Which of the statements given above is/are correct?

1 and 3 only

2 only

2 and 3 only

1, 2 and 3

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Explanation:

Laffer Curve is a representation of the relationship between tax rates and tax revenue collected by governments. It illustrates the concept of taxable income elasticity. It is a bell shaped curve and one of the uses of the Laffer Curve is to allow for optimal taxation. The Laffer curve is typically represented as a graph which starts at 0% tax with zero revenue, rises to a maximum rate of revenue at an intermediate rate of taxation, and then falls again to zero revenue at a 100% tax rate.