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Consider the following statements
- The Laffer Curve is an economic concept that states that inflation and unemployment have a stable and inverse relationship.
- The Phillips curve is an economic concept developed to show the relationship between tax rates and the amount of tax revenue collected by governments.
Which of the above statements is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
Consider the following statements The Laffer Curve is an economic conc...
Explanation:
The Laffer Curve and the Phillips Curve are both economic concepts, but they are not related to each other. Let's understand both concepts separately.
The Laffer Curve:
The Laffer Curve is an economic concept developed by economist Arthur Laffer. It shows the relationship between tax rates and government revenue. The curve suggests that there is an optimal tax rate that maximizes government revenue. If tax rates are too high, people will be discouraged from working and investing, which will result in lower tax revenue. On the other hand, if tax rates are too low, government revenue will also be low.
The Phillips Curve:
The Phillips Curve is an economic concept developed by economist A.W. Phillips. It shows the relationship between unemployment and inflation. The curve suggests that there is an inverse relationship between unemployment and inflation. When unemployment is low, inflation tends to be high, and when unemployment is high, inflation tends to be low.
Since the statement in option 1 is incorrect and the statement in option 2 is incorrect, the correct answer is option D - Neither 1 nor 2.
The Laffer Curve and the Phillips Curve are both economic concepts, but they are not related to each other. Let's understand both concepts separately.
The Laffer Curve:
The Laffer Curve is an economic concept developed by economist Arthur Laffer. It shows the relationship between tax rates and government revenue. The curve suggests that there is an optimal tax rate that maximizes government revenue. If tax rates are too high, people will be discouraged from working and investing, which will result in lower tax revenue. On the other hand, if tax rates are too low, government revenue will also be low.
The Phillips Curve:
The Phillips Curve is an economic concept developed by economist A.W. Phillips. It shows the relationship between unemployment and inflation. The curve suggests that there is an inverse relationship between unemployment and inflation. When unemployment is low, inflation tends to be high, and when unemployment is high, inflation tends to be low.
Since the statement in option 1 is incorrect and the statement in option 2 is incorrect, the correct answer is option D - Neither 1 nor 2.
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Community Answer
Consider the following statements The Laffer Curve is an economic conc...
The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship.
The Laffer Curve is a theory developed by supply-side economist Arthur Laffer to show the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate Laffer’s argument that sometimes-cutting tax rates can increase total tax revenue.
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Consider the following statements The Laffer Curve is an economic concept that states that inflation and unemployment have a stable and inverse relationship. The Phillips curve is an economic concept developed to show the relationship between tax rates and the amount of tax revenue collected by governments.Which of the above statements is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'D'. Can you explain this answer?
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