Question

please try to do it ASAP and it's 15 marks so please explain it

1. As Canada recovers from the economic challenges brought on by the COVID pandemic, the federal government will make choices that will cause tax rates to rise or fall. This will cause a change in Canada’s position on the Laffer Curve.

Explain what will happen to Canada’s position on the Laffer Curve for both the cases where the tax rates rise and when they fall.

Answer 1

Fall in tax rate below T* where tax revenue is at its peak will decline tax revenue while rise in tax rate above T* will also reduce tax revenue.

Tax Revenul Revenue, maximizing Rising Declining Revenue Over This Plose Revenal oorly This Phase. vesy Tox 09 % Raite