Economics (AS & A Level) · Feb / March 2024 · Paper 32 · Question 24
9708Effectiveness of policy options to meet all macroeconomic objectives
The diagram shows the relationship between the income tax rate and tax revenue. Which statement is correct?
- AA tax rate cut from Y to Z will cause tax revenue to decrease.
- BAt tax rates below Z a tax rate cut will cause tax revenue to increase.
- CThe greater the rate of tax beyond Z, the smaller will be the tax revenue generated.
- DTax revenue will always increase as the rate of income tax increases.
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Correct answer: C. The greater the rate of tax beyond Z, the smaller will be the tax revenue generated.
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