The Laffer curve is based on the idea that if the tax rate is sufficiently high, then raising it even more will actually reduce total tax revenues. According to Laffer, this happens because the growing tax rates reduce economic activity at an even faster rate

Let "C = Ca + by" define the consumption function. The term "Ca" is known as

A) induced consumption. B) autonomous consumption. C) the marginal propensity to save. D) the marginal propensity to consume.

Your friend Shahla argues that inflation is bad for the economy because it lowers everyone's purchasing power. How would an economist respond to Shahla's statement?

a. Her statement is true. b. Her statement is false because inflation redistributes income but does not change the average level of income in the economy. c. Her statement is true when everyone's nominal income changes by the same amount. d. Her statement is true when wages and benefits are not indexed to the CPI. e. Her statement is true only in a closed economy.