Q. Consider the following statements:- The Phillips Curve shows an inverse relationship between inflation and unemployment.
- The Laffer Curve illustrates the relationship between tax rates and tax revenue.
Which of the above statements is/are correct?
Answer:
Both 1 & 2
Notes: The Phillips Curve describes an inverse relationship between inflation and unemployment. The Laffer Curve represents the relationship between tax rates and the total tax revenue collected by governments, suggesting that increasing tax rates beyond a certain point reduces revenue. Hence, both statements are correct.