2024 · Q96
Consider the following statements:
- 1The 15th Finance Commission used fiscal effort as a criterion for horizontal devolution unlike the 14th Finance Commission
- 2Both the 14th and the 15th Finance Commission used pre-2011 demographic variables as a criteria for horizontal devolution Which of the statements given above is/are correct?
indian-polity-economyeconomy-fundamentals
- A1 only
- B2 only
- CBoth 1 and 2
- DNeither 1 nor 2
Explanation
The Laffer Curve illustrates the relationship between the tax rate and total tax revenue: revenue is zero at 0% and 100% rates and reaches a maximum at some intermediate rate, forming an inverted-U curve. It does not plot inflation against unemployment (Phillips Curve), money supply against price level, or government spending against GDP. Hence the tax-rate–revenue relationship is correct.