What is the tax wedge?choose correct option. A) A tax wedge is the difference between the pretax and posttax return to an economic activity, For example, a tax on labor income would increase the posttax return on working   B) A tax wedge is the difference between the pretax and posttax return to an economic activity, for example, a tax on interest income would decrease the posttax return to investment.

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A:

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Laffer Curve Analysis

In terms of economics, the Laffer curve was popular among those economists who were or who belonged to the supply side of the economic peripheral.  This concept was popularized by the famous supply-side economist known as Arthur Laffer. This curve illustrated the relationship between the tax rates and government revenue. It is already known that the tax which the public or individuals residing in an economy bear is the revenue or income of the government with the help of which the government does all the necessary works in the society, which is beneficial for the economy.