A local government is considering a 10 percent tax on items A, B, and C. They want to tax only those goods for which the burden of the tax is lowest on suppliers. They know that the elasticity of supply of all the suppliers in question is about equal and have observed that when the price of A, B, and C rose 10 percent, total sales receipts for A and B rose 2 percent but declined 2 percent for C. From this information, they should:
A. tax A and B but not C.
B. tax A, B, and C equally.
C. tax C but not A and B.
D. You need to know the volume of sales to determine the answer.
Answer: A
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The proposition that an increase in the federal budget deficit caused entirely by a current tax cut has no effect on aggregate demand is called the
A) Ricardian equivalence theorem. B) interest rate effect. C) indirect effect. D) open-economy effect.
The price of a first-class stamp in 1957 was 3 cents, and it is 49 cents in 2014. From this we know that
A) both the relative and the absolute price of first-class stamps increased from 1957 to 2014. B) the money price of first-class stamps increased from 1957 to 2014 but the absolute price of first-class stamps stayed constant. C) the money price of first-class stamps increased from 1957 to 2014 and the relative price of first-class stamps decreased. D) the money price of first-class stamps increased from 1957 to 2014, but we can't tell if the relative price of first-class stamps increased or decreased without more information.
Fiscal policy is the use of taxes and spending by the government to affect aggregate demand
a. True b. False Indicate whether the statement is true or false
If the exchange rate changes from $1 = 2 euros to $1 = 3 euros:
A. the dollar has appreciated in value. B. the dollar has depreciated in value. C. the dollar has neither appreciated nor depreciated, but the euro has appreciated in value. D. U.S. exports to Europe will increase.