If Supply Is More Inelastic Than Demand Is, the

question 16

Multiple Choice

If supply is more inelastic than demand is, the

• A)more the tax will fall on producers
• B)more the tax will fall on consumers
• C)less likely that a tax will have an impact on market transactions
• D)less likely it a tax will lead to tax avoidance
• E)greater the impact that a tax has on consumer expectations

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Definitions:

Floating Rate Debt

A type of debt instrument with a variable interest rate that adjusts periodically based on a benchmark interest rate or index.

Risk-Free Rates

The theoretical rate of return of an investment with no risk of financial loss, typically represented by the yield on government securities.

Arbitrage Opportunities

Situations where a security or asset is simultaneously priced differently in two or more markets, allowing for risk-free profit through simultaneous buying and selling.

Spot Exchange Rate

The existing rate for the instant exchange of one currency for another.