To Simplify Our Consumption Models, Suppose U

question 68

Multiple Choice

To simplify our consumption models, suppose U.S. consumers only purchase food and all other goods where food is plotted along the horizontal axis of the indifference map. Also, suppose that all states initially impose state sales taxes on all goods (including food) , but then the states exempt food from the state sales tax. How does this tax policy change alter the consumer's budget line?

• A) Makes the budget line steeper
• B) Makes the budget line flatter
• C) Parallel rightward shift
• D) Parallel leftward shift
• E) none of the above

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Definitions:

Castilian Export Economy

Refers to the historical economic model of the Castile region of Spain, focusing on exporting goods, especially during the 16th and 17th centuries.

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The period from 1501 to 1600, marked by significant events such as the Renaissance, the Reformation, and the Age of Exploration.

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A natural fiber obtained from sheep and other animals, used for textiles and fabrics because of its warmth and durability.

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The process of creating land from sea, lakes, or swamps in the Netherlands, involving the use of dikes and drainage canals.