The Following Was Heard on a Primetime News Cast

question 34

Essay

The following was heard on a primetime news cast.
"The government has just increased the sales tax.This is unfair to consumers,particularly the poor,because budgets are already stretched far enough.It would have been much more fair for the government to have levied an excise tax on firms as a way of making big business give back to the community."
Explain why the person's argument is more than likely incorrect.Be sure to discuss whether the person has over or understated the effect of the tax on consumers and producers.

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Definitions:

CPI

The Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, typically used as an indicator of inflation.

Inflation Rate

The rate in percentage terms that indicates how quickly the average price level of goods and services escalates, diminishing the buying power.

Market Basket

A fixed list of items used to track the progress of inflation in an economy or to compare prices over time.

CPI

The Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, typically used to assess changes in the cost of living.