The General Equilibrium Effects of an Excise Tax on Gasoline

question 2

Multiple Choice

The general equilibrium effects of an excise tax on gasoline which would then be used to purchase military equipment would tend to:

• A)raise the price of energy and the price of military equipment, but not have an effect of the quantity of labor employed.
• B)raise the price of energy and the price of military equipment, but lower the price of labor.
• C)lower the price of energy and the price of military equipment, but not have an effect of the quantity of labor employed.
• D)raise the price of energy and the price of military equipment, and increase the quantity of labor employed.

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