When a Tax Is Levied on the Sale of an Item

question 90

Multiple Choice

When a tax is levied on the sale of an item,

• A) consumers will generally buy more of it.
• B) producers will generally supply more of it.
• C) the price (including the tax) of the product will generally decline.
• D) less of the item will generally be bought and sold.

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Definitions:

Interest On Reserves

The rate paid by central banks to financial institutions on the excess reserves they hold at the central bank.

Money Supply

The complete financial assets volume in an economy at a designated point in time.

Money Supply

The total amount of money available in an economy at a specific time, including cash and bank deposits.

Commodity Money

A form of currency in which the value of the money is derived from the material from which it is made, such as gold or silver coins.