How Is the Incidence of a Tax Determined

question 86

Multiple Choice

How is the incidence of a tax determined

• A)It is not required when one is only interested in issues of equity.
• B)It is identical to the determination of legal liability for a tax.
• C)It requires one to evaluate where the tax burden eventually falls.
• D)It is solely determined by conditions of the "flypaper theory" of taxation.

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Definitions:

Full Employment GDP

The output level produced in an economy when labor resources are fully employed, but not over-employed.

Spending

The expenditure of money on goods, services, or other items by individuals, businesses, or governments.

Classical Economics

A school of economic thought, originating in the 18th and 19th centuries, that focuses on free markets and the idea that markets, if left unregulated, will naturally adjust to equilibrium over time.

Keynes

A reference to John Maynard Keynes, a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.