If the Government Eliminates a Tax on a Good with a Perfectly

question 158

Multiple Choice

If the government eliminates a tax on a good with a perfectly elastic supply,who benefits most?

• A) buyers
• B) sellers
• C) buyers if the demand is also perfectly elastic, otherwise sellers
• D) buyers if the demand is unit elastic, otherwise sellers
• E) Buyers and sellers benefit equally.

Understand the relationship between nominal and real interest rates, inflation, and investment decisions.

Grasp the loanable funds theory, including the effects of changing savings behavior on the equilibrium interest rate.

Learn how interest rates affect the supply of loanable funds and investment decisions.

Understand the functions and outcomes of usury laws in credit markets.

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Definitions:

Momentum

An investment strategy that involves buying securities that have had high returns over a certain period and selling those that have had poor returns, based on the belief that trends will continue.

Turnover

Turnover refers to the total volume of shares or securities traded within a particular timeframe or the rate at which inventory is sold and replaced in a business.

Fama-French Model

A three-factor model developed for explaining asset prices and their returns, incorporating market risk, the size effect, and the value effect.

Benchmarking Performance

The process of comparing the performance of one's investments or company to a standard or a set of standards.