If Consumers Pay More of a Tax Than Do the Producers

question 33

Multiple Choice

If consumers pay more of a tax than do the producers,

• A)demand is more elastic than supply.
• B)the amount of tax revenue collected by the government is almost zero.
• C)supply is more elastic than demand.
• D)the equilibrium price paid by consumers rises by less than half the amount of the tax.
• E)None of the above answers is correct.

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Definitions:

Crowding Out

An economic phenomenon where increased government spending reduces private sector investment or consumption due to higher interest rates.

Interest Rate

The percentage charged on a loan or paid on savings, representing the cost of borrowing or the gain on saved funds.

Private Sector

The part of the economy that is owned and operated by individuals and companies for profit, unlike the public sector, which is controlled by the government.

Credit Demand

The desire or willingness of consumers and businesses to borrow money at a given interest rate.