When a Tax Is Imposed on a Good for Which

question 50

Multiple Choice

When a tax is imposed on a good for which both demand and supply are very elastic,

• A)sellers effectively pay the majority of the tax.
• B)buyers effectively pay the majority of the tax.
• C)the tax burden is equally divided between buyers and sellers.
• D)None of the above is correct;further information would be required to determine how the burden of the tax is distributed between buyers and sellers.

Comprehend the concepts and significance of automatic stabilizers within the economy and their effects during various economic cycles.

Recognize the historical context and effects of specific fiscal policies and tax reforms on the economy.

Explain the paradox of thrift and its implications for individual savings and overall economic performance.

Understand the multiplier effect, its calculation, and its implications for fiscal policy and economic output.

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Definitions:

Pontiac's Rebellion

A conflict between Native American tribes and the British military forces in the Great Lakes region (1763-1766), led by Chief Pontiac, aiming to drive the British out of the territory.

Proclamation of 1763

An edict issued by King George III following Great Britain's acquisition of French territory in North America after the end of the French and Indian War, forbidding settlements west of the Appalachian Mountains.

Ohio Company

A land company formed in 1747 that was granted a tract of land west of the Appalachian Mountains by the British government to promote settlement.

French and Indian War

A major conflict in North America (1754-1763) that was part of the larger Seven Years' War, involving French and native allies against English and their colonies, leading to significant territorial changes.