The Burden of a Tax That Is Imposed on a Good

question 136

Multiple Choice

The burden of a tax that is imposed on a good is said to fall on consumers if:

• A) the price paid by consumers for the good declines.
• B) the price paid by consumers for the good increases.
• C) the wages received by workers who produce the good declines.
• D) the wages received by workers who produce the good increases.

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Definitions:

EAFE Index

An index that measures the stock market performance of developed markets outside of the United States and Canada.

Non-U.S. Stocks

Shares of companies based outside of the United States, often used to diversify investment portfolios.

CAPM

The Capital Asset Pricing Model, a theory that describes the relationship between risk and expected return for assets, particularly stocks.

Exchange-Rate Risk

The potential for investors to experience losses due to changes in the exchange rate between two currencies in their foreign investment transactions.