It Does Not Matter Whether a Tax Is Levied on the Buyers

question 14

Multiple Choice

It does not matter whether a tax is levied on the buyers or the sellers of a good because

• A)sellers always bear the full burden of the tax.
• B)buyers always bear the full burden of the tax.
• C)buyers and sellers will share the burden of the tax.
• D)None of the above is correct;the incidence of the tax does depend on whether the buyers or the sellers are required to pay the tax.

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Definitions:

Medium Of Exchange

A middleman device or framework that assists in facilitating transactions, including the selling, buying, or swapping of items, among participants.

Money Supply

The overall financial capital available in an economy at a particular moment.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they receive from the central bank's discount window.

Reserve Requirement

Regulations set by central banks determining the minimum amount of reserves each bank must hold as a proportion of its deposits.