Which of the Following Statements Is Correct Regarding the Imposition

question 23

Multiple Choice

Which of the following statements is correct regarding the imposition of a tax on gasoline?

• A)The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
• B)The incidence of the tax depends upon the price elasticities of demand and supply.
• C)The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government.
• D)The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.

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Definitions:

Multiplier

In macroeconomics, a factor that quantifies the effect of an initial change in the economy (such as investment or spending) on the total level of economic activity.

Automatic Stabilizers

Economic policies and programs designed to offset fluctuations in a nation's economic activity without additional government action.

Transfer Payments

Payments made by the government to individuals or groups without receiving any goods or services in return, such as social security or welfare benefits.

Crowd-Out Effect

The phenomenon where increased government spending leads to a reduction in private sector spending and investment, often due to higher interest rates.