In the Graph Below, a Tax Increase Would Be Paid

question 245

Multiple Choice

In the graph below, a tax increase would be paid:

• A)​largely by the sellers.
• B)​largely by the buyers.
• C)​equally by the sellers and buyers.
• D)​by the government.

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Definitions:

Level Of Consumption

The total amount of goods and services consumed by households over a certain period.

MPC

Marginal Propensity to Consume, which is the proportion of an increase in income that gets spent on consumption.

MPS

The marginal propensity to save, which is the fraction of an increase in income that is saved rather than spent.

Milton Friedman

An American economist known for his strong belief in free-market capitalism.