In Summarizing the Research on the Externalities Associated with Driving

question 99

Multiple Choice

In summarizing the research on the externalities associated with driving cars, a 2007 Journal of Economic Literature article concluded that the optimal corrective tax on gasoline in the United States, in 2012 dollars, would be about

• A) $0.40 per gallon.
• B) $0.90 per gallon.
• C) $2.10 per gallon.
• D) $2.70 per gallon.

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Definitions:

Marginal Propensity

The proportion of an additional unit of income that is spent on consumption; a key concept in Keynesian economics related to how income changes affect spending.

Simple Multiplier

The Simple Multiplier is an economic concept that quantifies the impact of a change in investment, government spending, or other economic activity on total output or income.

Aggregate Expenditure

Aggregate expenditure is the total amount of spending in an economy, including consumer spending, investment, government spending, and net exports.

Equilibrium Real GDP

The level of gross domestic product where aggregate supply equals aggregate demand at current prices, adjusted for inflation.