Which of the Following Things Can a Government Do to Lower

question 14

Multiple Choice

Which of the following things can a government do to lower the costs of inflation?

• A)sell inflation-indexed bonds and rewrite tax laws so that real rather than nominal gains are taxed
• B)sell inflation-indexed bonds but not rewrite tax laws so that real rather than nominal gains are taxed
• C)rewrite tax laws so that real rather than nominal gains are taxed,but not sell inflation-indexed bonds
• D)neither sell inflation-indexed bonds nor rewrite tax laws so that real rather than nominal gains are taxed

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Definitions:

Internalize Costs

The process of ensuring that businesses or individuals take into account the external costs they impose on society in their decision-making.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a balance of the market.

Equilibrium Quantity

The quantity of goods or services supplied that is equal to the quantity demanded at the equilibrium price.

Marginal Social Cost

The cost to society of producing one additional unit of a good or service, incorporating both the private costs and any external costs.