If Revenue from a Cigarette Tax Is Used to Pay

question 467

Multiple Choice

If revenue from a cigarette tax is used to pay for healthcare for people with lung cancer, the cigarette tax may be justified on the basis of

• A)the benefits principle.
• B)the ability-to-pay principle.
• C)vertical equity.
• D)horizontal equity.

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Definitions:

Aggregate Spending

The total amount of money spent by all sectors of an economy, including consumption, investment, government purchases, and net exports.

Velocity of Money

The velocity at which currency is transferred from one deal to another and the extent to which a currency unit is employed over a certain period.

Real Output

The actual value of goods and services produced in an economy, adjusted for inflation, representing the total economic output.

Money Supply

The aggregate financial resources available for transactions in an economy at a specific point, counting in cash forms like coins, notes, and the values in checking and savings bank accounts.