If an excise tax reduces economic surplus why does the government impose the tax?
A. The marginal benefits of programs funded by the tax is worth the marginal cost.
B. The opportunity cost of having the tax is higher.
C. Tax revenue is scarce and the government needs to tax the right goods.
D. The government needs the money to get out of debt.
Answer: A
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What will be an ideal response?
The government of a DVC may purposely cause inflation because:
A. a rapid rate of inflation attracts private foreign capital into a DVC. B. there is conclusive evidence that inflation discourages people from having large families. C. this will strengthen the nation's position in international markets. D. inflation works like taxation in that it may release resources from consumption so that they can be invested.