Why are consumption taxes relevant for measuring the tax wedge?
What will be an ideal response?
A tax on consumption raises the price paid for consumption goods and services and so is equivalent to a cut in the real wage rate from the perspective of workers.
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In the past twenty years the economy's responsiveness to monetary policy has become
A) weaker and more stretched out. B) weaker and shorter. C) stronger and more stretched out. D) stronger and shorter.
A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon, it sold 33% less milk. Since everything else remained the same, we would say the
a. demand for milk is perfectly elastic b. demand for milk is elastic c. demand for milk is perfectly inelastic d. demand for milk is unitary elastic e. law of supply does not apply in this situation