The tax on gasoline in England is close to 3.20 per gallon, ...

[AEWBW]

The tax on gasoline in England is close to 3.20 per gallon, whereas the federal excise tax on gasoline in the United States is 18.4 cents per gallon. Suppose the U. S. government raised the federal excise tax to the English gas tax rate of 3.20.
 
  Explain the likely impact of that higher tax rate on conservation, oil exploration, and the development of substitutes for gasoline.

Question 2

According to Okun's law, if the cyclical unemployment rate increases by 3 percentage points, real GDP growth will decrease by about 3 percentage points.
 
  Indicate whether the statement is true or false

[Dominic]

Answer to Question 1

The increase in the federal excise tax on gasoline would increase the price of gasoline, which would decrease consumption and encourage conservation. The higher gas price would make it more profitable for oil companies to expand exploration, and it would encourage the development of substitutes for gasoline.

Answer to Question 2

FALSE

[AEWBW]

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