Author Question: As a result of the imposition of a tax on a product: a. some consumer surplus is transferred from ... (Read 46 times)

natalie2426 · **on:** Jun 30, 2018

As a result of the imposition of a tax on a product:
a. some consumer surplus is transferred from buyers to producers.
b. some producer surplus is transferred from sellers to consumers.
c. some consumer and producer surplus is transferred from buyers and sellers to the government.
d. there is no change in either consumer or producer surplus.

Question 2

What effects does operating in an open economy add to expansionary monetary policy? To contractionary monetary policy?

enass · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

c

Answer to Question 2

Expansionary monetary policy would decrease interest rates in the U.S. That would reduce real interest in the U.S. relative to other countries, which would make investing in the U.S. relatively less attractive relative to other countries. That would reduce the demand for dollars, lowering the exchange rate value of the dollar, which would lead to an increase in net exports (as well as domestic investment) and aggregate demand. Contractionary monetary policy would have the opposite effects.