Suppose the government is currently imposing a $40-Per-bettle tax on run, True o

Question

Suppose the government is currently imposing a $40-Per-bettle tax on run, True or False: The government can raise the tax revenue by decreasing the per-unit tax on rum, True False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bettle, and a tax of $80 per bettle. On the following grouph, use the black curve (plus symbels) to illustate the deadweight loss in these cases. its equal to 1/2 times Base times Height. In the case of a deadweight triangle found on the graph input the base is the amount of the tax and the height is the reduction in quantity caused by the tax)

Explanation / Answer

Answer: No

Decrease in net interest income is caused by the increase in financing cost without a corresponding increase in the earnings rate. Change in NII is caused by refinancing risk. The increase in market interest rates does not affect the interest income because the bond has a fixed-rate coupon for ten years.

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