Suppose an economy is comprised of only two markets: one for food and the other for housing.A tax on food used to finance transfer payments is likely to:

Question

Quizplus · Accepted Answer

A tax on food used to finance transfer payments will decrease the demand for food, leading to a decrease in the price of food. The decrease in the demand for food will also lead to a decrease in the demand for housing, as people will have more money to spend on other goods and services. This will lead to a decrease in the price of housing.

Suppose an Economy Is Comprised of Only Two Markets: One