# If the federal government taxes gasoline but returns the entire money back to citizens, are citiz...

###### Question:

If the federal government taxes gasoline but returns the entire money back to citizens, are citizens better off, worse off, are unaffected by this policy? What could be the possible motivation for the government? a. b. For simplicity, assume that all citizens are identical in their income and preferences. Draw graph/s with gasoline on the X-axis and composite good on the Y-axis. Make sure the graph is large, neat and clear and easy to read. Explain your answer in terms of income and substitution effects.

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