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Calculate the price of drug store stocks

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Question: Suppose the government decided to levy the current 15.3% social security tax on all levels of wages and salaries, not just the first $80,000, and used all the money collected to pay for prescription drug benefits for the poor and the aged. What do you think would happen to:

(A) Total consumption?

(B) Purchases of consumer durables?

(C) The price of pharmaceutical company stocks?

(D) The price of drug store stocks?

(E) The overall stock market? How would your answers to (C) to (E) change if, as part of the legislation, drug prices were now set by the government?

Reference no: EM131737300

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