The relative price of a country's goods and services in terms of foreign goods and services is the real exchange rate.
Indicate whether the statement is true or false
Ques. 2In countries that have experienced hyperinflation, what role have large government budget deficits played in causing the very high inflation rates?
What will be an ideal response?
Ques. 3Why would a higher tax rate lower the government purchases multiplier? What does the tax rate have to do with the government purchases multiplier?
What will be an ideal response?
Ques. 4Suppose Political Party A proposes a tax cut on business income to stimulate the economy. Political Party B opposes the tax cut on business income asserting that it would only help businesses, not the average working man and woman.
If you were hired as an economist for Political Party A, explain how the tax cut on business income would help the average working man and woman.
Ques. 5An increase in the purchasing power of money need not lead to an increase in the purchasing power of income because the falling price level would likely mean falling wages and salaries.
Indicate whether the statement is true or false
Ques. 6If currency speculators decide that the value of the dollar should rise in the future relative to the yen, this will increase the demand for dollars and decrease the supply of dollars.
Indicate whether the statement is true or false
Ques. 7Holding all else constant, an economic expansion in Mexico should decrease the demand for U.S. dollars.
Indicate whether the statement is true or false
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