Explain why many mayors of cities facing the need to borrow for infrastructure improvements, may not look favorably on a large federal income tax rate reduction?
What will be an ideal response?
The interest earned on municipal bonds is exempt from federal income taxes. A reduction in the federal income tax rate decreases the attractiveness of these bonds. As a result of the decrease in demand, their prices will fall and their yields will need to increase to attract investors.
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
The figure above shows the relationship between the price of a dozen roses and the quantity of roses a florist can sell. The slope between points B and C equals
A) 16. B) 8. C) 4. D) 2. E) 14.
If the Federal Reserve increases interest rates, ceteris paribus
A) the supply curve of U.S. dollars shifts leftward and the supply curve of European euros shifts rightward. B) the demand curve for U.S. dollars shifts leftward and the supply curve of U.S. dollars shifts rightward. C) the demand curve for U.S. dollars and the demand curve for European euros both shift rightward. D) the supply curve of U.S. dollars shifts rightward and the supply curve of European euros shifts leftward
The government supports economic growth by investing in:
a. education, savings, and scientific research. b. education, exploration, and internationalization. c. savings, production, and technology. d. technology, savings, and production.