Suppose the government cuts taxes. We would expect interest rates to ________ and the dollar to ________ in foreign exchange markets
A) rise; appreciate B) fall; depreciate C) rise; depreciate D) fall; appreciate
A
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The ________ the exchange rate, the ________ are foreign-produced goods and hence the smaller the quantity of dollars supplied
A) lower; more expensive B) lower; cheaper C) greater; cheaper D) greater; more expensive
If expected inflation were 5%, and the real interest rate was 3%, what sector would be worse off if the actual inflation rate turned out to be 2%
a. Businesses. b. Laborers. c. Both. d. None.
Suppose the nominal interest rate is 0.03, the tax rate on interest income is 0.2, and the expected real after-tax interest rate is 0.004. What is the expected inflation rate?
A. 0.02 B. 0.01 C. 0.00 D. 0.03
In early 2007, Pioneer and JVC, two Japanese electronics firms, each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets
Which of the following could explain why these firms did not simply raise their prices and increase their profits? A) The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business. B) The move to cut prices is probably just a temporary one to gain market share. In the long run the firms will raise prices and be able to increase their profits. C) Most likely, intense competition between these two major producers probably pushed prices down. Thereafter, each feared that it would lose its customers to the other if it raised its prices. D) In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned.