Suppose a small country sets all of its tariffs at 40 percent which causes a reduction in imports by 20 percent. If the total imports affected by the tariffs are 40 percent of the gross domestic product (GDP), the net national loss from the tariffs as a percentage of GDP is
A. 3.2%.
B. 6.4%.
C. 1.6%.
D. close to 90%.
Answer: C
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If the MPC is 0.8 and the tax rate is 20%, the expenditure multiplier will equal
A) 1.19. B) 2.78 C) 4.0. D) 6.0.
Other things equal, the equation for the real interest rate indicates that:
a. as inflation increases, the real interest rate will rise. b. as inflation increases, the nominal interest rate will fall. c. as inflation decreases, real income will fall. d. as inflation decreases, the real interest rate will rise. e. as inflation changes, the real interest rate will not change.
You see on the news that a recession has started in Saudi Arabia. Which of the following would happen in the market for Saudi riyals?
a. A decrease in the supply of riyals and an appreciation of the riyal. b. An increase in the supply of riyals and a depreciation of the riyal. c. A decrease in the supply of riyals and a depreciation of the riyal. d. An increase in the supply of riyals and an appreciation of the riyal. e. Cannot be determined without additional information.
Which of the following is correct? Investment tax credits
a. can increase investment, but stimulating investment is not a key to ending a recession. b. can increase investment, which is a key to ending a recession. c. can not increase spending on investment goods, but stimulating investment is not a key to ending a recession. d. can not increase spending on investment goods, but stimulating investment is a key to ending a recession.