When negative externalities exist in a market, if the producers are forced to pay a Pigouvian tax then:
A. those who interact in the market will lose surplus.
B. those who interact in the market will gain surplus.
C. producers will gain surplus.
D. those who do not interact in the market but are affected by the externality will lose surplus.
A. those who interact in the market will lose surplus.
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In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by passing the Smoot-Hawley Tariff. In response to this tariff, other countries ________ and international trade ________
A) lowered their tariffs; thrived B) raised their tariffs; collapsed C) doubled their tariffs; became unrestricted D) eliminated tariffs; began to grow outside of the United States
The reserve ratio is 20 percent. After the Fed buys $1 million in U.S. government securities from a bond dealer by transmitting the funds to the dealer?s deposit account at Bank A, Bank A lends a construction company an amount equal to its excess reserves. The construction company spends the entire amount on lumber from a lumber yard, which deposits the construction company?s check in its deposit account with Bank A. The maximum loan Bank A can now make is
A) $0. B) $640,000. C) $800,000. D) $1 million.
Interest rate parity can be summarized by which of the following equilibrium conditions?
a. The foreign interest rate must equal the domestic interest rate plus the expected inflation. b. The foreign interest rate must equal the domestic interest rate. c. The foreign interest rate must equal the expected change in the exchange rate. d. The domestic interest rate must equal the foreign interest rate plus the expected change in exchange rate. e. The domestic interest rate must equal the foreign interest rate minus any expected inflation.
Floating exchange rates are market determined, that is, supply and demand for foreign exchange sets the rate in the foreign exchange market
Indicate whether the statement is true or false