Under a flexible exchange rate system, one factor that does NOT directly affect rates of exchange is
A) changes in the inflation rate in each country.
B) changes in productivity in each country.
C) changes in gold holdings in each country.
D) changes in economic stability in each country.
C
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A year ago a country reduced the tax rate on all interest income from 20% to 10%. During the year private saving was $500 billion as compared to $400 billion the year before the tax reform. Taxes on interest income fell by $10 billion. Assuming no other changes in income, or government revenues or spending, which of the following is correct?
a. the substitution effect was larger than the income effect; national saving rose b. the substitution effect was larger than the income effect; national saving fell c. the income effect was larger than the substitution effect; national saving rose d. the income effect was larger than the substitution effect; national saving fell
If the government wanted to encourage home? ownership, it? could:
A. make mortgage interest tax deductible. B. add a? 10% surcharge on every home purchase. C. tax homeowners based on asset values. D. None of the above.
Answer the next question based on the following consolidated balance sheet for the commercial banking system. Assume the required reserve ratio is 12 percent. All figures are in billions of dollars.AssetsLiabilities & Net WorthReserves$60 Checkable Deposits$150Loans100 Stock Shares135Securities25 Property100?Refer to the above data. The maximum amount by which the commercial banking system can expand the supply of money by lending is:
A. $450 billion. B. $250 billion. C. $350 billion. D. $600 billion.
Suppose potential income is $60 billion, actual income is $40 billion, and expenditures don't vary with income. If the actual budget deficit is $4 billion and the marginal tax rate is 20 percent, the cyclical deficit:
A. is between zero and $4 billion. B. is zero. C. is $4 billion. D. cannot be determined from the given information.