What is an overvalued exchange rate? What factors may cause a country's currency to become overvalued?
What will be an ideal response?
The value of the domestic currency is greater than its value at the equilibrium point
in the foreign exchange market. One likely reason why currencies become overvalued
is the insistence of the central bank in maintaining fixed exchange rates in the face of substantial domestic inflation.
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Britain taxed windows from 1696 until 1851 . Under the 1747-57 tax rates, you would pay no tax if your home had 0 – 9 windows but if your home had 10 – 14 windows you would pay a tax of 6 pence per window for every window in your home
a. In what way is the window tax similar to the U.S. income tax? b. In what way is the window tax different from the U.S. income tax? c. Do you think from 1747–1757 the number of new homes with 9 or fewer windows increased from the pre-1747 days? Explain.
Refer to Figure 15-10. Compared to a perfectly competitive market, consumer surplus is lower in a monopoly by an amount equal to the
A) area FGE. B) area FHE. C) area P1P2EF. D) area P1P2GF.
The burden of a luxury tax falls
a. more on the rich than on the middle class. b. more on the poor than on the rich. c. more on the middle class than on the rich. d. equally on the rich, the middle class, and the poor.
Economic profits are competed away in the long run for a monopolistic competitor because of the absence of significant _______________________.
Fill in the blank(s) with the appropriate word(s).