Which of the following statements is accurate?
A. Fixed exchange rates greatly constrain a country's ability to pursue an independent monetary policy.
B. Fiscal policy is highly effective with fixed exchange rates and unresponsive international capital flows.
C. Contractionary monetary policy is effective under a fixed exchange-rate regime.
D. Fiscal policy is not effective with fixed exchange rates in an environment of highly responsive international capital flows.
Answer: A
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A business owner makes 50 items a day. She spends 8 hours in producing those items. If hired elsewhere she could have earned $10 an hour. The item sells for $10 each. Production occurs seven days a week. If the explicit (other production) costs total $10,000 a month the economic profit for the month (30 working/selling days) equals:
a. $2,600 b. $5,000 c. $2,240 d. $11,760
As discussed in the Case in Point on the size of the fiscal multiplier, a study conducted by Jonathan Parker on the effect of fiscal policy during recessions suggests that
A) the multiplier effect of fiscal policy is much less than that for monetary policy. B) temporary fiscal policy financed through government borrowing implies a multiplier value between 0.8 and 1.5. C) fiscal policy has little effect on the economy and that the multiplier value is effectively zero. D) statistical models are inadequate to determine the multiplier and the multiplier value likely varies based on the state of the economy.
Given the currencies below, which was not replaced by the Euro?
A) German mark B) Irish pound C) British pound D) French franc
What makes a tax "efficient"? Describe the efficiency properties of a lump sum tax
Under what conditions might a regular unit tax approximate a lump-sum tax? List one trade-off facing policymakers in attempting to minimized the excess burden of taxation.