One unpleasant cure for the U.S. trade deficit of the 1990s would be for foreigners who hold U.S. financial assets to demand
a. lower interest rates to stimulate U.S. growth rates.
b. higher interest rates and generate a recession in the United States.
c. higher interest rates and generate an appreciation of the dollar.
d. lower interest rates and generate a depreciation of the dollar.
b
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Why might IS policies make a country likely to incur a large foreign debt?
What will be an ideal response?
As a part of the tax cut package signed into law on December 17, 2010, the government reduced the employee portion of the payroll tax from 4% to 2% for 2011. According to the permanent-income hypothesis, households that smooth consumption will
A) use all of the extra income generated by this tax reduction for consumption during 2011. B) use a large portion of the extra income generated by this tax reduction for consumption during 2011. C) use most of the extra income generated by this tax reduction as saving during 2011. D) split the income evenly between consumption and saving during 2011, since the tax cut will expire after one year and consumption is smoothed.
Social Security payroll taxes are examples of
a. progressive taxation. b. regressive taxation. c. proportional taxation. d. marginal taxes.
Which of the following situations will tend to feature economic rents that are much higher than the resource's opportunity cost?
a. Unskilled day labor on a construction site b. Generic lumber used in the construction of a commercial building. c. Wheat grown by one of the thousands of wheat farmers in the U.S. and bought by Kellogg to produce breakfast cereal d. An otherwise unemployable software engineer possessing unique knowledge required to resolve a particular company's latest software bug.