A Country's Budget Constraint States That

question 45

Multiple Choice

A country's budget constraint states that

• A)the value of exports must be equal to the value of imports.
• B)a country will engage in trade only if the value of imports exceed the value of exports.
• C)real income in the exporting country must be equal to real income in the importing country.
• D)unless a country engages in trade,the value of exports cannot exceed the value of goods produced.
• E)a country will engage in trade only if the value of exports exceeds the value of imports.

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Definitions:

Ability-To-Pay Principle

The ability-to-pay principle is a tax theory suggesting that taxes should be levied based on the taxpayer’s capacity to pay, implying that wealthier individuals should pay more in taxes.

Gasoline Tax

A tax imposed on the sale of gasoline, often used by governments to raise revenue and discourage excessive fuel consumption.

Mortgage-Interest Deduction

A tax deduction for mortgage interest paid on the first $750,000 of mortgage debt, available to U.S. taxpayers.

Horizontal Equity

The principle that individuals with similar financial situations should be treated equally by the taxation system.