Assume That There Is a Simultaneous Tax Cut and Monetary

question 49

Multiple Choice

Assume that there is a simultaneous tax cut and monetary contraction. In a flexible exchange rate regime, we know with certainty that:

• A) the exchange rate would increase.
• B) the exchange rate would increase and output would decrease.
• C) the exchange rate would decrease and output would increase.
• D) the exchange rate and output would both increase.
• E) the exchange rate would increase and output would remain unchanged.

---

Definitions:

Allocating Resources

The process of assigning available resources, such as time, money, and labor, to specific uses to achieve an organization's objectives.

Equilibrium

A state in which market supply and demand balance each other, and, as a result, prices become stable.

Market Fluctuation

Variations in the market prices of goods, services, or securities due to changes in supply and demand, investor sentiment, or other factors.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices.