Under a Fixed Exchange Rate Regime, We Know That a Tax

question 45

Multiple Choice

Under a fixed exchange rate regime, we know that a tax increase will cause which of the following?

• A) An increase in the exchange rate.
• B) An increase in investment.
• C) An increase in imports.
• D) An increase in net exports.
• E) An increase in the interest rate.

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Definitions:

Net Book Value

The value at which an asset is carried on a balance sheet, calculated as the original cost minus accumulated depreciation and impairment costs.

Fair Value

The estimated price at which an asset or liability could be exchanged between knowledgeable and willing parties in an arm's length transaction.

Double Declining-Balance Depreciation

A method of accelerated depreciation which doubles the normal depreciation rate that would be applied to an asset under the straight-line method.

Depreciation Expense

An accounting method of allocating the cost of a tangible asset over its useful life.