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:

Public Safety

Efforts and services provided by the state or communities to ensure the protection and well-being of the public, including policing, firefighting, and emergency medical services.

Private Market

A sector of the economy where transactions occur between private entities without significant government intervention, dealing in goods, services, and financial assets.

Rival in Consumption

A property of a good whereby one person's use of the good reduces the ability of another person to use the same good.

Individual Marginal Benefit

The additional satisfaction or utility that an individual derives from consuming one more unit of a good or service.