If a Government Wants to Increase the Value of Its

question 352

Multiple Choice

If a government wants to increase the value of its currency in foreign exchange markets, it can:

• A) use contractionary monetary policy.
• B) use expansionary monetary policy.
• C) decrease interest rates.
• D) sell its currency.

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Definitions:

Lump-Sum Tax

A tax that is a fixed amount, not dependent on the taxpayer's income level or assets' value.

Average Tax Rate

The fraction of total income that is paid in taxes, calculated by dividing the total taxes paid by the total taxable income.

Ability-To-Pay Principle

A tax theory stating that taxes should be levied according to an individual or entity’s capacity to pay.

Benefits Principle

A theory in taxation stating that those who benefit from government services should pay taxes in proportion to the amount they benefit.