The Price Adjustments of a Dynamic Model Are Founded on the Intuition

question 46

Multiple Choice

The price adjustments of a dynamic model are founded on the intuition that

• A) upward pressure should be exerted on prices if actual GDP exceeds potential GDP.
• B) downward pressure should be exerted on prices if actual GDP falls short of potential GDP.
• C) downward pressure should be exerted on prices if unemployment in excess of the natural rate puts downward pressure on wages.
• D) upward pressure should be exerted on prices if employment above potential employment portends upward pressure on wages.
• E) all of the above.

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Definitions:

Total Tax

The comprehensive sum of all taxes a person or entity is liable to pay, including federal, state, local, and other forms of taxes.

Provincial Tax Brackets

The divisions at which tax rates change in a progressive tax system within specific provinces or territories.

Non-Eligible Dividends

Dividends that do not qualify for the dividend tax credit in certain jurisdictions, typically paid by companies that pay tax at a rate that is lower than the standard corporate tax rate.

Capital Gains

The profit earned from the sale of an asset or investment, which is the difference between the selling price and the purchase price.