The Table Given Below Reports the Inflation Rate in the U.S

question 81

Multiple Choice

The table given below reports the inflation rate in the U.S. and Canada for two years.
Table 8.1
$\begin{array}{|c|c|c|}\hline & \text { United States } & \text { Canada } \\\hline \text { Inflation Rate (year 1) } & 0 \% & 0 \% \\\hline \text { Inflation Rate (year 2) } & 0 \% & 3.6 \% \\\hline\end{array}$
-Refer to Table 8.1. Assume the exchange rate is fixed at 1.4 CAD (Canadian dollars) = 1 USD (United States dollars) . Between year 1 and year 2, what happens to the U.S. aggregate demand curve?

• A) There is a movement to the right along the AD curve.
• B) The AD curve shifts to the right.
• C) The AD curve becomes relatively elastic.
• D) The AD curve shifts to the left.
• E) There is a movement to the left along the AD curve.

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Definitions:

Regressive Tax

A tax rate that decreases as the taxable amount increases, placing a higher burden on lower-income earners.

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