A Decline in the Output Gap Causes the Demand for Real

question 28

Multiple Choice

A decline in the output gap causes the demand for real balances

• A) to rise and the interest rate to fall.
• B) to fall and the interest rate to rise.
• C) and the interest rate to fall.
• D) and the interest rate to rise.

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Definitions:

Foreign Tax Credit

An irreversible tax credit for income taxes remitted to a foreign country because of withholdings on foreign income tax.

Taxable Income

Income that is subject to taxation, after all allowed deductions and exemptions are subtracted from gross income.

U.S. Tax Liability

The total amount of tax owed to the federal government by an individual or entity.

Foreign Income Taxes

Taxes paid to a foreign government on income earned from sources within that foreign country.