When a Tax on Output Is Imposed to Internalise the External

question 65

True/False

When a tax on output is imposed to internalise the external costs of pollution, the supply curve shifts down by the amount of the tax.

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Definitions:

Interest Rate Parity

A theory stating that the difference in interest rates between two countries is equal to the difference in the forward exchange rate and the spot exchange rate.

Covered Interest Arbitrage

An investment strategy where an investor uses the difference in interest rates between two countries to profit from currency exchange rate changes, using a forward contract to hedge exchange rate risk.

Profit or Loss

The difference between total revenues and total expenses of a business over a specific period of time.

Converted

This term usually refers to a change in the characteristics or use of an asset, such as converting a building for a different purpose or converting securities from one form to another, like bonds to stock.