Other Things Being Equal,an Economy with a Higher Net Tax

question 107

Multiple Choice

Other things being equal,an economy with a higher net tax rate will have a ________ marginal propensity to spend and thus a ________ AD curve compared to an economy with a lower net tax rate.

• A)lower; steeper
• B)higher; flatter
• C)higher; steeper
• D)lower; rightward shift of the
• E)lower; leftward shift of the

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Definitions:

Purchasing Power

The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy.

Nominal Exchange Rate

The price of one currency in terms of another, not adjusted for inflation differences between the countries.

Price Level

The price level represents the average of the current prices of goods and services in an economy, often measured by a price index.

Domestic Prices

The cost of goods and services within a country's borders, influenced by local demand, supply, taxes, and subsidies.