Which Is a Microeconomic Question, Rather Than a Macroeconomic Question

question 56

Multiple Choice

Which is a microeconomic question, rather than a macroeconomic question?

• A) Will a decrease in the income tax rate lift the nation out of a recession?
• B) Will an increase in consumer spending cause inflation?
• C) Will a decrease in the income tax rate lead to a government budget deficit?
• D) Will an increase in the cigarette tax reduce the number of packs sold?

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Definitions:

Underlying Asset

An asset such as a stock, bond, commodity, or currency on which a derivative's price is based.

Exercise Price

The price at which the holder of an options contract may buy or sell the underlying security, also known as the strike price.

Quanto

A type of derivative in which the underlying is denominated in one currency, but the instrument itself is settled in another currency at a fixed rate.

Foreign Currency

Currency used in a country other than one’s own, involving the exchange of currencies in international trade or investment.