Suppose the Interest Rate in England Is 5% and the Interest

question 181

Multiple Choice

Suppose the interest rate in England is 5% and the interest rate in France is 7%.If the euro is expected to depreciate by 3% against the British pound:

• A) because the euro-pound exchange rate will change,people will invest in other countries,such as the United States.
• B) there will be no flow of funds from England to France because of the exchange rate uncertainty.
• C) funds will flow from England to France.
• D) funds will flow from France to England.

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Definitions:

Ability-To-Pay Principle

A taxation principle that suggests taxes should be levied according to an individual's or entity's ability to pay, favoring a more equitable distribution of the tax burden.

U.S. Income Tax

A tax imposed by the U.S. government on the income generated by businesses and individuals within its jurisdiction.

FICA Tax

A federal payroll tax in the United States that funds Social Security and Medicare programs.

Progressive

A term that may refer to a system or policy where the rate increases as the taxable amount increases, often used in the context of taxation or a general approach promoting change or innovation.