1. Lower tax rates provide positive work incentives causing the aggregate supply
ID: 2440512 • Letter: 1
Question
1. Lower tax rates provide positive work incentives causing the aggregate supply curve to shift right is a policy supported by classical economists. monetarists. Keynesians. rational expectationists. supply side economists.2. When the Federal Reserve decreases the discount rate, monetarists and Keynesians would agree on which of the following changes to the money supply and interest rates.
Money Supply / Interest Rates Decrease / Increase Decrease / No change Increase / Increase Increase / Decrease No change / Increase 3. Assume the U.S. dollar and the Mexican peso are traded in flexible currency markets. Which of the following would cause the U.S. dollar to depreciate relative to the Mexican peso? Higher price level in Mexico relative to the United States. Higher interest rates in the United States relative to Mexico. Higher incomes in Mexico relative to the United States. Increasing price level in the United States relative to Mexico. Decreasing price level in the United States relative to Mexico. 1. Lower tax rates provide positive work incentives causing the aggregate supply curve to shift right is a policy supported by classical economists. monetarists. Keynesians. rational expectationists. supply side economists.
Explanation / Answer
a) "Supply-side economist " believed in such theories.
b) With a lower discount rate, the money supply will increase and the interest rate will decrease. The banks now have more money to end at a lower rate which will be passed on to the consumers.
c) Increasing the price level in the US will increase the imports from Mexico and depreciate the US dollar because of increase outflow of currency.
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