Author Question: Would a tax on prescriptions drugs be more likely to be progressive or regressive? ... (Read 87 times)

RYAN BANYAN · **on:** Jun 30, 2018

Would a tax on prescriptions drugs be more likely to be progressive or regressive? Why?

Question 2

Suppose a U.S. investor buys a Canadian government bond with a face value of Canadian dollar (CAD) 100 and an annual yield of 8.8 percent. Which of the following statements is true?
a. At maturity, the dollar return from the Canadian bond will be 108.8, regardless of what happens to the exchange rate.
b. The Canadian bond will yield the same dollar return from the time of purchase to the time of maturity.
c. An American will make a profit on the Canadian bond only when the CAD-denominated return is higher on the Canadian bond than the dollar-denominated return on a comparable U.S. bond.
d. The dollar return on the Canadian bond depends on the dollar price of the Canadian dollar at the time of maturity.
e. The decision to buy the Canadian bond should be based solely on the CAD interest return and not on changes in the exchange rate.

Natalie4ever · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A tax on prescriptions drugs would most likely be regressive. Prescription medication is essentially a necessity. The dollar amount of the taxes would not vary between households based on income. However, the same dollar amount would represent a smaller percentage of the income for a high-income household while representing a larger percentage of the income of a low-income household.

Answer to Question 2

d