The tax wedge is the difference between the
A) amount of taxes needed to pay off the national debt and the actual amount of taxes.
B) nominal and real interest rates.
C) pretax and posttax returns to an economic activity.
D) amount of taxes needed to balance the federal budget and the actual amount of taxes.
Question 2
Suppose the Fed purchases Treasury securities. Interest rates in the United States will ________ and the U.S. dollar will ________ against foreign currencies.
A) decrease; depreciate B) increase; depreciate
C) decrease; appreciate D) increase; appreciate
