Author Question: Assume perfect capital mobility. Under a fixed exchange rate system, expansionary fiscal policy ... (Read 145 times)

ssal · **on:** Jun 30, 2018

Assume perfect capital mobility. Under a fixed exchange rate system, expansionary fiscal policy causes income to _____, while under flexible exchange rates expansionary fiscal policy causes income to _____.

a. increase; increase
b. increase; remain unchanged
c. increase; decrease
d. remain unchanged; increase

Question 2

Inflation leads to bracket creep, which forces taxpayers to pay a larger percentage of their income in taxes, when

(a) Changes in the real purchasing power of their income do not keep pace with inflation.
(b) Changes in the real purchasing power of their income keep pace with inflation.
(c) Income tax codes change quickly as inflation emerges, impacting real purchasing power.
(d) Income tax codes increase without taxpayer knowledge, forcing them to pay higher taxes
than anticipated.