Which of the following statements about taxation is TRUE?
A) Increasing taxes will always increase tax revenues.
B) Static tax analysis recognizes that an increase in taxation could lead to a decrease in tax revenues.
C) Dynamic tax analysis assumes that an increase in taxation will leave the tax base unchanged.
D) There is a tax rate at which tax revenues are maximized.
Answer: D
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When there is excess demand for a product in a market,
a. price will tend to fall. b. price must be below the equilibrium price. c. price must be above the equilibrium price. d. producers will reduce output and sales will fall.
Which of the following explains why banks try to keep their holdings of excess reserves low?
A. To escape Fed penalties. B. To please bank examiners. C. To keep the money multiplier low. D. To maximize profits.