The deadweight loss of a tax is
a. the reduction in economic welfare of taxpayers that exceeds the revenue raised by the government.
b. the improved efficiency created as people reallocate resources according to the tax incentive rather than the true costs and benefits.
c. the loss in tax revenues.
d. Both a and b are correct.
a
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Currency traders expect the value of the dollar to fall. What effect will this have on the demand for dollars and the supply of dollars in the foreign exchange market?
A) Demand for dollars will decrease, and supply of dollars will decrease. B) Demand for dollars will increase, and supply of dollars will decrease. C) Demand for dollars will increase, and supply of dollars will increase. D) Demand for dollars will decrease, and supply of dollars will increase.
A purchase of foreign assets by a central bank has the same impact on the monetary base as:
A) an open market purchase of government securities B) an open market sale of government securities C) an increase in the discount rate D) a reduction in the interest on reserves