Explain the principle of neutrality with respect to taxes
What will be an ideal response?
All else equal, taxes that are neutral with respect to economic decisions (that is, taxes that do not distort economic decisions) are generally preferable to taxes that distort economic decisions. Taxes that are not neutral impose excess burdens.
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From 2000 to 2014, the dollar depreciated substantially against other currencies. This drop in value most likely benefitted
A) European citizens traveling in the U.S. B) U.S. citizens traveling in Europe. C) U.S. manufacturers importing parts from abroad. D) U.S. citizens purchasing foreign-made automobiles.
If Brazil experienced a period of rapid and unexpected inflation, causing Brazilians to lose confidence in the local currency (real) as a store of value, which of the following would be least likely to occur?
a. The value of the Brazilian real would depreciate on the foreign exchange market. b. Foreign currency would be used as a substitute for the real. c. The real would be used as a store of value in other countries d. Brazilians would save less. e. The purchasing power of the real would decrease.