If prices in the economy rise, then
A) the purchasing power of a dollar rises.
B) the purchasing power of a dollar stays constant.
C) the purchasing power of a dollar declines.
D) the purchasing power of a dollar cannot be determined.
Answer: C
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You are a government tax policy advisor. You are asked how to convert the U.S. income tax into a consumption tax. Which of the following is the best response?
a. It already is a consumption tax. b. Flatten the brackets into one rate. c. Exclude the first $25,000 of income. d. Allow unlimited contributions into IRAs
The equation of exchange is
A) an assumption that is not always true. B) true in the short run but not always in the long run. C) an accounting identity and therefore is always true. D) a theory developed at the Federal Reserve.