In the case of a specific tax, tax incidence is independent of who pays
A) only when supply and demand elasticities are not constant.
B) only when the tax is collected from consumers.
C) in most but not all cases.
D) in all cases.
D
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If the Federal Reserve announces that its target for the federal funds rate is falling from 3 percent to 2.25 percent, how do you expect workers and firms to react?
A) As long as the Fed's announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation. B) As long as the Fed's announcement is credible, workers and firms will decrease their consumption and investment spending, which will decrease aggregate demand and inflation. C) Workers and firms will incorporate the decrease in interest rates into their expectations of inflation, and they will expect inflation to fall as a result of Fed's policy announcement. D) If the Fed's announcement is not credible, workers and firms will not expect inflation to rise so they will increase their consumption and investment spending, which will decrease aggregate demand and increase inflation.
Assume that there is a fixed rate of interest on contracts for borrowers and lenders. If unanticipated inflation occurs in the economy, then:
A. borrowers are hurt, but lenders benefit. B. both lenders and borrowers benefit. C. both lenders and borrowers are hurt. D. lenders are hurt, but borrowers benefit.