The liquidity trap occurs when the demand for money
Is perfectly interest elastic
Is perfectly interest inelastic
Means that an increase in money supply leads to a fall in the interest rate
Means that an increase in the money supply leads to an increase in the interest rate
In a regressive tax system
The amount of tax paid increases with income
The average rate of tax decreases with more income
The average rate of tax falls as income increases
The average rate of tax is constant as income increases
Open market operations occur when the government
Reduces spending
Buys and sells bonds and securities
Increases taxation
Increases the exchange rate
If the economy grows the governments budget position should automatically
Worsen
Improve
Stay the same
Decrease with inflation
The marginal rate of tax paid is
The total tax paid/ total income
Total income/ total tax paid
Change in the tax paid/ change in income
Change in income/ change in tax paid
A government might use tax to
Discourage consumption of goods with positive externalities
Discourage consumption of merit goods
Discourage consumption of public goods
Discourage consumption of goods with negative externalities
