The following data is for the small, recently independent island nation of Hibiscus: Tax rate: 10% flat
Question:
The following data is for the small, recently independent island nation of Hibiscus:
Tax rate: 10% flat tax on all citizens since its independence in 2010
Labor supply: 200 workers in 2010, and has grown by 3 percent each successive year
Inflation rate: Has fluctuated between 2 percent and 3 percent annually since 2010
Unemployment rate: A constant 4.5 percent each year since 2010
Exchange rate: Since 2010 has fluctuated by more than 20 percent, both up and down, relative to the rates of major currencies
Interest rate: Has risen from 2.5 percent to 3.5 percent since 2010
Explain why macroeconomists would find it difficult to test the following hypotheses for Hibiscus:
a. Tax rates affect the supply of labor
b. The inflation rate affects the unemployment rate
c. The exchange rate affects the interest rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...
Step by Step Answer:
Principles of Macroeconomics
ISBN: 978-0134078809
12th edition
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster