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 2015 Labor supply: 200 workers in 2015, and has grown by 3 percent each successive year Inflation rate: Has fluctuated between 2 percent and 3 percent annually since 2015 Unemployment rate: A constant 4.5 percent each year since 2015 Exchange rate: Since 2015 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 2015 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.
Step by Step Answer:
Principles Of Macroeconomics
ISBN: 9781292303826
13th Global Edition
Authors: Karl E. Case,Ray C. Fair , Sharon E. Oster