Reference no: EM132008003

The state of California has a chronic budget deficit. In 2009 and 2010 the state has raised taxes and fees and cut spending, which slowed the economic expansion in this state. The state government is doing this despite the bad economic impact because: (a) it has a balanced-budget requirement. (b) it has automatic destabilizers. (c) a progressive tax policy that calls for higher taxes each year. (d) it had to balance out the Federal tax cuts and increased spending.

Right now the United States has some of the lowest interest rates in the world. This would: (a) cause the USD to appreciate more foreign investors buy dollars to loan money in the United States because of low interest rates. (b) cause the USD to depreciate as fewer foreign investors buy dollars to loan money in the United States because of low interest rates. (c) not affect the value of the USD because interest rates are set by the supply and demand for dollars in the United States, while exchange rates are set by the supply and demand for dollars in the Rest of the World. (d) cause interest rates to go up since what goes down must come up.