If the money supply is growing at a rate of 6 percent a year, real GDP is growing at a rate of 3 percent, and velocity is constant, what will the inflation rate be?
a. Writing in the Wall Street Journal, Martin Feldman, an economist at Harvard University, argues that Behavior responses of taxpayers to the cut in the marginal tax rates enacted in 1986 resulted in an enormous rise in taxes paid, particularly by those who experienced the greatest reductions in marginal tax rates. How is it possible for cuts in marginal tax rates to result in an increase in total taxes collected?
b. In 2010, $1.00 U.S. bought 8.24 Chinese yuan and in 2012 it bought 6.64 Chinese yuan. How many U.S. dollars could 1 Chinese yuan purchase in 2010 and 2012?