How does the market mechanism distribute income?
The market mechanism distributes income through its payments to the factors of production. Everyone owns some potentially usable factors of production. Many people have only their own labor; but some people also have funds that they can lend, land that the owner can rent, or natural resources that they can sell at prices determined by supply and demand. So the distribution of income in a market economy is determined by the prices of the factors of production and by the amounts that are employed.
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When the economy is at full employment the unemployment rate equals the natural unemployment rate
Indicate whether the statement is true or false
Explain why it makes a difference if consumers consider a tax cut temporary rather than permanent. What does this explanation tell us about the importance of government credibility? Put this in the context of the 2008 and 2009 tax cuts favored by President Bush and President Obama.
What will be an ideal response?