Use a leaky bucket to discuss the trade off between income equality and economic efficiency
What will be an ideal response?
If society decides to transport water (income) from the higher-income groups to lower-income groups, then it can do so in a bucket. The bucket, however, has some leaks that represent the loss in productive output that comes from reduced incentives to work, save, or invest by both groups, and from losses arising from the bureaucratic cost of managing the programs. Society must decide how much leakage from the bucket it will accept in the effort to redistribute income.
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In the long run, the effect of a reduction in the money supply is to
A) decrease both the price level and real Gross Domestic Product (GDP). B) decrease real Gross Domestic Product (GDP) only. C) decrease the price level and increase real Gross Domestic Product (GDP). D) decrease the price level only.
People who reject all theories because they prefer to rely on experience
A) actually rely on unrecognized theories. B) don't know any theories and are trying to cover up their ignorance. C) tend to accomplish more but also to make more mistakes. D) tend to make fewer mistakes but also to accomplish less. E) value science more than theory.