Suppose there are two policy options facing a vote in the Senate. In the first, government spending will increase $50 billion, while the second option is to cut taxes by $50 billion. A Keynesian economist would argue for
A) the spending option because it has a bigger impact on total spending. The spending directly raises total spending plus it works through the multiplier, while the tax cut only works through the multiplier.
B) the tax option because it is easier to pass. The effects on total spending would be identical.
C) the spending option because it won't affect the deficit the way the tax cut would.
D) the tax option because it also affects the incentives workers face. Long-run aggregate supply will increase with the tax cut, but not with the spending increase.
A
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Securitization refers to
A) changing the mix in a financial portfolio away from stocks and toward bonds. B) selling directly to investors loans or securities that were formerly held by financial intermediaries. C) banks insisting that collateral be supplied on previously unsecured loans. D) reducing the exposure of a bank's portfolio to interest rate risk.
Suppose a government tried to mandate a real wage above the equilibrium real wage. Assuming that factor markets are otherwise free and competitive, explain why the higher real wage would fail to increase the share of labor income in national income
What will be an ideal response?