Answer True or False for each of the following. The Monetarists believe that fiscal policy results...

Answer True or False for each of the following.

The Monetarists believe that fiscal policy results in a high level of crowding out.

Supply side economists believe that the government skews the incentive system.

The R-E economists believe that money affects real economic variables.

The Monetarists admit that wages and prices are sticky in the short run.

According to supply-siders tax cuts should go to households.

According to Milton Friedman, the Fed should increase the money supply at a constant rate each year.

According to the original supply-siders, raising taxes can raise tax revenue some of the time.

Solutions

Expert Solution

The statement “The Monetarists believe that fiscal policy results in a high level of crowding out” is True.

The statement “Supply side economists believe that the government skews the incentive system” is True. It proposes that lesser role of the government for instance lower taxes creates incentives to save and invest.

The statement “The R-E economists believe that money affects real economic variables” is True. According to the rational expectation theory in the short run monetary authority can affect real economic variables by ensuring that people don’t develop expectation about their intention.

The statement “The Monetarists admit that wages and prices are sticky in the short run” is False.

The statement “According to supply-siders tax cuts should go to households” is False. Supply-siders argue for lower marginal tax rate for individuals and corporates.

The statement “According to Milton Friedman, the Fed should increase the money supply at a constant rate each year” is True.

The statement “According to the original supply-siders, raising taxes can raise tax revenue some of the time” is False.

Rahul Sunny answered 1 year ago

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