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Homework answers / question archive / 1) Why should monetary policy be made by rule rather than discretion? a
1) Why should monetary policy be made by rule rather than discretion?
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a. |
because there is a clear consensus among economists about what a good monetary policy rule would be |
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b. |
because rules would eliminate the political business cycle |
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c. |
because rules respond to any random shocks in the economy |
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d. |
because rules create time inconsistency |
2. Why does Canadian public policy discourage saving?
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a. |
because, other things the same, taxes increase the return from savings |
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b. |
because means-tested programs such as Old Age Security provide greater benefits to those who saved |
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c. |
because some forms of capital income are not taxed |
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d. |
because capital gains are taxed heavily |
3. Which of the following is an argument against a tax system that encourages savings?
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a. |
that individuals know better that the government how much to save |
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b. |
that saving is not an important determinant of a nation's ability to produce output |
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c. |
that rich people would bear the burden of such a tax system |
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d. |
that such a tax system would increase inequality |
Answer:
Q1 option A is correct
New classicals and real business cycle supports believe that discretionary monetary policy has no significant effect on output and employment which cannot be achieved by aggregate demand management .
Q2 option B
Q3 option B
Idle Savings acts as leakages in the economy which leads to lower production and output
