Question

Question 61 pts

The main disagreement among economists about the Laffer curve is about whether

increases in taxes will decrease GDP.

the effect of tax decreases on GDP will be so big as to raise government revenues when taxes are cut.

cutting marginal tax rates will increase the incentive to work.

cutting government entitlements will increase tax revenue.

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Question 91 pts

The money supply is growing at 4% per year. All other things equal, Friedman says this will result in:

a rise in production and employment of 4% per year in both the short and long run.

an inflation rate of approximately 1% in the long run.

a rise in production and employment of 1% per year in the long run.

an inflation rate of approximately 4% in the short run.

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Answer 1

Solution

The main disagreement among economists about the Laffer curve is about whether

the effect of tax decreases on GDP will be so big as to raise government revenues when taxes are cut. Option B. the effect of tax decreases on GDP will be so big as to raise government revenues when taxes are cut. is correct Option . The money supply is growing at 4% per year. All other things equal, Friedman says this will result in: a rise in production and employment of 4% per year in both the short and long run. Option A . a rise in production and employment of 4% per year in both the short and long run. is Correct Option .