808 PART THIRTEEN FINAL THOUGHTS 1. What causes the lags in the effect of monetary and fiscal policy on aggregate demand? What are the implications of these lags for the debate over active versus passive policy? 2. What might motivate a central banker to cause a political business cycle? What does the political business cycle imply for the debate over policy rules? 3. Explain how credibility might affect the cost of reducing inflation. 4. Why are some economists against a target of zero inflation? 5. Explain two ways in which a government budget deficit hurts a future worker. 6. What are two situations in which most economists view a budget deficit as justifiable? 7. Give an example of how the government might hurt young generations, even while reducing the government debt they inherit. 8. Some economists say that the government can continue running a budget deficit forever. How is that possible? 9. Some income from capital is taxed twice. Explain.
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