This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: ECON 101B: Section 22 Handout Date: 04/7/2011 Question 1 According to the Lucas critique, why should policy makers not rely upon the Phillips curve relationship between in&ation and unemployment as the formula for monetary policy? Question 2 Describe how automatic stabilizers can help to "cool o/" an economic boom. Which of the following cannot be considered an automatic stabilizer: income tax, investment tax credit, sales tax, corporate tax. Question 3 Many economists advocate a reduction in the capital gains tax in order to stimulate saving and investment. 1. Brie&y explain these economistsreasoning. 2. Other economists believe that a capital gains tax reduction on past acquisitions would reduce tax revenues without stimulating additional saving and investment. Brie&y explain their reasoning. 3. Instead, this second group of economists suggests that saving and investment could be stimulated more by focusing all of the tax reduction on new acquisitions. This action would allow the tax ratesacquisitions....
View Full Document