Business, 21.04.2020 22:43 luella614ox1zum

In his book The Optimum Quantity of Money, Milton Friedman talks about a helicopter dropping $2,000 over a community. The cash dropped by the helicopter gives the people in this community more money to spend. A tax cut also has the same effect: it increases disposable income. Suppose tax cuts, analogous to the helicopter drop, were proposed as a method to shift the labor demand curve to the right following a recession. How effective do you think this policy would be? A. Somewhat effective, but only to the extent that most of the tax cut is concurrently spent on domestic output, that multiplier effects occur, and crowding out is small. B. Very effective, since tax cuts are concentrated among wealthy individuals who usually spend all or most of the extra income. C. Not effective, since the majority of the tax cut is saved and any portion spent leads to complete crowding out. D. Not effective, since the tax cuts go to consumers rather than to the employers (demanders) of labor.

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In his book The Optimum Quantity of Money, Milton Friedman talks about a helicopter dropping $2,000...