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The expanding "underground" economy creates problems for economic policymakers. What are your views on this?

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Kristelle Balando
Kristelle BalandoLv10
29 Sep 2019

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Related questions

1- Think about our economy. Irrespective of economic conditions, we consume many goods and services in various quantities. There are constant allocation and re-allocation of resources. How does this happen? What economic mechanism helps allocate resources to the preferences of hundreds of millions of people? (Hint: Consumer's sovereignty).

2-In light of the underground economy, and other shortcomings of using GDP as a measuring rod, do you think the government should include estimates of the underground economy in its GDP calculations? Discuss the pros and cons. Use references as needed.

A small reduction in a country's growth rate is a concern to policymakers because

a. this leads to deflation, which makes people feel worse off.

b. a reduction usually leads to future reductions until finally the economy stagnates.

c. policymakers focus too much on economic growth and not enough on increasing savings rates.

d. a small change can have large effects on per capita GDP over time.

Studies indicate that the changes in fiscal and monetary policy affect the 3 economic agents in the economy (households, firms and government). How do the changes in monetary and fiscal policy instruments affect you personally or work-wise? Policymakers who want to stabilize the economy must decide how much to change the money supply, government spending, or taxes. Why is it difficult for policymakers to choose the appropriate strength of their actions? Which method do you think is better in the long run? Why? Some economists and policymakers argue in favor of replacing the current income tax in the USA with a consumption tax. What are your opinions on the issue? How do think such change impacts your income and expenditure pattern? Which tax method do you prefer- Income tax or consumption tax? Why? What are the pros and cons of the two tax methods?

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