ECONOMICS: Daily Answer Writing Challenge, 17 July 2014
1) Discuss in detail the views of VKRV Rao on deficit financing? (150 words)
2) How would a supply shock such as an exogenous increase in the price of oil, affect the aggregate price level and the level of real output in the new classical model? (200 words)
3) Within the classical model analyze the effects of an increase in the marginal income tax rate. Explain how output, employment and price level are affected. Consider the cases in which the increased revenue produced by the tax increase results in a decline in bond sales to the public and in which it results in lower money creation. ? (300 words)
