In the debate about whether the central bank should aim for zero inflation, which areas of disagreement involve positive statements and which involve normative judgments?
| Whether the costs of inflation are large or small |
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| Determining the size of the costs of reducing inflation |
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| Whether the Fed should reduce inflation to zero |
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Suppose the federal government cuts taxes and increases spending, raising the budget deficit to 12 percent of GDP. If nominal GDP is rising 5 percent per year, such budget deficits selector 1
sustainable forever. As a result, future generations will likely pay selector 2
- higher
- roughly equal
- lower
taxes.
For each of the following policies, indicate if it redistributes income from young to old generations or from old to young generations.
| An increase in the budget deficit |
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| More generous subsidies for education loans |
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| Greater investments in highways and bridges |
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| An increase in Social Security benefits |