Question

Suppose that Raphael, an economist from an AM talk radio program, and Susan, an economist from a school of industrial relations, are arguing Over saving incentives. The following dialogue Shows an excerpt from their debate:
Susan: I think it's safe to say that, in general, the savings rate of households in today's economy is much lower than it really needs to be to sustain an improvement in living standards.
Raphael: I think a switch from the income tax to a consumption tax would bring growth in living standards.
Susan: You really think households would change their saving behavior enough in response to this to make a difference? Because I don't.


The disagreement between these economists is most likely due to_____________ . Despite their differences, with which proposition are two economists chosen at random most likely to agree?

a. Rent ceilings reduce the quantity and quality of available housing.
b. Immigrants receive more in government benefits than they contribute in taxes.
c. Having a single income tax rate would improve economic performance.

Answer 1

Answer:

a. Difference in values

b. a. Rent ceilings reduce the quantity and quality of available housing.

Explanation:

The disagreement between these economists is most likely due to difference in values.

Economists are known to disagree a lot with each other and this is down to them having different values and perspectives with regards to several economic decisions. This is why there are different economic theories subscribed to by economists such as Keynesian and New Classical theories.

Despite these disagreements however, there are certain things they would always agree on and one of those is that rent ceilings reduce the quantity and quality of available housing.

The logic behind this is that imposing a rent ceiling would dissuade real estate investors from putting in more money to develop properties because the rent ceiling would limit the returns that they can get.

Supply of real estate would also fall because less investors would go into the market because they would fear being unable to recoup adequate returns on account of the rent ceiling.