Please answer either prompt 1 or 2. Answer all questions asked by the selected prompt. 3-4 pages in length.
Why does a capitalist economy tend to have a high degree of income inequality? Discuss income inequality between a) capitalists and workers, and b) among workers. What institutions or conditions in a capitalist economy tend to reduce the degree of income inequality? Why does the U.S. have a higher degree of income inequality than other developed capitalist countries?
Explain how fiscal policy (government spending and taxes) and monetary policy (determining interest rates) affect the level of output and employment in the economy according to Keynesian theory. What fiscal and monetary policies should the government follow to pull the economy out of a recession?
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