We are going to consider a vicious circle of events. Look at the figure shown. Starting at the left-hand end, suppose th

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We Are Going To Consider A Vicious Circle Of Events Look At The Figure Shown Starting At The Left Hand End Suppose Th 1 (56.16 KiB) Viewed 34 times

We are going to consider a vicious circle of events. Look at the figure shown. Starting at the left-hand end, suppose that the central bank pursues a policy of 'cheap money' for many years following a recession, resulting in a sustained boom in stock and bond prices. This changes endowments and raises inequality (the already wealthy stockholders become richer still). After this happens, which of the following changes might cause further inequality in endowments? n - Midden O The increase in stockholder wealth may encourage them to lobby for a reduction in taxation of inherited wealth. If this happens, their children will have greater endowments (relative to others), which is likely to create even further inequality in the future. The beneficiaries of the stock market boom may increase their general consumption. O The boom in the stock market may encourage firms to increase their net investment (since the cost of raising investment funds has fallen). New capital will introduce new technology and change the earnings of people with certain endowments, which could increase the inequality in earnings. O The beneficiaries of the stock market boom may increase their consumption of goods related to new technology and innovations, for example electric cars.