Read the article titled, “The Good Times Can Roll On,” by Edward Prescott and Lee E. Ohanian
Assess the claims made by Prescott and Ohanian. Moreover, identify the theoretical framework consistent with these claims. Explain the assumptions that lead to such conclusions. Provide critiques from the perspective of the opposing theoretical framework.
You are not limited to the following, but here are a few claims to consider:
- If policies are reformed to increase incentives for market economic activity, then investment and labor input expand as the economy rises to a higher growth path.
- The 2007-09 recession was due to policies changes that depressed the incentives for market activity.
- Growth in labor inputs accelerate GDP growth.
- A lower US corporate-tax rate enhances economic growth and makes the US more competitive.
- The rise in health-care costs is the most important reason wages have not increased more for US workers.
- Basic economic theory tells us that a lower corporate-tax rate will increase investment and hiring.
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