Draw a decision tree and indicate what the professor should do. Use net two-year savings for your tree’s payoffs (tax dollars saved less any legal expenses), do not discount anything, and assume 2.75% as the City’s tax rate for both years. Make sure to indicate the professor’s overall expected tax savings based on his decisions, and indicate his optimal decisions in the tree using bold lines. (Use the standard expected value approach throughout).

Crowding out is a phenomenon focused upon most by the macroeconomists of whereby a government deficit interest rates, which in turn private investment spending. this group also believed that fiscal policy is the only thing that can lower natural unemployment. is just as effective in countering recessions as monetary policy. can be used most of the time, but monetary policy becomes a better option when velocity is fluctuating. should be used only if the central bank follows a monetary policy rule. faces problematic lags in propagating changes throughout the economy.