ehavioural Finance final

Perspectives on the economic crisis and how public policy should deal with it range from the “Modern Monetary Theory” view, best summarised in “MOSLER’S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it” to the “Reverse Ricardian Equivalence ” proposition that austerity now will cause the public to spend in the knowledge that future tax payments will be lower.

Assess these policy recommendation extremes in the light of endogenous money theory, and suggest what should be done by the public sector to address this crisis. Your suggested response is not limited to monetary and fiscal policy, but can include regulatory and legal reforms as well.