Predict what would happen to the risk premiums ofmunicipal bonds if the federal government guaranteestoday that it will pay creditors if municipal governments default on their payments. Do you think that itwill then make sense for municipal bonds to be exemptfrom income taxes?
Predict what would happen to the risk premiums ofmunicipal bonds if the federal government guaranteestoday that it will pay creditors if municipal governments default on their payments. Do you think that itwill then make sense for municipal bonds to be exemptfrom income taxes?
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: Six Debates Over Macroeconomic Policy
Section: Chapter Questions
Problem 6PA
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Question
Predict what would happen to the risk premiums of
municipal bonds if the federal government guarantees
today that it will pay creditors if municipal governments default on their payments. Do you think that it
will then make sense for municipal bonds to be exempt
from income taxes?
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