How will the average bank behavior change

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Question: Again, think about the extreme case of crowding out known as "Ricardian equivalence." In real life, few citizens buy or sell government bonds directly; instead, normal people put their money in a bank (or invest it in a mutual fund), and then their bank (or mutual fund) uses that money to buy government bonds.

a. So does a tax cut mean banks will get more deposits, fewer deposits, or can't you tell with the information given?

b. How will the average bank's behavior change as a result of this tax cut, taking your response to part a into account?

Reference no: EM131834661

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