1. Does the existence of credit market imperfections imply that there is a useful role for...

Question

1. Does the existence of credit market imperfections imply that there is a useful role for government tax policy?

2. What are two sources of credit market imperfections?

3. Explain how a default premium can arise, and what would cause it to increase.

David · Accepted Answer

1. Does the existence of credit market imperfections imply that there is a useful role for government 
tax policy?
Answer: The existence of imperfection in credit market, surely, implies that there is a useful role for 
government tax policy. Because, when there is a instance of tax cut, the government behaves as a 
bank that makes loans available to at a rate that is below then the market rates. This leads to 
general economic welfare. 
2. What are two sources of credit market imperfections? 
Answer:

1. Does the existence of credit market imperfections imply that there is a useful role for government tax policy? 2. What are two sources of credit market imperfections? 3. Explain how a default...

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