Question #3 A. Two important policy proposals during the recession were I) equity injections into banks, and 2} mortgage restructuring to write-down the principal on underwater mortgages. Explain the logic for these policy proposals in terms of two different theories of what caused the Great Recession. Mian and Su provide empirical evidence for the causes of the Great Recession by comparing outcomes across US counties. They interpret the variation they observe across US counties as a \"natural experiment\" that can be used to assess the causes ot'the Great Recession. Explain the logic for the natural experiment, and why Mian and Su argue it provides strong evidence for the role of household debt accumulation and the housing bust in the Great Recession. Econ 134, Spring 2023 Instructor: Yuriy Gorodnichenko; Homework #4 Due: 8pm, April 10 (bcourses) Consider the interpretation of the Great Recession proposed by Gertler and Gilchrist. What would constitute a \"natural experiment" similar to the one in Part B designed to test Gertler and Gilchrist's theory? Would it \"help\" in developing your empirical strategy if the banks in particular states tended to be particularly invested in mortgage backed securities? Does the increasing prevalence of interstate banking in the US since the 1980's make this kind of \"natural experiment\" easier or harder to nd? Ergianatogy Note: Part A of this question asks you to discuss aiternate theories of the Great Recession. But how might you decide which one you believe? Empirical economists spend much of their time coming up with creative ways to test whether a theory is supported by the data. Parts 3 and C ask you to think through empiricat tests of the theories you discuss in Part A of the