Question 1

If tax rates are raised to avoid a deficit during a recession, then

Accepted Answer

A)  real GDP and deadweight loss from taxes will rise.
B)  real GDP will rise and deadweight loss from taxes will fall.
C)  real GDP will fall and deadweight loss from taxes will rise.
D)  real GDP and deadweight loss from taxes will fall.E) All of the above
F) C) and D)

Question 2

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy.

Accepted Answer

A) True 
 B)False

Question 3

If a central bank had to give up its discretion and follow a rule that required it to keep inflation low,

Accepted Answer

A)  the short-run Phillips curve would shift up.
B)  the short-run Phillips curve would shift down.
C)  the long-run Phillips curve would shift right.
D)  the long-run Phillips curve would shift left.E) None of the above
F) A) and C)

Question 4

Eliminating double-taxation would likely

Accepted Answer

A)  raise saving and primarily benefit people with lower incomes.
B)  raise saving but primarily benefit people with higher incomes.
C)  reduce saving but primarily benefit people with lower incomes.
D)  reduce saving and primarily benefit people with higher income.E) A) and C)
F) B) and C)

Question 5

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Accepted Answer

Those who oppose stabilization policy mo...

Question 6

Are there any situations in which running a budget deficit is justified? Explain.

Accepted Answer

The two primary justifications for runni...

Question 7

When the government has a deficit, a burden is necessarily imposed on future generations of taxpayers.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise the price level?

Accepted Answer

A)  both the shift of aggregate demand and the shift of aggregate supply
B)  the shift of aggregate demand, but not the shift of aggregate supply
C)  the shift of aggregate supply, but not the shift of aggregate demand
D)  neither the shift of aggregate demand nor the shift of aggregate supplyE) C) and D)
F) B) and C)

Question 9

Suppose the nation's price level rises as a result of an increase in aggregate demand and a decrease in aggregate supply which leaves output unchanged. If the Fed is required to follow a rule that stabilizes the price level, what will the Fed do to the money supply and what impact will this have on total output in the economy?

Accepted Answer

To keep the price level stable...

Question 10

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

Accepted Answer

Consumers may recognize that b...

Question 11

A country has a growth rate of 3%. Government spending is 60 billion units of currency and its tax revenues are 32 billion units of currency. The current national debt is 400 billion units of currency. At which inflation rate is its debt-to-income ratio unchanged?

Accepted Answer

A)  2%
B)  3%
C)  4%
D)  5%E) A) and C)
F) All of the above

Question 12

Fluctuations in employment and output result from changes in

Accepted Answer

A)  aggregate demand only.
B)  aggregate supply only.
C)  aggregate demand and aggregate supply.
D)  neither aggregate demand nor aggregate supply.E) B) and D)
F) A) and B)

Question 13

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Accepted Answer

A)  some forms of capital income are taxed twice
B)  if they are large enough, bequests are taxed
C)  both a and b
D)  neither a nor bE) A) and D)
F) None of the above

Question 14

If there is a political business cycle and the Federal Reserve supports the incumbent, then we should expect that prior to elections

Accepted Answer

A)  interest rates and output would rise.
B)  interest rates would rise and output would fall.
C)  interest rates would fall and output would rise.
D)  interest rates and output would fall.E) B) and D)
F) C) and D)

Question 15

Changes in tax laws that reduce taxes more for those who save a lot will

Accepted Answer

A)  favor low-income households.
B)  favor people with high income.
C)  create a more egalitarian society.
D)  unambiguously increase national saving.E) B) and C)
F) C) and D)

Question 16

U.S. public policy discourages saving because

Accepted Answer

A)  other things the same, taxes increase the return from savings.
B)  means tested programs such as Medicaid provide lower benefits to those who did not save.
C)  none of parents' bequest to their children is taxed.
D)  some forms of capital income are taxed twice.E) A) and B)
F) None of the above

Question 17

A reduction in the tax rate on interest income

Accepted Answer

A)  would necessarily raise national saving.
B)  would primarily benefit the wealthy.
C)  both a and b are correct.
D)  None of the above are correct.E) None of the above
F) A) and C)

Question 18

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Accepted Answer

A)  high and the reduction is unexpected.
B)  high and the reduction is expected.
C)  low and the reduction is unexpected.
D)  low and the reduction is expected.E) A) and B)
F) A) and C)

Question 19

A law that requires the money supply to grow by a fixed percentage each year would eliminate

Accepted Answer

A)  the time inconsistency problem, but not political business cycles.
B)  the political business cycle, but not the time inconsistency problem.
C)  both the time inconsistency problem and political business cycles.
D)  neither the time inconsistency problem nor political business cycles.E) All of the above
F) A) and B)

Question 20

One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?

Accepted Answer

A temporar...

Exam 36: Six Debates Over Macroeconomic Policy

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Correct Answer
verified
Those who oppose stabilization policy mo...
View Answer

One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?

Correct Answer
verified
A temporar...
View Answer

If tax rates are raised to avoid a deficit during a recession, then

Correct Answer
verified

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Correct Answer
verified

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise the price level?

Correct Answer
verified

A reduction in the tax rate on interest income

Correct Answer
verified

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy.

Correct Answer
verified

U.S. public policy discourages saving because

Correct Answer
verified

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Correct Answer
verified

When the government has a deficit, a burden is necessarily imposed on future generations of taxpayers.

Correct Answer
verified

Correct Answer
verified
To keep the price level stable...
View Answer

If a central bank had to give up its discretion and follow a rule that required it to keep inflation low,

Correct Answer
verified

Fluctuations in employment and output result from changes in

Correct Answer
verified

A law that requires the money supply to grow by a fixed percentage each year would eliminate

Correct Answer
verified

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

Correct Answer
verified
Consumers may recognize that b...
View Answer

Changes in tax laws that reduce taxes more for those who save a lot will

Correct Answer
verified

If there is a political business cycle and the Federal Reserve supports the incumbent, then we should expect that prior to elections

Correct Answer
verified

Are there any situations in which running a budget deficit is justified? Explain.

Correct Answer
verified
The two primary justifications for runni...
View Answer

A country has a growth rate of 3%. Government spending is 60 billion units of currency and its tax revenues are 32 billion units of currency. The current national debt is 400 billion units of currency. At which inflation rate is its debt-to-income ratio unchanged?

Correct Answer
verified

Eliminating double-taxation would likely

Correct Answer
verified

Exam 36: Six Debates Over Macroeconomic Policy

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Correct AnswerverifiedThose who oppose stabilization policy mo...View AnswerShow Answer

One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?

Correct AnswerverifiedA temporar...View AnswerShow Answer

If tax rates are raised to avoid a deficit during a recession, then

Correct AnswerverifiedShow Answer

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Correct AnswerverifiedShow Answer

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise the price level?

Correct AnswerverifiedShow Answer

A reduction in the tax rate on interest income

Correct AnswerverifiedShow Answer

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy.

Correct AnswerverifiedShow Answer

U.S. public policy discourages saving because

Correct AnswerverifiedShow Answer

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Correct AnswerverifiedShow Answer

When the government has a deficit, a burden is necessarily imposed on future generations of taxpayers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedTo keep the price level stable...View AnswerShow Answer

If a central bank had to give up its discretion and follow a rule that required it to keep inflation low,

Correct AnswerverifiedShow Answer

Fluctuations in employment and output result from changes in

Correct AnswerverifiedShow Answer

A law that requires the money supply to grow by a fixed percentage each year would eliminate

Correct AnswerverifiedShow Answer

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

Correct AnswerverifiedConsumers may recognize that b...View AnswerShow Answer

Changes in tax laws that reduce taxes more for those who save a lot will

Correct AnswerverifiedShow Answer

If there is a political business cycle and the Federal Reserve supports the incumbent, then we should expect that prior to elections

Correct AnswerverifiedShow Answer

Are there any situations in which running a budget deficit is justified? Explain.

Correct AnswerverifiedThe two primary justifications for runni...View AnswerShow Answer

A country has a growth rate of 3%. Government spending is 60 billion units of currency and its tax revenues are 32 billion units of currency. The current national debt is 400 billion units of currency. At which inflation rate is its debt-to-income ratio unchanged?

Correct AnswerverifiedShow Answer

Eliminating double-taxation would likely

Correct AnswerverifiedShow Answer

Correct Answer
verified
Those who oppose stabilization policy mo...
View Answer

Correct Answer
verified
A temporar...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
To keep the price level stable...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Consumers may recognize that b...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The two primary justifications for runni...
View Answer

Correct Answer
verified

Correct Answer
verified