Question 1

The Federal Reserve will tend to tighten monetary policy when

Accepted Answer

A)  interest rates are rising too rapidly.
B)  it thinks the unemployment rate is too high.
C)  the growth rate of real GDP is quite sluggish.
D)  it thinks inflation is too high today, or will become too high in the future.E) B) and C)
F) A) and D)

Question 2

Suppose that a country has an inflation rate of about 2 percent per year and a real growth rate of about 3 percent per year.Suppose also that it has nominal GDP of about 200 billion units of currency.It can have a deficit of just under

Accepted Answer

A)  4 billion units without raising the debt-to-income ratio.
B)  6 billion units without raising the debt-to-income ratio.
C)  10 billion units without raising the debt-to-income ratio.
D)  12 billion units without raising the debt-to-income ratio.E) B) and C)
F) A) and B)

Question 3

IRA,401(k) ,403(b) ,and Keogh plans

Accepted Answer

A)  impose added taxes on those who save.
B)  place no limits on the amount people can deposit into these programs.
C)  impose penalties for withdrawals except under certain circumstances.
D)  None of the above is correct.E) None of the above
F) A) and B)

Question 4

Those who desire that policymakers stabilize the economy would advocate which of the following when aggregate demand is insufficient to ensure full employment?

Accepted Answer

A)  decrease the money supply
B)  decrease taxes
C)  decrease government expenditures
D)  None of the above is correct.E) B) and C)
F) A) and C)

Question 5

Suppose that the government goes into deficit in order to help local school districts build better schools.Does this burden future generations?

Accepted Answer

The benefits of the project ac...

Question 6

Suppose the tax rate on interest income from saving were reduced.

Accepted Answer

A)  The income effect, but not the substitution effect, would tend to reduce private saving.
B)  The substitution effect, but not the income effect, would tend to reduce private saving.
C)  Both the income and substitution effect would tend to reduce private saving.
D)  Neither the income nor the substitution effect would tend to reduce private saving.E) A) and B)
F) A) and C)

Question 7

Some studies have found that saving is not very sensitive to the rate of return on saving.

Accepted Answer

A) True 
 B)False

Question 8

Means-tested government programs tend to reduce saving.What are means-tested programs and how do they reduce saving?

Accepted Answer

Means-tested benefits give assistance,or...

Question 9

A permanent reduction in inflation would

Accepted Answer

A)  permanently reduce shoeleather costs and permanently lower unemployment
B)  permanently reduce shoeleather costs and temporarily raise unemployment
C)  temporarily reduce shoeleather costs and temporarily lower unemployment
D)  temporarily reduce shoeleather costs and temporarily raise unemploymentE) A) and B)
F) A) and C)

Question 10

Which of the following is not correct?

Accepted Answer

A)  Government debt cannot continue to rise forever.
B)  If the government uses funds to pay for useful programs, on net the debt need not burden future generations.
C)  Social Security transfers wealth from younger generations to older generations.
D)  The average U.S.citizens' share of the government debt represents less than 2 percent of her lifetime income.E) C) and D)
F) A) and B)

Question 11

Policymakers following a "lean against the wind" policy would

Accepted Answer

A)  increase government expenditures when output is low and decrease them when output is high.
B)  increase government expenditures when output is low and do nothing when output is high.
C)  decrease government expenditures when output is low and increase them when output is high.
D)  decrease government expenditures when output is high and do nothing when output is low.E) A) and C)
F) B) and D)

Question 12

In the fall of 2005,consumers indicated that they were less optimistic about the future of the economy.This change in sentiment would likely

Accepted Answer

A)  shift aggregate demand left.
B)  decrease output.
C)  increase unemployment.
D)  All of the above are correct.E) A) and C)
F) All of the above

Question 13

Which of the following would transfer wealth from old to young?

Accepted Answer

A)  increases in the budget deficit
B)  decreased building of highways and bridges
C)  more generous education subsidies
D)  indexation of Social Security benefits to inflationE) A) and B)
F) C) and D)

Question 14

A balanced budget would require that when real GDP was growing rapidly,

Accepted Answer

A)  the government raise taxes or cut expenditures.This would increase the magnitude of economic fluctuations.
B)  the government raise taxes or cut expenditures.This would decrease the magnitude of economic fluctuations.
C)  the government cut taxes or raise expenditures.This would increase the magnitude of economic fluctuations.
D)  the government cut taxes or raise expenditures.This would decrease the magnitude of economic fluctuations.E) C) and D)
F) None of the above

Question 15

A nation's saving rate is not a primary determinant of its long-run economic prosperity.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an argument against requiring the government to balance its budget?

Accepted Answer

A)  Some economists believe that rules are better than discretion.
B)  Per-capita debt is small relative to lifetime income.
C)  The effect of deficit spending on future generations depends in part on what the government buys.
D)  Other government policies also redistribute income across generations.E) C) and D)
F) All of the above

Question 17

The effects of a decline in the value of financial assets,such as stocks,on consumption and the economy might be offset by

Accepted Answer

A)  increasing government spending.
B)  decreasing the money supply.
C)  increasing taxes.
D)  None of the above is correct.E) A) and C)
F) B) and D)

Question 18

Which of the following would likely increase private saving?

Accepted Answer

A)  expansion of IRA type accounts and a consumption tax
B)  expansion of IRA type accounts, but not a consumption tax
C)  a consumption tax, but not expansion of IRA type accounts
D)  neither expansion of IRA type accounts nor a consumption taxE) B) and C)
F) All of the above

Question 19

Tax laws do not give preferential treatment to some kinds of retirement saving.

Accepted Answer

A) True 
 B)False

Question 20

In practice,the problems created by time inconsistency and the political business cycle appear to be quite serious.

Accepted Answer

A) True 
 B)False

Exam 36: Five Debates Over Macroeconomic Policy

In the fall of 2005,consumers indicated that they were less optimistic about the future of the economy.This change in sentiment would likely

Correct AnswerverifiedShow Answer

A permanent reduction in inflation would

Correct AnswerverifiedShow Answer

A nation's saving rate is not a primary determinant of its long-run economic prosperity.

Correct AnswerverifiedShow Answer

IRA,401(k) ,403(b) ,and Keogh plans

Correct AnswerverifiedShow Answer

Suppose that the government goes into deficit in order to help local school districts build better schools.Does this burden future generations?

Correct AnswerverifiedThe benefits of the project ac...View AnswerShow Answer

Tax laws do not give preferential treatment to some kinds of retirement saving.

Correct AnswerverifiedShow Answer

Which of the following is not an argument against requiring the government to balance its budget?

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Which of the following is not correct?

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Which of the following would likely increase private saving?

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Those who desire that policymakers stabilize the economy would advocate which of the following when aggregate demand is insufficient to ensure full employment?

Correct AnswerverifiedShow Answer

Policymakers following a "lean against the wind" policy would

Correct AnswerverifiedShow Answer

Some studies have found that saving is not very sensitive to the rate of return on saving.

Correct AnswerverifiedShow Answer

The effects of a decline in the value of financial assets,such as stocks,on consumption and the economy might be offset by

Correct AnswerverifiedShow Answer

Suppose that a country has an inflation rate of about 2 percent per year and a real growth rate of about 3 percent per year.Suppose also that it has nominal GDP of about 200 billion units of currency.It can have a deficit of just under

Correct AnswerverifiedShow Answer

The Federal Reserve will tend to tighten monetary policy when

Correct AnswerverifiedShow Answer

Suppose the tax rate on interest income from saving were reduced.

Correct AnswerverifiedShow Answer

A balanced budget would require that when real GDP was growing rapidly,

Correct AnswerverifiedShow Answer

In practice,the problems created by time inconsistency and the political business cycle appear to be quite serious.

Correct AnswerverifiedShow Answer

Which of the following would transfer wealth from old to young?

Correct AnswerverifiedShow Answer

Means-tested government programs tend to reduce saving.What are means-tested programs and how do they reduce saving?

Correct AnswerverifiedMeans-tested benefits give assistance,or...View AnswerShow Answer

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Means-tested benefits give assistance,or...
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