Question 1

A program to reduce inflation is likely to have higher 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 2

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 C)
F) None of the above

Question 3

Part of the argument against deficits is that they

Accepted Answer

A)   increase interest rates and investment.
B)   increase interest rates and decrease investment.
C)   decrease interest rates and investment.
D)   decrease interest rates and increase investment.E) B) and D)
F) A) and B)

Question 4

Which of the following is not an argument in favor of reforming the tax laws to encourage saving?

Accepted Answer

A)   Saving is a key determinant of long-run prosperity.
B)   Current tax laws discourage saving for the purpose of leaving a large bequest.
C)   The substitution effect of a higher return to saving may be about equal to the income effect of a higher return to saving.
D)   The tax code currently taxes some forms of capital income twice.E) None of the above
F) B) and D)

Question 5

A recession has no benefit to society-it represents a sheer waste of resources.

Accepted Answer

A) True 
 B)False

Question 6

The major driver of future federal spending is rising health care costs.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Suppose that a country has an inflation rate of about 2 percent per year and a real GDP growth rate of about 3 percent per year.Then the government can have a deficit of about

Accepted Answer

A)   6 percent of GDP without raising the debt-to-income ratio.
B)   5 percent of GDP without raising the debt-to-income ratio.
C)   1.5 percent of GDP without raising the debt-to-income ratio.
D)   1 percent of GDP without raising the debt-to-income ratio.E) None of the above
F) All of the above

Question 9

Identify three government policies that discourage saving.

Accepted Answer

First,the returns to saving are heavily ...

Question 10

Explain why policy lags could make stabilization policies counterproductive.

Accepted Answer

As the textbook explains,it takes time t...

Question 11

An individual would suffer lower losses from an unexpectedly higher inflation rate if

Accepted Answer

A)   she held much currency and owned few bonds.
B)   she held much currency and owned many bonds.
C)   she held little currency and owned few bonds.
D)   she held little currency and owned many bonds.E) A) and C)
F) All of the above

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Suppose that the country of Aquilonia has an inflation rate of about 2 percent per year and a real growth rate of about 1 percent per year.Suppose also that it has nominal GDP of about 200 billion units of currency and current nominal national debt of 150 billion units of domestic currency.Which of the following government spending and taxation figures will not raise the debt-to-income ratio?

Accepted Answer

A)   government spending equal to 20 billion units and tax collections equal to 16 billion units
B)   government spending equal to 20 billion units and tax collections equal to 14 billion units
C)   government spending equal to 20 billion units and tax collections equal to 10 billion units
D)   government spending equal to 20 billion units and tax collections equal to 8 billion unitsE) B) and C)
F) B) and D)

Question 14

A higher rate of return on saving has

Accepted Answer

A)   an income effect that discourages saving and a substitution effect that encourages saving.
B)   an income effect that encourages saving and a substitution effect that discourages saving.
C)   income and substitution effects that both decrease saving.
D)   income and substitution effects that both increase saving.E) B) and C)
F) A) and B)

Question 15

A reduction in the tax rate on income from saving would

Accepted Answer

A)   most directly benefit the poor in the short run.
B)   increase real wages over time.
C)   decrease the capital stock over time.
D)   decrease productivity over time.E) A) and D)
F) B) and C)

Question 16

If a reduction in taxes on savings reduced the amount of saving,then the

Accepted Answer

A)   income effect equaled the substitution effect.
B)   income effect outweighed the substitution effect.
C)   the substitution effect outweighed the income effect.
D)   None of the above.E) A) and B)
F) A) and D)

Question 17

Of means tested programs and IRA's,which lower the rate of return on saving?

Accepted Answer

A)   Both means-tested programs and IRA's.
B)   Means-tested programs,but not IRA's.
C)   IRA's but not means-tested programs.
D)   Neither means-tested program,or IRA's.E) A) and D)
F) B) and D)

Question 18

Advocates of stabilization policy argue that when there is a recession,the government should increase the money supply and increase government expenditures.

Accepted Answer

A) True 
 B)False

Question 19

"Leaning against the wind" is exemplified by a

Accepted Answer

A)   tax cut when there is a recession.
B)   decrease in the money supply when there is a recession.
C)   decrease in government expenditures when there is a recession.
D)   increasing money supply when there is a boom.E) A) and B)
F) All of the above

Question 20

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)   Do nothing and let markets correct themselves.E) None of the above
F) A) and B)

Exam 36: Five Debates Over Macroeconomic Policy

Correct Answer
verified

Explain why policy lags could make stabilization policies counterproductive.

Correct Answer
verified
As the textbook explains,it takes time t...
View Answer

A recession has no benefit to society-it represents a sheer waste of resources.

Correct Answer
verified

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

Correct Answer
verified

If a reduction in taxes on savings reduced the amount of saving,then the

Correct Answer
verified

Identify three government policies that discourage saving.

Correct Answer
verified
First,the returns to saving are heavily ...
View Answer

Of means tested programs and IRA's,which lower the rate of return on saving?

Correct Answer
verified

Which of the following is not an argument in favor of reforming the tax laws to encourage saving?

Correct Answer
verified

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

Correct Answer
verified

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

Advocates of stabilization policy argue that when there is a recession,the government should increase the money supply and increase government expenditures.

Correct Answer
verified

An individual would suffer lower losses from an unexpectedly higher inflation rate if

Correct Answer
verified

A reduction in the tax rate on income from saving would

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Part of the argument against deficits is that they

Correct Answer
verified

A higher rate of return on saving has

Correct Answer
verified

Suppose that a country has an inflation rate of about 2 percent per year and a real GDP growth rate of about 3 percent per year.Then the government can have a deficit of about

Correct Answer
verified

"Leaning against the wind" is exemplified by a

Correct Answer
verified

The major driver of future federal spending is rising health care costs.

Correct Answer
verified

Exam 36: Five Debates Over Macroeconomic Policy

Correct AnswerverifiedShow Answer

Explain why policy lags could make stabilization policies counterproductive.

Correct AnswerverifiedAs the textbook explains,it takes time t...View AnswerShow Answer

A recession has no benefit to society-it represents a sheer waste of resources.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a reduction in taxes on savings reduced the amount of saving,then the

Correct AnswerverifiedShow Answer

Identify three government policies that discourage saving.

Correct AnswerverifiedFirst,the returns to saving are heavily ...View AnswerShow Answer

Of means tested programs and IRA's,which lower the rate of return on saving?

Correct AnswerverifiedShow Answer

Which of the following is not an argument in favor of reforming the tax laws to encourage saving?

Correct AnswerverifiedShow Answer

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

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

Advocates of stabilization policy argue that when there is a recession,the government should increase the money supply and increase government expenditures.

Correct AnswerverifiedShow Answer

An individual would suffer lower losses from an unexpectedly higher inflation rate if

Correct AnswerverifiedShow Answer

A reduction in the tax rate on income from saving would

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Part of the argument against deficits is that they

Correct AnswerverifiedShow Answer

A higher rate of return on saving has

Correct AnswerverifiedShow Answer

Suppose that a country has an inflation rate of about 2 percent per year and a real GDP growth rate of about 3 percent per year.Then the government can have a deficit of about

Correct AnswerverifiedShow Answer

"Leaning against the wind" is exemplified by a

Correct AnswerverifiedShow Answer

The major driver of future federal spending is rising health care costs.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
As the textbook explains,it takes time t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
First,the returns to saving are heavily ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified