Question 1

The economy goes into recession. Which of the following lists contains things policymakers could do to try to end the recession?

Accepted Answer

A)   increase the money supply, increase taxes, increase government spending
B)   increase the money supply, increase taxes, decrease government spending
C)   increase the money supply, decrease taxes, increase government spending
D)   decrease the money supply, increase taxes, decrease government spendingE) B) and D)
F) A) and D)

Question 2

Eliminating means requirements for government benefits would

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) C) and D)
F) B) and C)

Question 3

Which of the following is correct? Investment tax credits

Accepted Answer

A)   can increase investment, but stimulating investment is not a key to ending a recession.
B)   can increase investment, which is a key to ending a recession.
C)   can not increase spending on investment goods, but stimulating investment is not a key to ending a recession.
D)   can not increase spending on investment goods, but stimulating investment is a key to ending a recession.E) A) and B)
F) All of the above

Question 4

A "lean against the wind" policy says the government should not use stabilization policy and simply let the economy "weather the storm."

Accepted Answer

A) True 
 B)False

Question 5

The time inconsistency of policy implies that

Accepted Answer

A)   what policymakers say they will do is generally what they will do, but people don't believe them because of current policy.
B)   when people expect that inflation will be low, it is harder for the Fed to increase output by increasing the money supply.
C)   people will believe Fed policy will be more inflationary than the Fed claims.
D)   what policymakers say they will do is usually not what they do, but people believe them anyway.E) A) and B)
F) A) and C)

Question 6

An economist would be more likely to argue for reducing inflation if she thought that

Accepted Answer

A)   the central bank lacked credibility and if bonds were usually not indexed for inflation.
B)   the central bank lacked credibility and if bonds were usually indexed for inflation.
C)   the central bank had credibility and if bonds were usually not indexed for inflation.
D)   the central bank had credibility and if bonds were usually indexed for inflation.E) None of the above
F) B) and D)

Question 7

Which kind of lag is important for monetary policy? Which kind of lag is important for fiscal policy?

Accepted Answer

Both are prone to lags, but the lags are...

Question 8

Opponents of using policy to stabilize the economy generally believe that

Accepted Answer

A)   neither fiscal nor monetary policy have much impact on aggregate demand.
B)   attempts to stabilize the economy decrease the magnitude of economic fluctuations.
C)   unemployment and inflation are not cause for much concern.
D)   economic conditions can easily change between the start of policy action and when it takes effect.E) A) and B)
F) All of the above

Question 9

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Accepted Answer

A)   its income effect on saving and its effect on the government budget
B)   its income effect on saving but not its effect on the government budget
C)   its effect on the government budget but not its income effect on saving
D)   neither its income effect on saving nor its effect on the government budgetE) None of the above
F) B) and D)

Question 10

Which of the following is an argument in favor of a balanced budget rule?

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) B) and C)
F) C) and D)

Question 11

If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output, they could

Accepted Answer

A)   increase government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will raise output above its long-run level.
B)   increase government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will reduce output to below its long-run level.
C)   decrease government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will raise output above its long-run level.
D)   decrease government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will reduce output to below its long-run level.E) A) and B)
F) A) and C)

Question 12

Which of the following is correct? In the 1990's

Accepted Answer

A)   the Fed maintained low inflation because it had to follow a policy rule.
B)   the Fed maintained low inflation even without being required to follow a policy rule.
C)   the Fed was not required to follow a policy rule and let inflation move higher.
D)   the Fed was required to follow a policy rule, but it provided the Fed enough discretion that inflation moved higher.E) All of the above
F) B) and C)

Exam 18: Six Debates Over Macroeconomic Policy

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Correct Answer
verified

Which of the following is an argument in favor of a balanced budget rule?

Correct Answer
verified

If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output, they could

Correct Answer
verified

Which kind of lag is important for monetary policy? Which kind of lag is important for fiscal policy?

Correct Answer
verified
Both are prone to lags, but the lags are...
View Answer

Eliminating means requirements for government benefits would

Correct Answer
verified

Opponents of using policy to stabilize the economy generally believe that

Correct Answer
verified

The time inconsistency of policy implies that

Correct Answer
verified

A "lean against the wind" policy says the government should not use stabilization policy and simply let the economy "weather the storm."

Correct Answer
verified

Which of the following is correct? Investment tax credits

Correct Answer
verified

Which of the following is correct? In the 1990's

Correct Answer
verified

The economy goes into recession. Which of the following lists contains things policymakers could do to try to end the recession?

Correct Answer
verified

An economist would be more likely to argue for reducing inflation if she thought that

Correct Answer
verified

Exam 18: Six Debates Over Macroeconomic Policy

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Correct AnswerverifiedShow Answer

Which of the following is an argument in favor of a balanced budget rule?

Correct AnswerverifiedShow Answer

If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output, they could

Correct AnswerverifiedShow Answer

Which kind of lag is important for monetary policy? Which kind of lag is important for fiscal policy?

Correct AnswerverifiedBoth are prone to lags, but the lags are...View AnswerShow Answer

Eliminating means requirements for government benefits would

Correct AnswerverifiedShow Answer

Opponents of using policy to stabilize the economy generally believe that

Correct AnswerverifiedShow Answer

The time inconsistency of policy implies that

Correct AnswerverifiedShow Answer

A "lean against the wind" policy says the government should not use stabilization policy and simply let the economy "weather the storm."

Correct AnswerverifiedShow Answer

Which of the following is correct? Investment tax credits

Correct AnswerverifiedShow Answer

Which of the following is correct? In the 1990's

Correct AnswerverifiedShow Answer

The economy goes into recession. Which of the following lists contains things policymakers could do to try to end the recession?

Correct AnswerverifiedShow Answer

An economist would be more likely to argue for reducing inflation if she thought that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Both are prone to lags, but the lags are...
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
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