Question 1

"Leaning against the wind" is exemplified by an)

Accepted Answer

A)   tax increase when there is a recession.
B)   increase in the money supply when there is a recession.
C)   decrease in government expenditures when there is a recession.
D)   All of the above are correct.E) None of the above
F) All of the above

Question 2

List two costs of inflation.

Accepted Answer

shoeleather costs, menu costs,...

Question 3

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Accepted Answer

A)   only price stability
B)   only maximum employment
C)   only price stability and maximum employment
D)   price stability, maximum employment, and moderate long-term interest ratesE) All of the above
F) B) and D)

Question 4

Reforming tax laws to encourage saving is motivated by which of the Ten Principles of Economics from Chapter 1?

Accepted Answer

A)   The cost of something is what you give up to get it Principle 2) .
B)   Trade can make everyone better off Principle 5) .
C)   Markets are usually a good way to organize economic activity Principle 6) .
D)   A country's standard of living depends on its ability to produce goods and services Principle 8) .E) A) and B)
F) None of the above

Question 5

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

Accepted Answer

A) True 
 B)False

Question 6

What is the political business cycle and how does it relate to whether the central bank should have discretion or use a rule?

Accepted Answer

The political business cycle describes t...

Question 7

Which of the following is an important advantage of discretionary monetary policy?

Accepted Answer

A)   Influencing the political business cycle
B)   Flexibility to deal with changing economic conditions
C)   Limiting the opportunities for abuse of power by policymakers
D)   Avoiding the time inconsistency of policy problemE) A) and B)
F) None of the above

Question 8

If net exports fall, what actions could a central bank take to stabilize the economy?

Accepted Answer

Increase t...

Question 9

In addition to the tax code, other policies reduce the incentives for people to save Provide an example.

Accepted Answer

Some government benefits are m...

Question 10

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) None of the above
F) A) and D)

Question 11

Between 1980 and 1995 government debt as a percentage of GDP

Accepted Answer

A)   increased from about 25% to 50%.
B)   decreased from about 50% to 25%.
C)   decreased from about 25% to almost zero.
D)   increased from about 10% to 20%.E) B) and C)
F) A) and D)

Question 12

Provide two specific ways in which reducing inflation might leave "permanent scars" on the economy.

Accepted Answer

Reducing inflation leads to a temporary ...

Question 13

nominal federal funds rate, y is real GDP, y* is an estimate of the natural rate of output, π is the inflation rate, and π* is the inflation target. Other things the same, if the economy starts at y* and π* and then y rises and exceeds y* by 1% and π rises 2% points above π*, the rule would require the Fed to raise the federal funds rate by

Accepted Answer

A)   1.5 percentage points
B)   2.5 percentage points
C)   3.5 percentage points
D)   5.5 percentage pointsE) A) and B)
F) B) and D)

Question 14

If a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then

Accepted Answer

A)   the long-run Phillips curve would shift right.
B)   the long-run Phillips curve would shift left.
C)   the short-run Phillips curve would shift up.
D)   the short-run Phillips curve would shift down.E) A) and B)
F) B) and C)

Question 15

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

Accepted Answer

A)   both the tax cut and the increase in government expenditures
B)   the tax cut but not the increase in government expenditures
C)   the increase in government expenditures but not the tax cut
D)   neither the increase in government expenditures nor the tax cutE) A) and C)
F) C) and D)

Question 16

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Accepted Answer

A)   increase the money supply, increase taxes
B)   increase the money supply, cut taxes
C)   decrease the money supply, increase taxes
D)   decrease the money supply, cut taxesE) A) and B)
F) All of the above

Question 17

Economists agree that at least in the short run disinflation

Accepted Answer

A)   leads to a period of higher unemployment. They also agree that the costs of even moderate inflation is high.
B)   leads to a period of higher unemployment. They disagree about the cost of moderate inflation.
C)   leads to a period of lower unemployment. They also agree that the cost of even moderate inflation is high.
D)   leads to a period of lower unemployment. They disagree about the cost of moderate inflation.E) A) and B)
F) A) and C)

Question 18

An individual would suffer higher 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) B) and C)

Question 19

Why might government expenditures be more appropriate than tax cuts to counter recessions? Is there any evidence for this thinking?

Accepted Answer

According to the traditional Keynesian m...

Question 20

Identify three government policies that discourage saving.

Accepted Answer

First, the returns to saving are heavily...

Exam 18: Six Debates Over Macroeconomic Policy

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

Correct Answer
verified

If a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then

Correct Answer
verified

Correct Answer
verified

Which of the following is an important advantage of discretionary monetary policy?

Correct Answer
verified

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Correct Answer
verified

Economists agree that at least in the short run disinflation

Correct Answer
verified

In addition to the tax code, other policies reduce the incentives for people to save Provide an example.

Correct Answer
verified
Some government benefits are m...
View Answer

Policymakers following a "lean against the wind" policy would

Correct Answer
verified

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Correct Answer
verified

Provide two specific ways in which reducing inflation might leave "permanent scars" on the economy.

Correct Answer
verified
Reducing inflation leads to a temporary ...
View Answer

Identify three government policies that discourage saving.

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

List two costs of inflation.

Correct Answer
verified
shoeleather costs, menu costs,...
View Answer

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

Correct Answer
verified

If net exports fall, what actions could a central bank take to stabilize the economy?

Correct Answer
verified
Increase t...
View Answer

Between 1980 and 1995 government debt as a percentage of GDP

Correct Answer
verified

Reforming tax laws to encourage saving is motivated by which of the Ten Principles of Economics from Chapter 1?

Correct Answer
verified

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

Correct Answer
verified

What is the political business cycle and how does it relate to whether the central bank should have discretion or use a rule?

Correct Answer
verified
The political business cycle describes t...
View Answer

Why might government expenditures be more appropriate than tax cuts to counter recessions? Is there any evidence for this thinking?

Correct Answer
verified
According to the traditional Keynesian m...
View Answer

"Leaning against the wind" is exemplified by an)

Correct Answer
verified

Exam 18: Six Debates Over Macroeconomic Policy

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

Correct AnswerverifiedShow Answer

If a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is an important advantage of discretionary monetary policy?

Correct AnswerverifiedShow Answer

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Correct AnswerverifiedShow Answer

Economists agree that at least in the short run disinflation

Correct AnswerverifiedShow Answer

In addition to the tax code, other policies reduce the incentives for people to save Provide an example.

Correct AnswerverifiedSome government benefits are m...View AnswerShow Answer

Policymakers following a "lean against the wind" policy would

Correct AnswerverifiedShow Answer

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Correct AnswerverifiedShow Answer

Provide two specific ways in which reducing inflation might leave "permanent scars" on the economy.

Correct AnswerverifiedReducing inflation leads to a temporary ...View AnswerShow Answer

Identify three government policies that discourage saving.

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

List two costs of inflation.

Correct Answerverifiedshoeleather costs, menu costs,...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

If net exports fall, what actions could a central bank take to stabilize the economy?

Correct AnswerverifiedIncrease t...View AnswerShow Answer

Between 1980 and 1995 government debt as a percentage of GDP

Correct AnswerverifiedShow Answer

Reforming tax laws to encourage saving is motivated by which of the Ten Principles of Economics from Chapter 1?

Correct AnswerverifiedShow Answer

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

Correct AnswerverifiedShow Answer

What is the political business cycle and how does it relate to whether the central bank should have discretion or use a rule?

Correct AnswerverifiedThe political business cycle describes t...View AnswerShow Answer

Why might government expenditures be more appropriate than tax cuts to counter recessions? Is there any evidence for this thinking?

Correct AnswerverifiedAccording to the traditional Keynesian m...View AnswerShow Answer

"Leaning against the wind" is exemplified by an)

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Some government benefits are m...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Reducing inflation leads to a temporary ...
View Answer

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

Correct Answer
verified
shoeleather costs, menu costs,...
View Answer

Correct Answer
verified

Correct Answer
verified
Increase t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The political business cycle describes t...
View Answer

Correct Answer
verified
According to the traditional Keynesian m...
View Answer

Correct Answer
verified