Question 1

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

Question 2

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 inflation.E) B) and C)
F) B) and D)

Question 3

A 1977 amendment to the Federal Reserve Act of 1913

Accepted Answer

A)   says the Federal Reserve should only promote maximum employment
B)   says the Federal Reserve should only promote price stability
C)   says the Federal Reserve should promote price stability and maximum employment, but does not specify how the Federal Reserve should weight these goals.
D)   says the Federal Reserve should promote price stability and maximum employment, but specifies that it place more weight on promoting price stability.E) A) and B)
F) A) and C)

Question 4

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 5

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation, the short- run Phillips curve will remain far to the

Accepted Answer

A)   left, and the sacrifice ratio will be low.
B)   left, and the sacrifice ratio will be high.
C)   right, and the sacrifice ratio will be low.
D)   right, and the sacrifice ratio will be high.E) All of the above
F) B) and C)

Question 6

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

Accepted Answer

A) True 
 B)False

Question 7

Some economists believe that there are positives from a little inflation and that it may "grease the wheels"

Accepted Answer

A)   in the stock market.
B)   in the foreign exchange market.
C)   in the bond market.
D)   in the labor market.E) A) and B)
F) C) and D)

Question 8

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 C)
F) B) and C)

Question 9

At the end of 2007, the government had a debt of about $5,000 billion. During 2007, real GDP grew by about 0.8 percent and inflation was about 2.7 percent. About what is the largest deficit the government could have run without raising the debt-to-GDP ratio?

Accepted Answer

A)   135 billion
B)   143 billion
C)   169 billion
D)   175 billionE) B) and C)
F) B) and D)

Question 10

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 B)
F) None of the above

Question 11

A year ago a country reduced the tax rate on all interest income from 40% to 10%. During the year private saving was $600 billion as compared to $500 billion the year before the tax reform. Taxes collected on interest income fell by $150 billion. Assuming no other changes in government revenues or spending which of the following is correct?

Accepted Answer

A)   the substitution effect was larger than the income effect; national saving rose
B)   the substitution effect was larger than the income effect; national saving fell
C)   the income effect was larger than the substitution effect; national saving rose
D)   the income effect was larger than the substitution effect; national saving fellE) A) and B)
F) A) and C)

Question 12

Suppose that a country has an inflation rate of about 2 percent per year and a real GDP growth rate of about 2.5 percent per year. Then the government can have a deficit of about

Accepted Answer

A)   5 percent of GDP without raising the debt-to-income ratio.
B)   4.5 percent of GDP without raising the debt-to-income ratio.
C)   1.25 percent of GDP without raising the debt-to-income ratio.
D)   .5 percent of GDP without raising the debt-to-income ratio.E) A) and D)
F) A) and C)

Question 13

The Federal Open Market Committee

Accepted Answer

A)   must submit its policies to the President and Senate for approval.
B)   operates with almost complete discretion over monetary policy.
C)   is required to target short-term interest rates in a mechanical way based on an equation that takes into account both price stability and output fluctuations.
D)   is required to set and publicize targets for money supply growth.E) A) and D)
F) B) and C)

Question 14

Explain what is meant by saying that capital income is taxed twice.

Accepted Answer

Shareholders are part owners o...

Question 15

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008- 2009 recession.

Accepted Answer

"Shovel ready" public works pr...

Question 16

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

Accepted Answer

A) True 
 B)False  True

Question 17

In response to recession, who primarily cut taxes rather than raised expenditures?

Accepted Answer

A)   President George W. Bush and President Barack Obama
B)   President George W. Bush but not President Barack Obama
C)   President Barack Obama but not President George W. Bush
D)   neither President George W. Bush nor President Barack ObamaE) A) and B)
F) A) and C)

Question 18

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) B) and D)
F) A) and D)

Question 19

Why might policymakers attempts to stabilize the economy do more harm than good?

Accepted Answer

Policy works with a lag. By th...

Question 20

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

Exam 36: Six Debates Over Macroeconomic Policy

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

Correct Answer
verified
C

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

Correct Answer
verified

A 1977 amendment to the Federal Reserve Act of 1913

Correct Answer
verified

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

Correct Answer
verified
The benefits of the project ac...
View Answer

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation, the short- run Phillips curve will remain far to the

Correct Answer
verified

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

Correct Answer
verified

Some economists believe that there are positives from a little inflation and that it may "grease the wheels"

Correct Answer
verified

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

Correct Answer
verified

At the end of 2007, the government had a debt of about $5,000 billion. During 2007, real GDP grew by about 0.8 percent and inflation was about 2.7 percent. About what is the largest deficit the government could have run without raising the debt-to-GDP ratio?

Correct Answer
verified

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

Correct Answer
verified

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 2.5 percent per year. Then the government can have a deficit of about

Correct Answer
verified

The Federal Open Market Committee

Correct Answer
verified

Explain what is meant by saying that capital income is taxed twice.

Correct Answer
verified
Shareholders are part owners o...
View Answer

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008- 2009 recession.

Correct Answer
verified
"Shovel ready" public works pr...
View Answer

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

Correct Answer
verified
True

In response to recession, who primarily cut taxes rather than raised expenditures?

Correct Answer
verified

A permanent reduction in inflation would

Correct Answer
verified

Why might policymakers attempts to stabilize the economy do more harm than good?

Correct Answer
verified
Policy works with a lag. By th...
View Answer

U.S. public policy discourages saving because

Correct Answer
verified
D

Exam 36: Six Debates Over Macroeconomic Policy

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

Correct AnswerverifiedC

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

Correct AnswerverifiedShow Answer

A 1977 amendment to the Federal Reserve Act of 1913

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

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation, the short- run Phillips curve will remain far to the

Correct AnswerverifiedShow Answer

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

Correct AnswerverifiedShow Answer

Some economists believe that there are positives from a little inflation and that it may "grease the wheels"

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

At the end of 2007, the government had a debt of about $5,000 billion. During 2007, real GDP grew by about 0.8 percent and inflation was about 2.7 percent. About what is the largest deficit the government could have run without raising the debt-to-GDP ratio?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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 2.5 percent per year. Then the government can have a deficit of about

Correct AnswerverifiedShow Answer

The Federal Open Market Committee

Correct AnswerverifiedShow Answer

Explain what is meant by saying that capital income is taxed twice.

Correct AnswerverifiedShareholders are part owners o...View AnswerShow Answer

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008- 2009 recession.

Correct Answerverified"Shovel ready" public works pr...View AnswerShow Answer

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

Correct AnswerverifiedTrue

In response to recession, who primarily cut taxes rather than raised expenditures?

Correct AnswerverifiedShow Answer

A permanent reduction in inflation would

Correct AnswerverifiedShow Answer

Why might policymakers attempts to stabilize the economy do more harm than good?

Correct AnswerverifiedPolicy works with a lag. By th...View AnswerShow Answer

U.S. public policy discourages saving because

Correct AnswerverifiedD

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C

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The benefits of the project ac...
View Answer

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Shareholders are part owners o...
View Answer

Correct Answer
verified
"Shovel ready" public works pr...
View Answer

Correct Answer
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True

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Correct Answer
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Policy works with a lag. By th...
View Answer

Correct Answer
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D