Question 1

Forward looking parents can reverse the adverse effects of government debt by saving more and leaving a larger bequest to their children.

Accepted Answer

A) True 
 B)False

Question 2

The laws that created the Fed give the institution only vague recommendations about what goals it should pursue,and they do not tell the Fed how to pursue whatever goals it might choose.

Accepted Answer

A) True 
 B)False

Question 3

In fiscal year 2001,the U.S.government ran a surplus of about $127 billion.In fiscal year 2002,the government ran a deficit of $159 billion.This change would be expected to have

Accepted Answer

A)   decreased interest rates and investment.
B)   decreased interest rates and increased investment.
C)   increased interest rates and investment.
D)   increased interest rates and decreased investment.E) B) and D)
F) B) and C)

Question 4

Economists agree that if a monetary policy rule is to be used,the best one makes the growth rate of the money supply constant.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is not true?

Accepted Answer

A)   All budget deficits can be justified as being due to war or recession.
B)   The U.S.federal debt in 2008 was $5.2 trillion.
C)   Government debt represets about 1 percent of a typical worker's lifetime resources.
D)   Forward looking parents can reverse adverse effects of government debt.E) A) and B)
F) B) and D)

Question 6

Which of the following would likely increase private saving?

Accepted Answer

A)   Both 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 tax.E) B) and C)
F) All of the above

Question 7

Once state and federal taxes are added together,a typical worker faces about a 40 percent marginal tax-rate on interest income.

Accepted Answer

A) True 
 B)False

Question 8

If inflation falls it

Accepted Answer

A)   causes people to put in more effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from lenders to borrowers.
B)   causes people to put in more effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.
C)   causes people to put in less effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from lenders to borrowers.
D)   causes people to put in less effort to keep money balances low.When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.E) A) and D)
F) B) and D)

Question 9

Suppose that the country of Aquilonia has an inflation rate of about 5 percent per year and a real growth rate of about 5 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 50 billion units and tax collections equal to 76 billion units
B)   government spending equal to 50 billion units and tax collections equal to 14 billion units
C)   government spending equal to 50 billion units and tax collections equal to 10 billion units
D)   government spending equal to 50 billion units and tax collections equal to 8 billion unitsE) A) and B)
F) A) and C)

Question 10

Some economists beleive 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 C)
F) All of the above

Question 11

Which of the following is correct?

Accepted Answer

A)   Deficits always require people to consume at the expense of their children.
B)   If the government uses funds to pay for investment programs,on net the debt need not burden future generations.
C)   If the government is indebt it must be running a deficit currently.
D)   The current government debt is a large share of lifetime income.E) A) and B)
F) None of the above

Question 12

The Fed raised interest rates in 2004 and 2005.This implies,other things the same,that the Fed

Accepted Answer

A)   increased the money supply because it was concerned about unemployment.
B)   increased the money supply because it was concerned about inflation.
C)   decreased the money supply because it was concerned about unemployment.
D)   decreased the money supply because it was concerned about inflation.E) C) and D)
F) A) and D)

Question 13

If the unemployment rate rises,which policies would be appropriate to reduce it?

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) A) and C)

Question 14

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 15

"Leaning against the wind" is exemplified by a

Accepted Answer

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

Question 16

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) None of the above

Question 17

If the budget deficit were reduced

Accepted Answer

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

Question 18

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

Accepted Answer

A) True 
 B)False

Question 19

If there is a political business cycle and the Federal Reserve supports the incumbent,then we should expect that prior to elections

Accepted Answer

A)   interest rates and output would rise.
B)   interest rates would rise and output would fall.
C)   interest rates would fall and output would rise.
D)   interest rates and output would fall.E) B) and D)
F) None of the above

Question 20

The average person's share of the U.S.government debt as a percentage of lifetime income is

Accepted Answer

A)   less than 2 percent.
B)   about 5 percent.
C)   about 10 percent.
D)   over 12 percent.E) B) and D)
F) None of the above

Exam 36: Five Debates Over Macroeconomic Policy

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

Correct Answer
verified

In fiscal year 2001,the U.S.government ran a surplus of about $127 billion.In fiscal year 2002,the government ran a deficit of $159 billion.This change would be expected to have

Correct Answer
verified

If there is a political business cycle and the Federal Reserve supports the incumbent,then we should expect that prior to elections

Correct Answer
verified

If inflation falls it

Correct Answer
verified

Correct Answer
verified

If the unemployment rate rises,which policies would be appropriate to reduce it?

Correct Answer
verified

The average person's share of the U.S.government debt as a percentage of lifetime income is

Correct Answer
verified

The Fed raised interest rates in 2004 and 2005.This implies,other things the same,that the Fed

Correct Answer
verified

The time inconsistency of policy implies that

Correct Answer
verified

Which of the following statements is not true?

Correct Answer
verified

The laws that created the Fed give the institution only vague recommendations about what goals it should pursue,and they do not tell the Fed how to pursue whatever goals it might choose.

Correct Answer
verified

"Leaning against the wind" is exemplified by a

Correct Answer
verified

Economists agree that if a monetary policy rule is to be used,the best one makes the growth rate of the money supply constant.

Correct Answer
verified

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

Correct Answer
verified

If the budget deficit were reduced

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

Once state and federal taxes are added together,a typical worker faces about a 40 percent marginal tax-rate on interest income.

Correct Answer
verified

Forward looking parents can reverse the adverse effects of government debt by saving more and leaving a larger bequest to their children.

Correct Answer
verified

Which of the following would likely increase private saving?

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

Exam 36: Five Debates Over Macroeconomic Policy

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

Correct AnswerverifiedShow Answer

In fiscal year 2001,the U.S.government ran a surplus of about $127 billion.In fiscal year 2002,the government ran a deficit of $159 billion.This change would be expected to have

Correct AnswerverifiedShow Answer

If there is a political business cycle and the Federal Reserve supports the incumbent,then we should expect that prior to elections

Correct AnswerverifiedShow Answer

If inflation falls it

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the unemployment rate rises,which policies would be appropriate to reduce it?

Correct AnswerverifiedShow Answer

The average person's share of the U.S.government debt as a percentage of lifetime income is

Correct AnswerverifiedShow Answer

The Fed raised interest rates in 2004 and 2005.This implies,other things the same,that the Fed

Correct AnswerverifiedShow Answer

The time inconsistency of policy implies that

Correct AnswerverifiedShow Answer

Which of the following statements is not true?

Correct AnswerverifiedShow Answer

The laws that created the Fed give the institution only vague recommendations about what goals it should pursue,and they do not tell the Fed how to pursue whatever goals it might choose.

Correct AnswerverifiedShow Answer

"Leaning against the wind" is exemplified by a

Correct AnswerverifiedShow Answer

Economists agree that if a monetary policy rule is to be used,the best one makes the growth rate of the money supply constant.

Correct AnswerverifiedShow Answer

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

Correct AnswerverifiedShow Answer

If the budget deficit were reduced

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

Once state and federal taxes are added together,a typical worker faces about a 40 percent marginal tax-rate on interest income.

Correct AnswerverifiedShow Answer

Forward looking parents can reverse the adverse effects of government debt by saving more and leaving a larger bequest to their children.

Correct AnswerverifiedShow Answer

Which of the following would likely increase private saving?

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

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

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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