Question 1

As opposed to an increase in government expenditures,a tax cut

Accepted Answer

A)   is likely to impact spending faster and according to traditional theory has a larger multiplier.
B)   is likely to impact spending faster,but according to traditional theory has a smaller multiplier.
C)   is likely to impact spending with a longer lag,but according to traditional theory has a larger multiplier.
D)   is likely to impact spending with a longer lag and according to traditional theory has a smaller multiplierE) B) and C)
F) None of the above

Question 2

Identify three government policies that discourage saving.

Accepted Answer

First,the returns to saving are heavily ...

Question 3

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate demand shifts right,the central bank must

Accepted Answer

A)   decrease the money supply,which will move output back towards its long-run level.
B)   decrease the money supply,which will move output farther from its long-run level.
C)   increase the money supply,which will move output back towards its long-run level.
D)   increase the money supply,which will move output farther from its long-run level.E) None of the above
F) B) 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

Economists

Accepted Answer

A)   agree that the costs of moderate inflation are low and that the cost of reducing inflation is small.
B)   agree that the costs of moderate inflation are low,but disagree about the cost of reducing inflation.
C)   disagree about the costs of moderate inflation,but agree that the cost of reducing inflation is small.
D)   disagree about the costs of moderate inflation and disagree about the cost of reducing inflation.E) None of the above
F) All of the above

Question 6

According to traditional Keynesian analysis,which has a greater impact on aggregate demand,changing taxes or changing government expenditures? Why?

Accepted Answer

An increase in government expe...

Question 7

Higher saving is associated with

Accepted Answer

A)   a larger capital stock and a higher standard of living.
B)   a larger capital stock but not a higher standard of living.
C)   a higher standard of living but not a larger capital stock.
D)   neither a higher standard of living nor a higher capital stock.E) B) and C)
F) C) and D)

Question 8

According to the political business cycle,after an election,unless the central bank acts inflation is likely to

Accepted Answer

A)   have risen.To counter this the central bank would raise interest rates.
B)   have risen.To counter this the central bank would lower interest rates.
C)   have fallen.To counter this the central bank would raise interest rates.
D)   have fallen.To counter this the central bank would lower interest rates.E) A) and D)
F) C) and D)

Question 9

Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate.

Accepted Answer

A) True 
 B)False

Question 10

The average U.S.citizens' share of the government debt represents about 1 percent of a person's lifetime income.

Accepted Answer

A) True 
 B)False

Question 11

An added benefit of inflation is that it allows for the possibility of

Accepted Answer

A)   menu costs.
B)   aggregate supply shocks.
C)   negative real interest rates.
D)   recessions.E) A) and B)
F) B) and D)

Question 12

Why might reforms to encourage saving lead to a less egalitarian society?

Accepted Answer

Taxing saving at a lower rate ...

Question 13

Which of the following is a cost of inflation?

Accepted Answer

A)   shoeleather costs
B)   menu costs
C)   relative price variability
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 14

Proponents of tax-law changes to encourage saving would

Accepted Answer

A)   argue that corporate tax rates should be decreased.
B)   increase the number of government benefits which are means-tested.
C)   argue that state sales tax should be replaced with state income tax.
D)   favor none of the above programs.E) C) and D)
F) B) and C)

Question 15

In fiscal year 2008,the U.S.government ran a deficit of about $459 billion.In fiscal year 2009,the government ran a deficit of about $1,413 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) A) and C)
F) B) and C)

Question 16

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

Question 17

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

Question 18

The Federal Reserve

Accepted Answer

A)   does not have an inflation targe;if it did it would likely be 1% or less.
B)   does not have an inflation target;if it did it would likely be in the range of 2%.
C)   does have an inflation target;it is 1%.
D)   does have an inflation target;it is a range from 1-3%.E) None of the above
F) B) and C)

Question 19

Tax cuts affect only aggregate demand not aggregate supply.

Accepted Answer

A) True 
 B)False

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) A) and B)
F) All of the above

Exam 36: Six Debates Over Macroeconomic Policy

The Federal Reserve

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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

According to traditional Keynesian analysis,which has a greater impact on aggregate demand,changing taxes or changing government expenditures? Why?

Correct AnswerverifiedAn increase in government expe...View AnswerShow Answer

Why might reforms to encourage saving lead to a less egalitarian society?

Correct AnswerverifiedTaxing saving at a lower rate ...View AnswerShow Answer

Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate.

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In fiscal year 2008,the U.S.government ran a deficit of about $459 billion.In fiscal year 2009,the government ran a deficit of about $1,413 billion.This change would be expected to have

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Proponents of tax-law changes to encourage saving would

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U.S.public policy discourages saving because

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Higher saving is associated with

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Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises.If the economy starts from long-run equilibrium and aggregate demand shifts right,the central bank must

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An added benefit of inflation is that it allows for the possibility of

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Economists

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Tax cuts affect only aggregate demand not aggregate supply.

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As opposed to an increase in government expenditures,a tax cut

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The average U.S.citizens' share of the government debt represents about 1 percent of a person's lifetime income.

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

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Identify three government policies that discourage saving.

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

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

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Which of the following is a cost of inflation?

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According to the political business cycle,after an election,unless the central bank acts inflation is likely to

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The benefits of the project ac...
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An increase in government expe...
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Taxing saving at a lower rate ...
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First,the returns to saving are heavily ...
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