Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

The national debt

Accepted Answer

A)  exists because of past government budget deficits.
B)  is the difference between the government's spending and revenue in a given year.
C)  is the amount households owe on credit cards, mortgages, and other loans.
D)  is the amount households and firms have borrowed minus the amount they have saved.E) A) and B)
F) B) and C)

Question 3

Time inconsistency will cause the

Accepted Answer

A)  short-run Phillips curve to be higher than otherwise.
B)  short-run Phillips curve to be lower the otherwise.
C)  long-run Phillips curve to be farther to the right than otherwise.
D)  long-run Phillips curve to be farther left than otherwise.E) B) and D)
F) A) and C)

Question 4

In the early 1980s the Fed tightened monetary policy. Over the next few years inflation

Accepted Answer

A)  remained high and unemployment rose.
B)  fell but unemployment rose temporarily.
C)  and unemployment fell.
D)  and unemployment rose.E) A) and C)
F) A) and B)

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

Some studies have found that saving is not very sensitive to the rate of return on saving.

Accepted Answer

A) True 
 B)False

Question 7

A consumption tax that replaces an income tax

Accepted Answer

A)  only taxes a household on the money it spends.
B)  discourages saving.
C)  would likely result in a lower level of saving than an income tax.
D)  ultimately taxes income twice-once when the household pays income tax and once when the household makes a purchase.E) A) and B)
F) C) and D)

Question 8

What is meant by the political business cycle?

Accepted Answer

Central banks sympathetic to i...

Question 9

Which of the following might stabilize an economy that is at risk of inflation?

Accepted Answer

A)  the Fed to sell government bonds.
B)  increasing government spending.
C)  expanding the money supply.
D)  lowering taxes.E) C) and D)
F) None of the above

Question 10

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

Accepted Answer

A government deficit means that the gove...

Question 11

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Accepted Answer

A)  price level and real GDP change by more than otherwise.
B)  price level change by more than otherwise and real GDP change by less than otherwise.
C)  price level change by less than otherwise and real GDP change by more than otherwise.
D)  price level and real GDP change by less than otherwise.E) A) and C)
F) All of the above

Question 12

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 13

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

Accepted Answer

The typical estimate of the sacrifice ra...

Question 14

Why do many economists advocate a consumption tax rather than an income tax?

Accepted Answer

The current income tax means that income...

Question 15

What did the actions of the Federal Reserve during the 1990's demonstrate about monetary policy and rules?

Accepted Answer

During this time the Fed achieved and ma...

Question 16

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

Accepted Answer

Consumers may recognize that b...

Question 17

The cost of inflation reduction is a large, permanent increase in unemployment.

Accepted Answer

A) True 
 B)False

Question 18

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

Accepted Answer

A)  increased the money supply because it was concerned about inflation.
B)  decreased the increased the money supply because it was concerned about inflation.
C)  decreased the money supply because it was concerned about inflation.
D)  increased the money supply because it was concerned about unemployment.E) None of the above
F) B) and D)

Question 19

A reduction in the marginal tax-rate includes a substitution effect that tends to increase saving.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following would likely increase private saving?

Accepted Answer

A)  A consumption tax, but not expansion of means testing
B)  Both expansion of means testing and a consumption tax
C)  Expansion of means testing, but not a consumption tax
D)  Neither expansion of means testing nor a consumption taxE) A) and B)
F) B) and C)

Exam 36: Six Debates Over Macroeconomic Policy

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

Correct AnswerverifiedShow Answer

The national debt

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Which of the following would likely increase private saving?

Correct AnswerverifiedShow Answer

A reduction in the marginal tax-rate includes a substitution effect that tends to increase saving.

Correct AnswerverifiedShow Answer

A consumption tax that replaces an income tax

Correct AnswerverifiedShow Answer

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

Correct AnswerverifiedThe typical estimate of the sacrifice ra...View AnswerShow Answer

The cost of inflation reduction is a large, permanent increase in unemployment.

Correct AnswerverifiedShow Answer

What did the actions of the Federal Reserve during the 1990's demonstrate about monetary policy and rules?

Correct AnswerverifiedDuring this time the Fed achieved and ma...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

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

Correct AnswerverifiedConsumers may recognize that b...View AnswerShow Answer

Why do many economists advocate a consumption tax rather than an income tax?

Correct AnswerverifiedThe current income tax means that income...View AnswerShow Answer

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Correct AnswerverifiedShow Answer

Some studies have found that saving is not very sensitive to the rate of return on saving.

Correct AnswerverifiedShow Answer

In the early 1980s the Fed tightened monetary policy. Over the next few years inflation

Correct AnswerverifiedShow Answer

Which of the following might stabilize an economy that is at risk of inflation?

Correct AnswerverifiedShow Answer

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

Correct AnswerverifiedShow Answer

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

Correct AnswerverifiedA government deficit means that the gove...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Time inconsistency will cause the

Correct AnswerverifiedShow Answer

What is meant by the political business cycle?

Correct AnswerverifiedCentral banks sympathetic to i...View AnswerShow Answer

Correct Answer
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The typical estimate of the sacrifice ra...
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During this time the Fed achieved and ma...
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Correct Answer
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According to the traditional Keynesian m...
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Correct Answer
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Consumers may recognize that b...
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Correct Answer
verified
The current income tax means that income...
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A government deficit means that the gove...
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Central banks sympathetic to i...
View Answer