Question 1

Stimulus spending in 2009 was used for

Accepted Answer

A)  building roads and bridges.
B)  providing aid to local and state governments.
C)  making payments to the unemployed.
D)  All of the above are correct.E) B) and C)
F) A) and B)

Question 2

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

Question 3

Which of the following is correct?

Accepted Answer

A)  Economic forecasts are precise and aggregate spending responds almost immediately to interest rate changes.
B)  Economic forecast are precise and aggregate spending responds to interest rate changes with a lag.
C)  Economic forecasts are imprecise and aggregate spending responds almost immediately to interest rate changes.
D)  Economic forecast are imprecise and aggregate spending responds to interest rate changes with a lag.E) C) and D)
F) All of the above

Question 4

As it is usually practiced, inflation targeting sets

Accepted Answer

A)  a specific inflation rate for the central bank to target and prohibits it from deviating from the target even when some shock pushes inflation away from that number.
B)  a specific inflation rate for the central bank to target but allows it to deviate from the target when some shock pushes inflation away from that number.
C)  sets some range of inflation rates for the central bank to target and prohibits it from deviating from that range even when some shock pushes inflation outside the range.
D)  sets some range of inflation rates for the central bank to target but allows it to deviate from that range when some shock pushes inflation outside the range.E) B) and D)
F) C) and D)

Question 5

If the central bank has discretion to make policy, it may create economic fluctuations that reflect the electoral calendar. This is called the political business cycle.

Accepted Answer

A) True 
 B)False

Question 6

Inflation

Accepted Answer

A)  leads people to use more resources to reduce money holdings. There is no way it can make labor markets work more efficiently.
B)  leads people to use more resources to reduce money holdings. However, it can make labor markets work more efficiently.
C)  leads people to use fewer resources to reduce money holdings. There is no way it can make labor markets work more efficiently
D)  leads people to use fewer resources to reduce money holdings. However, it can make labor markets work more efficiently.E) A) and C)
F) None of the above

Question 7

Of means tested programs and IRA's, which lower the rate of return on saving?

Accepted Answer

A)  Both means-tested programs and IRA's.
B)  Means-tested programs, but not IRA's.
C)  IRA's but not means-tested programs.
D)  Neither means-tested program, or IRA's.E) B) and D)
F) C) and D)

Question 8

Approximately how often does the Federal Open Market Committee meet?

Accepted Answer

The FOMC m...

Question 9

Identify three government policies that discourage saving.

Accepted Answer

First, the returns to saving are heavily...

Question 10

Explain how it is possible for the government debt to grow forever.

Accepted Answer

The debt can grow because the economy gr...

Question 11

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 12

Studies have shown significant spending changes arise from interest rate changes after

Accepted Answer

A)  a few days.
B)  a few weeks.
C)  a few months.
D)  about a year and a half..E) A) and B)
F) B) and C)

Question 13

Means-tested programs tend to favor

Accepted Answer

A)  those with high income as would a consumption tax.
B)  those with high income while a consumption tax would favor those with low income.
C)  those with low income as would a consumption tax.
D)  those with low income while a consumption tax would favor those with high income.E) None of the above
F) A) and B)

Question 14

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

Question 15

Which of the following is not correct?

Accepted Answer

A)  Deficits give people the opportunity to consume at the expense of their children, but deficits do not require them to do so.
B)  Deficits and surpluses could be used to avoid fluctuations in the tax rate.
C)  The only times deficits have increased have been during times of war or economic downturns.
D)  Reducing the budget deficit rather than funding more education spending could, all things considered, make future generations worse off.E) A) and D)
F) A) and C)

Question 16

Which of the following raise the incentive for households to save?

Accepted Answer

A)  means-testing of government benefits and inheritance taxes
B)  means-testing of government benefits but not inheritance taxes
C)  inheritance taxes, but not means-testing of government benefits
D)  neither means-testing of government benefits nor inheritance taxesE) B) and D)
F) All of the above

Question 17

Higher inflation results in

Accepted Answer

A)  more frequent price changes and increased variability of relative prices.
B)  more frequent price changes and decreased variability of relative prices.
C)  less frequent price changes and increased variability of relative prices.
D)  less frequent price changes and decreased variability of relative prices.E) B) and C)
F) B) and D)

Question 18

Which of the following would likely increase private saving?

Accepted Answer

A)  both expansion of means testing and a consumption tax
B)  expansion of means testing, but not a consumption tax
C)  a consumption tax, but not expansion of means testing
D)  neither expansion of means testing nor a consumption taxE) B) and D)
F) B) and C)

Question 19

The Federal Reserve

Accepted Answer

A)  requires little time to change policy and aggregate demand responds quickly.
B)  requires little time to change policy but aggregate demand responds slowly.
C)  usually requires a substantial time to change policy but aggregate demand responds quickly.
D)  usually requires a substantial time to change policy and aggregate demand responds slowly.E) B) and C)
F) A) and D)

Question 20

Paul Volcker, former chair of the Fed, implemented

Accepted Answer

A)  contractionary policy which increased the popularity of the U.S. president who had appointed him.
B)  contractionary policy which decreased the popularity of the U.S. president who had appointed him.
C)  expansionary policy which increased the popularity of the U.S. president who had appointed him.
D)  expansionary policy which decreased the popularity of the U.S. president who had appointed him.E) A) and C)
F) A) and B)

Exam 36: Six Debates Over Macroeconomic Policy

Of means tested programs and IRA's, which lower the rate of return on saving?

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As it is usually practiced, inflation targeting sets

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Higher inflation results in

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The Federal Reserve

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Explain how it is possible for the government debt to grow forever.

Correct AnswerverifiedThe debt can grow because the economy gr...View AnswerShow Answer

If the central bank has discretion to make policy, it may create economic fluctuations that reflect the electoral calendar. This is called the political business cycle.

Correct AnswerverifiedShow Answer

Which of the following raise the incentive for households to save?

Correct AnswerverifiedShow Answer

Approximately how often does the Federal Open Market Committee meet?

Correct AnswerverifiedThe FOMC m...View AnswerShow Answer

Identify three government policies that discourage saving.

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

Which of the following is not correct?

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

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Which of the following is correct?

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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

Means-tested programs tend to favor

Correct AnswerverifiedShow Answer

Stimulus spending in 2009 was used for

Correct AnswerverifiedShow Answer

Which of the following would likely increase private saving?

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Inflation

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

Correct AnswerverifiedShow Answer

Studies have shown significant spending changes arise from interest rate changes after

Correct AnswerverifiedShow Answer

Paul Volcker, former chair of the Fed, implemented

Correct AnswerverifiedShow Answer

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The debt can grow because the economy gr...
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The FOMC m...
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First, the returns to saving are heavily...
View Answer

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