Question 1

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 household and firms have borrowed minus the amount they have saved.E) A) and B)
F) B) and C)

Question 2

Provide an example of how current expenditures might benefit future generations.

Accepted Answer

Expenditures on education rais...

Question 3

In which cases were tax cuts followed by robust growth?

Accepted Answer

A)  the ones of the Kennedy administration in 1964 and the ones of the Reagan administration in 1981
B)  the ones of the Kennedy administration in 1964 but not the ones of the Reagan administration in 1981
C)  the ones of the Reagan administration in 1981 but not the ones of the Kennedy administration in 1964
D)  neither the ones of the Kennedy administration in 1964 nor the ones of the Reagan administration in 1981E) B) and D)
F) B) and C)

Question 4

Suppose that the country of Aquilonia has an inflation rate of about 2 percent per year and a real growth rate of about 3 percent per year. Suppose also that it has nominal GDP of about 400 billion units of currency and current nominal national debt of 200 billion units of domestic currency. Which of the following government spending and taxation figures will keep the debt to-income ratio constant?

Accepted Answer

A)  government spending equal to 30 billion units and tax collections equal to 25 billion units
B)  government spending equal to 30 billion units and tax collections equal to 20 billion units
C)  government spending equal to 30 billion units and tax collections equal to 10 billion units
D)  government spending equal to 30 billion units and tax collections equal to 5 billion unitsE) A) and B)
F) None of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

When wages are set by contract, inflation

Accepted Answer

A)  reduces real wages; this likely makes labor markets more flexible.
B)  reduces real wages; this likely makes labor markets less flexible.
C)  raises real wages; this likely makes labor markets more flexible.
D)  raises real wages; this likely makes labor markets less flexible.E) B) and D)
F) All of the above

Question 8

"Leaning against the wind" is exemplified by a

Accepted Answer

A)  tax cut when there is a recession.
B)  decrease in the money supply when there is a recession.
C)  decrease in government expenditures when there is a recession.
D)  All of the above are correct.E) A) and C)
F) A) and D)

Question 9

In fiscal year 2011, the U.S. government ran a deficit of about $1,300 billion. In fiscal year 2012, the government ran a deficit of about $1,087 billion. Other things the same, 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 C)
F) A) and B)

Question 10

For which of the following policies is there a significant implementation lag?

Accepted Answer

A)  fiscal policy and monetary policy
B)  fiscal policy but not monetary policy
C)  monetary policy but not fiscal policy
D)  neither monetary policy nor fiscal policyE) All of the above
F) C) and D)

Question 11

According to computer estimates using a traditional macroeconomic model, the Obama administration found that the multiplier for tax cuts and government expenditures were respectively

Accepted Answer

A)  .99 and 1.59.
B)  1.59 and .99
C)  1.3 and 1.7
D)  1.7 and 1.3E) A) and B)
F) All of the above

Question 12

Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations. What are some things policymakers can do to boost the economy when aggregate demand is inadequate to ensure full employment?

Accepted Answer

Policymakers can increase gove...

Question 13

Which of the following is correct?

Accepted Answer

A)  No forms of capital income are taxed twice.
B)  The tax code cannot be rewritten to provide greater incentive to save.
C)  Means-tested benefits increase the incentive to save.
D)  There is a correlation between national savings rates and measures of economic well-being.E) A) and D)
F) A) and C)

Question 14

Which of the following is an argument against trying to use policy to stabilize the economy?

Accepted Answer

A)  Recessions represent a waste of resources.
B)  Pessimism on the part of households and firms may become a self-fulfilling prophecy.
C)  "Leaning against the wind" requires policymakers to increase aggregate demand in recessions and reduce aggregate demand in booms.
D)  Macroeconomic forecasting is not developed sufficiently to allow policymakers to change aggregate demand at the proper time.E) A) and B)
F) A) and C)

Question 15

The average U.S. citizens' share of the government debt represents less than 2 percent of a person's lifetime income.

Accepted Answer

A) True 
 B)False

Question 16

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

Accepted Answer

A lag of six months ...

Question 17

A recession has no benefit to society-it represents a sheer waste of resources.

Accepted Answer

A) True 
 B)False

Question 18

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the tax rate on interest income from saving were reduced.

Accepted Answer

A)  The income effect, but not the substitution effect, would tend to reduce private saving.
B)  The substitution effect, but not the income effect, would tend to reduce private saving.
C)  Both the income and substitution effect would tend to reduce private saving.
D)  Neither the income nor the substitution effect would tend to reduce private saving.E) B) and C)
F) None of the above

Question 20

Zero inflation

Accepted Answer

A)  might be dangerous because it could lead to rapidly increasing prices.
B)  would limit the flexibility of the labor market and so could at times raise unemployment.
C)  would make it easy for the Central bank to create negative real interest rates.
D)  is impossible to achieve in the real world.E) A) and D)
F) B) and D)

Exam 36: Six Debates Over Macroeconomic Policy

The national debt

Correct Answer
verified

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

Correct Answer
verified
A lag of six months ...
View Answer

In fiscal year 2011, the U.S. government ran a deficit of about $1,300 billion. In fiscal year 2012, the government ran a deficit of about $1,087 billion. Other things the same, this change would be expected to have

Correct Answer
verified

When wages are set by contract, inflation

Correct Answer
verified

For which of the following policies is there a significant implementation lag?

Correct Answer
verified

Zero inflation

Correct Answer
verified

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

Correct Answer
verified

Suppose the tax rate on interest income from saving were reduced.

Correct Answer
verified

Which of the following is correct?

Correct Answer
verified

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

Correct Answer
verified

Provide an example of how current expenditures might benefit future generations.

Correct Answer
verified
Expenditures on education rais...
View Answer

Which of the following is an argument against trying to use policy to stabilize the economy?

Correct Answer
verified

According to computer estimates using a traditional macroeconomic model, the Obama administration found that the multiplier for tax cuts and government expenditures were respectively

Correct Answer
verified

In which cases were tax cuts followed by robust growth?

Correct Answer
verified

A recession has no benefit to society-it represents a sheer waste of resources.

Correct Answer
verified

The average U.S. citizens' share of the government debt represents less than 2 percent of a person's lifetime income.

Correct Answer
verified

Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations. What are some things policymakers can do to boost the economy when aggregate demand is inadequate to ensure full employment?

Correct Answer
verified
Policymakers can increase gove...
View Answer

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

Correct Answer
verified

Correct Answer
verified

"Leaning against the wind" is exemplified by a

Correct Answer
verified

Exam 36: Six Debates Over Macroeconomic Policy

The national debt

Correct AnswerverifiedShow Answer

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

Correct AnswerverifiedA lag of six months ...View AnswerShow Answer

In fiscal year 2011, the U.S. government ran a deficit of about $1,300 billion. In fiscal year 2012, the government ran a deficit of about $1,087 billion. Other things the same, this change would be expected to have

Correct AnswerverifiedShow Answer

When wages are set by contract, inflation

Correct AnswerverifiedShow Answer

For which of the following policies is there a significant implementation lag?

Correct AnswerverifiedShow Answer

Zero inflation

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose the tax rate on interest income from saving were reduced.

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

Correct AnswerverifiedShow Answer

Provide an example of how current expenditures might benefit future generations.

Correct AnswerverifiedExpenditures on education rais...View AnswerShow Answer

Which of the following is an argument against trying to use policy to stabilize the economy?

Correct AnswerverifiedShow Answer

According to computer estimates using a traditional macroeconomic model, the Obama administration found that the multiplier for tax cuts and government expenditures were respectively

Correct AnswerverifiedShow Answer

In which cases were tax cuts followed by robust growth?

Correct AnswerverifiedShow Answer

A recession has no benefit to society-it represents a sheer waste of resources.

Correct AnswerverifiedShow Answer

The average U.S. citizens' share of the government debt represents less than 2 percent of a person's lifetime income.

Correct AnswerverifiedShow Answer

Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations. What are some things policymakers can do to boost the economy when aggregate demand is inadequate to ensure full employment?

Correct AnswerverifiedPolicymakers can increase gove...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

"Leaning against the wind" is exemplified by a

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
A lag of six months ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified
Expenditures on education rais...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Policymakers can increase gove...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified