Exam 18: Five Debates Over Macroeconomic Policy

What happens to economies when they are left alone?

Which statement is consistent with the political business cycle theory?

Suppose that the government goes into deficit in order to help local school districts build better schools. Does this action burden future generations?

What does the time inconsistency of monetary policy mean?

Suppose that at the start of fiscal year 2019 the government had a debt of $6300 billion. Suppose that during fiscal year 2019, real GDP grew by about 5 percent and inflation was about 2 percent. What is the largest deficit the government could have run without raising the debt-to-GDP ratio?

If a central bank had to give up its discretion and had to follow a rule that required it to keep inflation low, how would the Phillips curve shift?

Advocates of stabilization policy argue that when there is a recession, the government should decrease the money supply and increase government expenditures.

A reduction in the tax rate on income from saving would do which of the following?

Deficits do not necessarily burden future generations. Discuss and provide some examples.

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

Would economists say that, in general, the Canadian tax system encourages saving?

Some social programs transfer wealth from younger generations to older generations.

What does double taxation mean?

If the Canadian government went from a budget deficit to a budget surplus, what would we expect to happen to interest rates and investment?

What could the government do to decrease the costs of inflation without lowering the inflation rate?

Which of the following phrases best describes people's opposition to having an independent central bank?

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

Which of the following is a part of the argument against deficits?

Suppose aggregate demand fell. In order to stabilize the economy, what might the government do?

Suppose people in countries that have had persistently high inflation are sceptical about efforts to reduce inflation. What will happen to the short-run Phillips curve and the sacrifice ratio?