Question 1

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. 
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.

Question 2

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. 
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.

Question 3

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 tax 
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 tax

Question 4

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

Accepted Answer

The debt can grow because the economy gr

Question 5

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 taxes 
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 taxes

Question 6

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. 
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.

Question 7

Identify three government policies that discourage saving.

Accepted Answer

First, the returns to saving are heavily

Question 8

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. 
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.

Question 9

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. 
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.

Question 10

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. 
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.

Question 11

Approximately how often does the Federal Open Market Committee meet?

Accepted Answer

The FOMC m

Question 12

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 13

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 14

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. 
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.

Question 15

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. 
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.

Question 16

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. 
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.

Question 17

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 billion 
A) 135 billion 
B) 143 billion 
C) 169 billion 
D) 175 billion

Question 18

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. 
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.

Question 19

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

Question 20

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. 
A) in the stock market. 
B) in the foreign exchange market. 
C) in the bond market. 
D) in the labor market.

Exam 36: Six Debates Over Macroeconomic Policy

Paul Volcker, former chair of the Fed, implemented

Inflation

Which of the following would likely increase private saving?

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

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

The Federal Reserve

Identify three government policies that discourage saving.

Higher inflation results in

Means-tested programs tend to favor

Which of the following is not correct?

Approximately how often does the Federal Open Market Committee meet?

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

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.

As it is usually practiced, inflation targeting sets

Stimulus spending in 2009 was used for

Which of the following is correct?

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?

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

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

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

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

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