Exam 36: Six Debates Over Macroeconomic Policy

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

When the government has a deficit, a burden is necessarily imposed on future generations of taxpayers.

Fluctuations in employment and output result from changes in

If a central bank had to give up its discretion and follow a rule that required it to keep inflation low,

U.S. public policy discourages saving because

Suppose the nation's price level rises as a result of an increase in aggregate demand and a decrease in aggregate supply which leaves output unchanged. If the Fed is required to follow a rule that stabilizes the price level, what will the Fed do to the money supply and what impact will this have on total output in the economy?

One prominent debate over macroeconomic policy centers on the question of whether monetary and fiscal policy should be used to try to stabilize the economy.

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

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Are there any situations in which running a budget deficit is justified? Explain.

Eliminating double-taxation would likely

One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?

If there is a political business cycle and the Federal Reserve supports the incumbent, then we should expect that prior to elections

A law that requires the money supply to grow by a fixed percentage each year would eliminate

If tax rates are raised to avoid a deficit during a recession, then

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise the price level?

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

A reduction in the tax rate on interest income

A country has a growth rate of 3%. Government spending is 60 billion units of currency and its tax revenues are 32 billion units of currency. The current national debt is 400 billion units of currency. At which inflation rate is its debt-to-income ratio unchanged?

Changes in tax laws that reduce taxes more for those who save a lot will