Exam 36: Six Debates Over Macroeconomic Policy

Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of their contributions was to argue that if a central bank could convince people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. This possibility is known as

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

Which of the following are taxed?

Inflation reduction has the lowest cost when the efforts are

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

If inflation were reduced, then it is

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

Which of the following is a cost of inflation?

If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

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

Opponents of tax reforms intended to raise saving argue that such reforms

Proponents of a balanced government budget acknowledge that running a budget deficit is justifiable in time of war.

Which of the following is not an argument made by those who oppose reforming the tax laws to encourage saving?