Question 1

Means-tested government benefits base benefits on

Accepted Answer

A) a household's wealth and are an incentive to save. 
B) a household's wealth and are a disincentive to save. 
C) the current interest rate and are an incentive to save. 
D) the current interest rate and are a disincentive to save. 
A) a household's wealth and are an incentive to save. 
B) a household's wealth and are a disincentive to save. 
C) the current interest rate and are an incentive to save. 
D) the current interest rate and are a disincentive to save.

Question 2

The Fed lowered interest rates in 2007 and 2008. This implies, other things the same, that the Fed

Accepted Answer

A) increased the money supply because it was concerned about unemployment. 
B) increased the money supply because it was concerned about inflation. 
C) decreased the money supply because it was concerned about unemployment. 
D) decreased the money supply because it was concerned about inflation. 
A) increased the money supply because it was concerned about unemployment. 
B) increased the money supply because it was concerned about inflation. 
C) decreased the money supply because it was concerned about unemployment. 
D) decreased the money supply because it was concerned about inflation.

Question 3

The time inconsistency of monetary policy means that

Accepted Answer

A) once people have formed expectations of low inflation based on a promise by the central bank, the central bank is tempted to raise inflation to lower unemployment. 
B) at some times central banks think it is more important to keep unemployment low; at other times, they think it is more important to keep inflation low. 
C) monetary policy is not consistent across time because it is influenced by politics. 
D) monetary policy is not consistent across time because policymakers are incompetent. 
A) once people have formed expectations of low inflation based on a promise by the central bank, the central bank is tempted to raise inflation to lower unemployment. 
B) at some times central banks think it is more important to keep unemployment low; at other times, they think it is more important to keep inflation low. 
C) monetary policy is not consistent across time because it is influenced by politics. 
D) monetary policy is not consistent across time because policymakers are incompetent.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

According to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size.

Accepted Answer

A) True 
 B)False

Question 6

Proponents of zero inflation argue that a successful program to reduce inflation

Accepted Answer

A) eventually reduces inflation expectations. 
B) eventually raises real interest rates. 
C) permanently decreases output. 
D) permanently raises unemployment. 
A) eventually reduces inflation expectations. 
B) eventually raises real interest rates. 
C) permanently decreases output. 
D) permanently raises unemployment.

Question 7

Which of the following would likely increase private saving?

Accepted Answer

A) Both expansion of IRA type accounts and a consumption tax. 
B) Expansion of IRA type accounts, but not a consumption tax. 
C) A consumption tax, but not expansion of IRA type accounts. 
D) Neither expansion of IRA type accounts nor a consumption tax. 
A) Both expansion of IRA type accounts and a consumption tax. 
B) Expansion of IRA type accounts, but not a consumption tax. 
C) A consumption tax, but not expansion of IRA type accounts. 
D) Neither expansion of IRA type accounts nor a consumption tax.

Question 8

In essence, a consumption tax puts all saving into tax-advantaged savings accounts.

Accepted Answer

A) True 
 B)False

Question 9

There are ways that policymakers could reduce the costs of inflation without reducing inflation.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following two effects of a decrease in the tax rate on saving would raise savings?

Accepted Answer

A) the income effect and the substitution effect 
B) the income effect but not the substitution effect 
C) the substitution effect but not the income effect 
D) neither the substitution effect nor the income effect 
A) the income effect and the substitution effect 
B) the income effect but not the substitution effect 
C) the substitution effect but not the income effect 
D) neither the substitution effect nor the income effect

Question 11

Critics of active monetary and fiscal policy emphasize

Accepted Answer

A) that policy affects the economy with a lag and our ability to forecast future economic conditions is poor. 
B) "leaning against the wind" of economic change to stabilize the economy. 
C) cutting government spending, raising taxes, and reducing the money supply when aggregate demand is excessive. 
D) boosting government spending, lowering taxes, and increasing the money supply when aggregate demand is low. 
A) that policy affects the economy with a lag and our ability to forecast future economic conditions is poor. 
B) "leaning against the wind" of economic change to stabilize the economy. 
C) cutting government spending, raising taxes, and reducing the money supply when aggregate demand is excessive. 
D) boosting government spending, lowering taxes, and increasing the money supply when aggregate demand is low.

Question 12

Which costs of inflation could the government take action to reduce without reducing inflation?

Accepted Answer

A) shoeleather costs 
B) unintended changes in tax liabilities 
C) menu costs 
D) none of the above is correct. 
A) shoeleather costs 
B) unintended changes in tax liabilities 
C) menu costs 
D) none of the above is correct.

Question 13

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

Accepted Answer

A) True 
 B)False

Question 14

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

Accepted Answer

A) True 
 B)False

Question 15

By law what goals are the Federal Reserve to pursue? What, if any, specific weights are given for these goals?

Accepted Answer

maximum employment, stable pri

Question 16

Which of the following is correct?

Accepted Answer

A) Well designed tax cuts can increase investment which fluctuates more than consumption over the business cycle. 
B) Well designed tax cuts can increase investment but it fluctuates less than consumption over the business cycle. 
C) Tax cuts have little effect on investment which fluctuate more than consumption over the business cycle. 
D) Tax cuts have little effect on investment but it fluctuates less than consumption over the business cycle 
A) Well designed tax cuts can increase investment which fluctuates more than consumption over the business cycle. 
B) Well designed tax cuts can increase investment but it fluctuates less than consumption over the business cycle. 
C) Tax cuts have little effect on investment which fluctuate more than consumption over the business cycle. 
D) Tax cuts have little effect on investment but it fluctuates less than consumption over the business cycle

Question 17

Which of the following can tax cuts influence?

Accepted Answer

A) aggregate demand and aggregate supply 
B) aggregate demand but not aggregate supply 
C) aggregate supply but not aggregate demand 
D) neither aggregate demand nor aggregate supply 
A) aggregate demand and aggregate supply 
B) aggregate demand but not aggregate supply 
C) aggregate supply but not aggregate demand 
D) neither aggregate demand nor aggregate supply

Question 18

Suppose a country has had a high and relatively stable inflation rate for a long time. How might this affect the costs and benefits of inflation reduction?

Accepted Answer

If inflation is usually about what peopl

Question 19

The time inconsistency of policy implies that

Accepted Answer

A) what policymakers say they will do is generally what they will do, but people don't believe them because of current policy. 
B) when people expect that inflation will be low, it is harder for the Fed to increase output by increasing the money supply. 
C) people will believe Fed policy will be more inflationary than the Fed claims. 
D) what policymakers say they will do is usually not what they do, but people believe them anyway. 
A) what policymakers say they will do is generally what they will do, but people don't believe them because of current policy. 
B) when people expect that inflation will be low, it is harder for the Fed to increase output by increasing the money supply. 
C) people will believe Fed policy will be more inflationary than the Fed claims. 
D) what policymakers say they will do is usually not what they do, but people believe them anyway.

Question 20

Inflation

Accepted Answer

A) causes people to spend more time reducing money balances. When inflation is unexpectedly high it redistributes wealth from lenders to borrowers. 
B) causes people to spend more time reducing money balances. When inflation is unexpectedly high it redistributes wealth from borrowers to lenders. 
C) causes people to spend less time reducing money balances. When inflation is unexpectedly high it redistributes wealth from lenders to borrowers. 
D) causes people to spend less time reducing money balances. When inflation is unexpectedly high it redistributes wealth from borrowers to lenders. 
A) causes people to spend more time reducing money balances. When inflation is unexpectedly high it redistributes wealth from lenders to borrowers. 
B) causes people to spend more time reducing money balances. When inflation is unexpectedly high it redistributes wealth from borrowers to lenders. 
C) causes people to spend less time reducing money balances. When inflation is unexpectedly high it redistributes wealth from lenders to borrowers. 
D) causes people to spend less time reducing money balances. When inflation is unexpectedly high it redistributes wealth from borrowers to lenders.

Exam 36: Six Debates Over Macroeconomic Policy

Means-tested government benefits base benefits on

The Fed lowered interest rates in 2007 and 2008. This implies, other things the same, that the Fed

The time inconsistency of monetary policy means that

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

According to traditional Keynesian analysis, a tax cut has a larger effect on aggregate demand than an increase in government expenditures of the same size.

Proponents of zero inflation argue that a successful program to reduce inflation

Which of the following would likely increase private saving?

In essence, a consumption tax puts all saving into tax-advantaged savings accounts.

There are ways that policymakers could reduce the costs of inflation without reducing inflation.

Which of the following two effects of a decrease in the tax rate on saving would raise savings?

Critics of active monetary and fiscal policy emphasize

Which costs of inflation could the government take action to reduce without reducing inflation?

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

By law what goals are the Federal Reserve to pursue? What, if any, specific weights are given for these goals?

Which of the following is correct?

Which of the following can tax cuts influence?

Suppose a country has had a high and relatively stable inflation rate for a long time. How might this affect the costs and benefits of inflation reduction?

The time inconsistency of policy implies that

Inflation

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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