Question 1

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Accepted Answer

A) only price stability 
B) only maximum employment 
C) only price stability and maximum employment 
D) price stability, maximum employment, and moderate long-term interest rates 
A) only price stability 
B) only maximum employment 
C) only price stability and maximum employment 
D) price stability, maximum employment, and moderate long-term interest rates

Question 2

Paul Volcker's inflation reduction efforts

Accepted Answer

A) failed to reduce inflation. 
B) failed to reduce expected inflation. 
C) resulted in the highest unemployment rate since the Great Depression. 
D) none of the above are correct. 
A) failed to reduce inflation. 
B) failed to reduce expected inflation. 
C) resulted in the highest unemployment rate since the Great Depression. 
D) none of the above are correct.

Question 3

Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?

Accepted Answer

A) The economy responds very quickly to changes in the interest rate and changes in economic conditions are easy to predict. 
B) The economy responds very quickly to changes in the interest rate and changes in economic conditions are nearly impossible to predict. 
C) The economy responds to changes in the interest rate with a lag and changes in economic conditions are easy to predict. 
D) The economy responds to changes in the interest rate with a lag and changes in economic conditions are nearly impossible to predict. 
A) The economy responds very quickly to changes in the interest rate and changes in economic conditions are easy to predict. 
B) The economy responds very quickly to changes in the interest rate and changes in economic conditions are nearly impossible to predict. 
C) The economy responds to changes in the interest rate with a lag and changes in economic conditions are easy to predict. 
D) The economy responds to changes in the interest rate with a lag and changes in economic conditions are nearly impossible to predict.

Question 4

Tax cuts

Accepted Answer

A) can easily target investment spending, but investment spending falls by only a small percentage during recessions. 
B) can easily target investment spending, which falls by a large percentage during recessions. 
C) cannot easily target investment spending, but investment spending falls by only a small percentage during recessions. 
D) cannot easily target investment spending, which falls by a large percentage during recessions. 
A) can easily target investment spending, but investment spending falls by only a small percentage during recessions. 
B) can easily target investment spending, which falls by a large percentage during recessions. 
C) cannot easily target investment spending, but investment spending falls by only a small percentage during recessions. 
D) cannot easily target investment spending, which falls by a large percentage during recessions.

Question 5

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008-2009 recession.

Accepted Answer

"Shovel ready" public works pr

Question 6

Eliminating means requirements for government benefits would

Accepted Answer

A) raise saving and primarily benefit people with lower incomes. 
B) raise saving but primarily benefit people with higher incomes. 
C) reduce saving but primarily benefit people with lower incomes. 
D) reduce saving and primarily benefit people with higher income. 
A) raise saving and primarily benefit people with lower incomes. 
B) raise saving but primarily benefit people with higher incomes. 
C) reduce saving but primarily benefit people with lower incomes. 
D) reduce saving and primarily benefit people with higher income.

Question 7

When aggregate demand is high, risking higher inflation, those in favor of using monetary and fiscal policy to stabilize the economy might recommend

Accepted Answer

A) increasing government spending. 
B) expanding the money supply. 
C) lowering taxes. 
D) the Fed sell government bonds. 
A) increasing government spending. 
B) expanding the money supply. 
C) lowering taxes. 
D) the Fed sell government bonds.

Question 8

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

Accepted Answer

A) both the tax cut and the increase in government expenditures 
B) the tax cut but not the increase in government expenditures 
C) the increase in government expenditures but not the tax cut 
D) neither the increase in government expenditures nor the tax cut 
A) both the tax cut and the increase in government expenditures 
B) the tax cut but not the increase in government expenditures 
C) the increase in government expenditures but not the tax cut 
D) neither the increase in government expenditures nor the tax cut

Question 9

According to a 1977 amendment to the Federal Reserve Act of 1913, what weights should the Fed put on the goals of maximum employment, stable prices, and moderate long-term interest rates?

Accepted Answer

While the amendment indicates

Question 10

Government deficits mean that

Accepted Answer

A) national saving is negative so public saving is negative. 
B) national saving is negative so public saving is lower than otherwise. 
C) public saving is negative so national saving is negative. 
D) public saving is negative so national saving is lower than otherwise. 
A) national saving is negative so public saving is negative. 
B) national saving is negative so public saving is lower than otherwise. 
C) public saving is negative so national saving is negative. 
D) public saving is negative so national saving is lower than otherwise.

Question 11

If inflation falls,

Accepted Answer

A) people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
B) people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. 
C) people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
D) people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. 
A) people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
B) people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. 
C) people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
D) people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.

Question 12

Why might tax cuts be more appropriate than increasing government expenditures to counter recessions? Is there any evidence for this thinking?

Accepted Answer

Tax cuts affect aggregate demand quickly

Question 13

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

Accepted Answer

A) True 
 B)False

Question 14

The effects of a decline in the value of financial assets, such as stocks, on consumption and the economy might be offset by

Accepted Answer

A) increasing government spending. 
B) decreasing the money supply. 
C) increasing taxes. 
D) undertaking no policy action. 
A) increasing government spending. 
B) decreasing the money supply. 
C) increasing taxes. 
D) undertaking no policy action.

Question 15

Which of the following things can a government do to lower the costs of inflation?

Accepted Answer

A) sell inflation-indexed bonds and rewrite tax laws so that real rather than nominal gains are taxed 
B) sell inflation-indexed bonds but not rewrite tax laws so that real rather than nominal gains are taxed 
C) rewrite tax laws so that real rather than nominal gains are taxed, but not sell inflation-indexed bonds 
D) neither sell inflation-indexed bonds nor rewrite tax laws so that real rather than nominal gains are taxed 
A) sell inflation-indexed bonds and rewrite tax laws so that real rather than nominal gains are taxed 
B) sell inflation-indexed bonds but not rewrite tax laws so that real rather than nominal gains are taxed 
C) rewrite tax laws so that real rather than nominal gains are taxed, but not sell inflation-indexed bonds 
D) neither sell inflation-indexed bonds nor rewrite tax laws so that real rather than nominal gains are taxed

Question 16

Is it possible that deficits do not burden future generations?

Accepted Answer

Some programs, such as Social Security,

Question 17

Which of the following does the U.S. currently have?

Accepted Answer

A) means-tested government benefits and tax laws that tax capital income only once 
B) means-tested government benefits and tax laws that tax some capital income twice 
C) tax laws that tax capital income only once, but not means-tested government benefits 
D) tax laws that tax some capital income twice, but not means-tested government benefits 
A) means-tested government benefits and tax laws that tax capital income only once 
B) means-tested government benefits and tax laws that tax some capital income twice 
C) tax laws that tax capital income only once, but not means-tested government benefits 
D) tax laws that tax some capital income twice, but not means-tested government benefits

Question 18

What fiscal policies did the government implement in response to the 2008-2009 recession? Can we be certain that these policies were effective? Explain.

Accepted Answer

The government cut taxes and raised expe

Question 19

Explain why policy lags could make stabilization policies counterproductive.

Accepted Answer

As the textbook explains, it takes time

Question 20

An individual would suffer lower losses or maybe even gain from an unexpectedly higher inflation rate if

Accepted Answer

A) she held much currency and on net was a lender. 
B) she held much currency and on net was a borrower. 
C) she held little currency and on net was a lender. 
D) she held little currency and on net was a borrower. 
A) she held much currency and on net was a lender. 
B) she held much currency and on net was a borrower. 
C) she held little currency and on net was a lender. 
D) she held little currency and on net was a borrower.

Exam 36: Six Debates Over Macroeconomic Policy

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Paul Volcker's inflation reduction efforts

Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?

Tax cuts

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008-2009 recession.

Eliminating means requirements for government benefits would

When aggregate demand is high, risking higher inflation, those in favor of using monetary and fiscal policy to stabilize the economy might recommend

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

According to a 1977 amendment to the Federal Reserve Act of 1913, what weights should the Fed put on the goals of maximum employment, stable prices, and moderate long-term interest rates?

Government deficits mean that

If inflation falls,

Why might tax cuts be more appropriate than increasing government expenditures to counter recessions? Is there any evidence for this thinking?

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

The effects of a decline in the value of financial assets, such as stocks, on consumption and the economy might be offset by

Which of the following things can a government do to lower the costs of inflation?

Is it possible that deficits do not burden future generations?

Which of the following does the U.S. currently have?

What fiscal policies did the government implement in response to the 2008-2009 recession? Can we be certain that these policies were effective? Explain.

Explain why policy lags could make stabilization policies counterproductive.

An individual would suffer lower losses or maybe even gain from an unexpectedly higher inflation rate if

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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