Question 1

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

Accepted Answer

Consumers may recognize that b

Question 2

Why do many economists advocate a consumption tax rather than an income tax?

Accepted Answer

The current income tax means that income

Question 3

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

Accepted Answer

The typical estimate of the sacrifice ra

Question 4

A consumption tax that replaces an income tax

Accepted Answer

A) only taxes a household on the money it spends. 
B) discourages saving. 
C) would likely result in a lower level of saving than an income tax. 
D) ultimately taxes income twice-once when the household pays income tax and once when the household makes a purchase. 
A) only taxes a household on the money it spends. 
B) discourages saving. 
C) would likely result in a lower level of saving than an income tax. 
D) ultimately taxes income twice-once when the household pays income tax and once when the household makes a purchase.

Question 5

The national debt

Accepted Answer

A) exists because of past government budget deficits. 
B) is the difference between the government's spending and revenue in a given year. 
C) is the amount households owe on credit cards, mortgages, and other loans. 
D) is the amount households and firms have borrowed minus the amount they have saved. 
A) exists because of past government budget deficits. 
B) is the difference between the government's spending and revenue in a given year. 
C) is the amount households owe on credit cards, mortgages, and other loans. 
D) is the amount households and firms have borrowed minus the amount they have saved.

Question 6

Which of the following might stabilize an economy that is at risk of inflation?

Accepted Answer

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

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The cost of inflation reduction is a large, permanent increase in unemployment.

Accepted Answer

A) True 
 B)False

Question 9

What did the actions of the Federal Reserve during the 1990's demonstrate about monetary policy and rules?

Accepted Answer

During this time the Fed achieved and ma

Question 10

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

Accepted Answer

A government deficit means that the gove

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A reduction in the marginal tax-rate includes a substitution effect that tends to increase saving.

Accepted Answer

A) True 
 B)False

Question 13

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Accepted Answer

A) price level and real GDP change by more than otherwise. 
B) price level change by more than otherwise and real GDP change by less than otherwise. 
C) price level change by less than otherwise and real GDP change by more than otherwise. 
D) price level and real GDP change by less than otherwise. 
A) price level and real GDP change by more than otherwise. 
B) price level change by more than otherwise and real GDP change by less than otherwise. 
C) price level change by less than otherwise and real GDP change by more than otherwise. 
D) price level and real GDP change by less than otherwise.

Question 14

Time inconsistency will cause the

Accepted Answer

A) short-run Phillips curve to be higher than otherwise. 
B) short-run Phillips curve to be lower the otherwise. 
C) long-run Phillips curve to be farther to the right than otherwise. 
D) long-run Phillips curve to be farther left than otherwise. 
A) short-run Phillips curve to be higher than otherwise. 
B) short-run Phillips curve to be lower the otherwise. 
C) long-run Phillips curve to be farther to the right than otherwise. 
D) long-run Phillips curve to be farther left than otherwise.

Question 15

Which of the following would likely increase private saving?

Accepted Answer

A) A consumption tax, but not expansion of means testing 
B) Both expansion of means testing and a consumption tax 
C) Expansion of means testing, but not a consumption tax 
D) Neither expansion of means testing nor a consumption tax 
A) A consumption tax, but not expansion of means testing 
B) Both expansion of means testing and a consumption tax 
C) Expansion of means testing, but not a consumption tax 
D) Neither expansion of means testing nor a consumption tax

Question 16

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

Accepted Answer

According to the traditional Keynesian m

Question 17

In the early 1980s the Fed tightened monetary policy. Over the next few years inflation

Accepted Answer

A) remained high and unemployment rose. 
B) fell but unemployment rose temporarily. 
C) and unemployment fell. 
D) and unemployment rose. 
A) remained high and unemployment rose. 
B) fell but unemployment rose temporarily. 
C) and unemployment fell. 
D) and unemployment rose.

Question 18

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

Accepted Answer

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

Question 19

What is meant by the political business cycle?

Accepted Answer

Central banks sympathetic to i

Question 20

Some studies have found that saving is not very sensitive to the rate of return on saving.

Accepted Answer

A) True 
 B)False

Exam 36: Six Debates Over Macroeconomic Policy

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

Why do many economists advocate a consumption tax rather than an income tax?

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

A consumption tax that replaces an income tax

The national debt

Which of the following might stabilize an economy that is at risk of inflation?

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

The cost of inflation reduction is a large, permanent increase in unemployment.

What did the actions of the Federal Reserve during the 1990's demonstrate about monetary policy and rules?

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

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

A reduction in the marginal tax-rate includes a substitution effect that tends to increase saving.

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Time inconsistency will cause the

Which of the following would likely increase private saving?

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

In the early 1980s the Fed tightened monetary policy. Over the next few years inflation

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

What is meant by the political business cycle?

Some studies have found that saving is not very sensitive to the rate of return on saving.

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 Nations 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

Filters