Question 1

Why might policymakers attempts to stabilize the economy do more harm than good?

Accepted Answer

Policy works with a lag. By th

Question 2

A reduction in the tax rate on income earned from past saving would

Accepted Answer

A) most directly benefit the poor in the short run. 
B) increase incomes over time. 
C) decrease the capital stock over time. 
D) decrease productivity over time. 
A) most directly benefit the poor in the short run. 
B) increase incomes over time. 
C) decrease the capital stock over time. 
D) decrease productivity over time.

Question 3

Explain how a higher rate of return on saving could, at least in theory, lead to lower saving.

Accepted Answer

A higher rate of return on saving means

Question 4

Suppose that a country has an inflation rate of about 3 percent per year and a real GDP growth rate of about 3 percent per year. How large of a deficit can the government run (as a percentage of GDP) without raising the debt-to-income ratio?

Accepted Answer

The government could run a def

Question 5

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.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

The two primary justifications for runni

Question 7

Which of the following would transfer wealth from old to young?

Accepted Answer

A) Increases in the budget deficit 
B) Decreased building of highways and bridges 
C) More generous education subsidies 
D) Indexation of Social Security benefits to inflation 
A) Increases in the budget deficit 
B) Decreased building of highways and bridges 
C) More generous education subsidies 
D) Indexation of Social Security benefits to inflation

Question 8

Paul Volcker, former chair of the Fed, implemented

Accepted Answer

A) contractionary policy, which increased the popularity of the U.S.president who had appointed him. 
B) contractionary policy, which decreased the popularity of the U.S.president who had appointed him. 
C) expansionary policy, which increased the popularity of the U.S.president who had appointed him. 
D) expansionary policy, which decreased the popularity of the U.S.president who had appointed him. 
A) contractionary policy, which increased the popularity of the U.S.president who had appointed him. 
B) contractionary policy, which decreased the popularity of the U.S.president who had appointed him. 
C) expansionary policy, which increased the popularity of the U.S.president who had appointed him. 
D) expansionary policy, which decreased the popularity of the U.S.president who had appointed him.

Question 9

Social Security transfers wealth from younger generations to older generations.

Accepted Answer

A) True 
 B)False

Question 10

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

Accepted Answer

A) True 
 B)False

Question 11

The average U.S. citizens' share of the government debt represents less than 2 percent of a person's lifetime income.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.

Accepted Answer

A) True 
 B)False

Question 14

Economists agree that if a monetary policy rule is to be used, the best one makes the growth rate of the money supply constant.

Accepted Answer

A) True 
 B)False

Exam 36: Six Debates Over Macroeconomic Policy

Why might policymakers attempts to stabilize the economy do more harm than good?

A reduction in the tax rate on income earned from past saving would

Explain how a higher rate of return on saving could, at least in theory, lead to lower saving.

Suppose that a country has an inflation rate of about 3 percent per year and a real GDP growth rate of about 3 percent per year. How large of a deficit can the government run (as a percentage of GDP) without raising the debt-to-income ratio?

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.

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

Which of the following would transfer wealth from old to young?

Paul Volcker, former chair of the Fed, implemented

Social Security transfers wealth from younger generations to older generations.

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

The average U.S. citizens' share of the government debt represents less than 2 percent of a person's lifetime income.

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

Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.

Economists agree that if a monetary policy rule is to be used, the best one makes the growth rate of the money supply constant.

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

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