Question 1

If government budget is in deficit, then real government saving is in surplus.

Accepted Answer

A) True 
 B)False  True

Question 2

What are public, private and national saving and what is the implication of real national saving?

Accepted Answer

Real government saving is the negative of the government deficit:
-(B^g_t - B^g_t_-1)/P.
Real private or total household saving is:
K_t - K_t-1 + (B^g_t - B^g_t-1)/P_t.
Real national saving is the total of real government saving and real private savings which is:
K_t - K_t-1.
The implication of this is that real national saving equals real net investment.

Question 3

A budget deficit caused by changing labour income taxes changes the labour and production.

Accepted Answer

A) True 
 B)False  True

Question 4

Ricardian equivalence implies that a government budget deficit:

Accepted Answer

A) increases current consumption. 
B) increases future tax liabilities. 
C) reduces national saving. 
D) all of the above. 
A) increases current consumption. 
B) increases future tax liabilities. 
C) reduces national saving. 
D) all of the above.

Question 5

The standard view of the budget deficit is that a deficit:

Accepted Answer

A) does not affect the economy in the long run. 
B) and the public debt are a burden on the economy. 
C) does not affect the economy in the short run. 
D) encourages economic growth. 
A) does not affect the economy in the long run. 
B) and the public debt are a burden on the economy. 
C) does not affect the economy in the short run. 
D) encourages economic growth.

Question 6

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Accepted Answer

A) real GDP does not change. 
B) real consumption increases. 
C) real gross investment falls. 
D) all of the above. 
A) real GDP does not change. 
B) real consumption increases. 
C) real gross investment falls. 
D) all of the above.

Question 7

The standard view of the budget deficit is that it:

Accepted Answer

A) increases the GDP in the long run. 
B) increases investment. 
C) reduces the capital stock in the long run. 
D) all of the above. 
A) increases the GDP in the long run. 
B) increases investment. 
C) reduces the capital stock in the long run. 
D) all of the above.

Question 8

What are the effects of the government lowering taxes by €1 for one period in the market clearing model with no transfer payments, the money stock fixed, no inflation and with a given time path of government purchases?

Accepted Answer

Households now hold the €1 government bo

Question 9

Households may feel wealthier due to a tax cut, if:

Accepted Answer

A) they are not able to borrow as much against future earnings as they wish. 
B) they are not able to lend present earnings as much as they wish. 
C) they care a lot about future generations. 
D) they plan to leave a bequest to their heirs. 
A) they are not able to borrow as much against future earnings as they wish. 
B) they are not able to lend present earnings as much as they wish. 
C) they care a lot about future generations. 
D) they plan to leave a bequest to their heirs.

Question 10

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A) reduces current national savings. 
B) raises investment. 
C) raises the future capital stock. 
D) all of the above. 
A) reduces current national savings. 
B) raises investment. 
C) raises the future capital stock. 
D) all of the above.

Question 11

Why might a budget deficit make households feel wealthier after a tax cut?

Accepted Answer

One reason households might feel wealthi

Question 12

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Accepted Answer

A) real GDP does rise. 
B) real consumption does not change. 
C) real gross investment rises. 
D) all of the above. 
A) real GDP does rise. 
B) real consumption does not change. 
C) real gross investment rises. 
D) all of the above.

Question 13

The governments uses of funds include:

Accepted Answer

A) printing money. 
B) transfer payments. 
C) taxes. 
D) all of the above. 
A) printing money. 
B) transfer payments. 
C) taxes. 
D) all of the above.

Question 14

What is the Ricardian equivalence theorem?

Accepted Answer

The theoretical finding that, for given

Question 15

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A) raises investment. 
B) reduces GDP in the long run. 
C) raises private saving. 
D) all of the above. 
A) raises investment. 
B) reduces GDP in the long run. 
C) raises private saving. 
D) all of the above.

Question 16

When a country has a deficit, its debt is growing.

Accepted Answer

A) True 
 B)False

Question 17

The governments sources of funds include:

Accepted Answer

A) transfer payments. 
B) printing money. 
C) paying interest on the government debt. 
D) all of the above. 
A) transfer payments. 
B) printing money. 
C) paying interest on the government debt. 
D) all of the above.

Question 18

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A) decreases consumption. 
B) reduces the capital stock in the long run. 
C) raises national saving. 
D) all of the above. 
A) decreases consumption. 
B) reduces the capital stock in the long run. 
C) raises national saving. 
D) all of the above.

Question 19

If the government reduces taxes by €1 this year without raising taxes or printing more money, then

Accepted Answer

A) future tax liabilities will rise by €1 plus the interest, R, that must be paid on the borrowing. 
B) future tax liabilities will rise by €1 less the interest, R, that must be paid on the borrowing. 
C) future tax liabilities will fall by €1 plus the interest, R, that must be paid on the borrowing. 
D) future tax liabilities will fall by €1 less the interest, R, that must be paid on the borrowing. 
A) future tax liabilities will rise by €1 plus the interest, R, that must be paid on the borrowing. 
B) future tax liabilities will rise by €1 less the interest, R, that must be paid on the borrowing. 
C) future tax liabilities will fall by €1 plus the interest, R, that must be paid on the borrowing. 
D) future tax liabilities will fall by €1 less the interest, R, that must be paid on the borrowing.

Question 20

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A) increases consumption. 
B) reduces the capital stock in the long run. 
C) reduces national saving. 
D) all of the above. 
A) increases consumption. 
B) reduces the capital stock in the long run. 
C) reduces national saving. 
D) all of the above.

If government budget is in deficit, then real government saving is in surplus.

What are public, private and national saving and what is the implication of real national saving?

A budget deficit caused by changing labour income taxes changes the labour and production.

Ricardian equivalence implies that a government budget deficit:

The standard view of the budget deficit is that a deficit:

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

The standard view of the budget deficit is that it:

What are the effects of the government lowering taxes by €1 for one period in the market clearing model with no transfer payments, the money stock fixed, no inflation and with a given time path of government purchases?

Households may feel wealthier due to a tax cut, if:

If households ignore effects on future generations, a pay as you go social security system:

Why might a budget deficit make households feel wealthier after a tax cut?

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

The governments uses of funds include:

What is the Ricardian equivalence theorem?

If households ignore effects on future generations, a pay as you go social security system:

When a country has a deficit, its debt is growing.

The governments sources of funds include:

If households ignore effects on future generations, a pay as you go social security system:

If the government reduces taxes by €1 this year without raising taxes or printing more money, then

If households ignore effects on future generations, a pay as you go social security system:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Macroeconomics Without Microeconomic Foundations

Markets, Prices, Supply, and Demand

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Inflation, Money Growth, and Interest Rates

Government Expenditure

Taxes

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters

Exam 15: Public Debt

If government budget is in deficit, then real government saving is in surplus.

What are public, private and national saving and what is the implication of real national saving?

A budget deficit caused by changing labour income taxes changes the labour and production.

Ricardian equivalence implies that a government budget deficit:

The standard view of the budget deficit is that a deficit:

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

The standard view of the budget deficit is that it:

What are the effects of the government lowering taxes by €1 for one period in the market clearing model with no transfer payments, the money stock fixed, no inflation and with a given time path of government purchases?

Households may feel wealthier due to a tax cut, if:

If households ignore effects on future generations, a pay as you go social security system:

Why might a budget deficit make households feel wealthier after a tax cut?

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

The governments uses of funds include:

What is the Ricardian equivalence theorem?

If households ignore effects on future generations, a pay as you go social security system:

When a country has a deficit, its debt is growing.

The governments sources of funds include:

If households ignore effects on future generations, a pay as you go social security system:

If the government reduces taxes by €1 this year without raising taxes or printing more money, then

If households ignore effects on future generations, a pay as you go social security system:

Thinking About Macroeconomics

National-Income Accounting: Gross Domestic Product and the Price Level

Introduction to Economic Growth

Working With the Solow Growth Model

Conditional Convergence and Long-Run Economic Growth

Macroeconomics Without Microeconomic Foundations

Markets, Prices, Supply, and Demand

Consumption, Saving, and Investment

An Equilibrium Business-Cycle Model

Capital Utilization and Unemployment

The Demand for Money and the Price Level

Inflation, Money Growth, and Interest Rates

Government Expenditure

Taxes

Money and Business Cycles I: the Price-Misperceptions Model

Money and Business Cycles Ii: Sticky Prices and Nominal Wage Rates

World Markets in Goods and Credit

Exchange Rates

Filters