Question 1

If the deficit is 0.02 times GDP,the existing debt-GDP ratio is 0.5,and the growth rate of nominal GDP is 0.03,then the change in the debt-GDP ratio is

Accepted Answer

A) +0.05 
B) +0.025. 
C) 0) 
D) -0.025. 
A) +0.05 
B) +0.025. 
C) 0) 
D) -0.025.

Question 2

Suppose that all workers place a value on their leisure of 75 goods per day.The production function relating output per day Y to the number of people working per day N is
Y = 500N - 0.4 N2,
and the marginal product of labor is
MPN = 500 - 0.8 N.
A 25% tax is levied on wages.
(a)How much is output per day?
(b)In terms of lost output,what is the cost of the distortion introduced by this tax?

Accepted Answer

Question 3

Real money demand in the economy is given by L = 0.5Y - 2500i,
Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.At what rate of inflation is seignorage maximized?

Accepted Answer

A) 0)05 
B) 0)075 
C) 0)09 
D) 0)10 
A) 0)05 
B) 0)075 
C) 0)09 
D) 0)10

Question 4

A decrease in the average tax rate,with the marginal tax rate held constant,will

Accepted Answer

A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate. 
A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate.

Question 5

Classical economists think that lump-sum tax changes

Accepted Answer

A) should be used to smooth business cycles. 
B) have a powerful effect on the economy. 
C) affect aggregate demand after a lag. 
D) have no effect because of Ricardian equivalence. 
A) should be used to smooth business cycles. 
B) have a powerful effect on the economy. 
C) affect aggregate demand after a lag. 
D) have no effect because of Ricardian equivalence.

Question 6

The three main categories of government outlays are

Accepted Answer

A) net interest payments, government investment, and government consumption expenditures. 
B) net government subsidies, the government deficit, and government purchases. 
C) government purchases, transfer payments, and net interest payments. 
D) government consumption expenditures, government investment, and transfer payments. 
A) net interest payments, government investment, and government consumption expenditures. 
B) net government subsidies, the government deficit, and government purchases. 
C) government purchases, transfer payments, and net interest payments. 
D) government consumption expenditures, government investment, and transfer payments.

Question 7

In which case would you be most likely to expect inflation to occur?

Accepted Answer

A) The government runs a sustained government deficit by lowering taxes. 
B) The government runs a sustained government deficit by increasing purchases. 
C) The government runs a sustained primary deficit by increasing purchases. 
D) The government funds its sustained deficit by increasing the money supply. 
A) The government runs a sustained government deficit by lowering taxes. 
B) The government runs a sustained government deficit by increasing purchases. 
C) The government runs a sustained primary deficit by increasing purchases. 
D) The government funds its sustained deficit by increasing the money supply.

Question 8

Subtracting government investment from government purchases gives us the amount of government

Accepted Answer

A) outlays. 
B) primary expenditures. 
C) secondary spending. 
D) consumption expenditures. 
A) outlays. 
B) primary expenditures. 
C) secondary spending. 
D) consumption expenditures.

Question 9

Why is the Social Security system in crisis at a time when it's running large surpluses? What's the source of the problem? What solutions have been proposed?

Accepted Answer

The Social Security system is in a crisi

Question 10

The primary deficit is equal to

Accepted Answer

A) the amount by which government purchases, transfers, and net interest exceed tax revenues. 
B) the amount by which government purchases and transfers exceed tax revenues. 
C) the deficit plus net interest payments. 
D) total tax revenues minus net interest minus government expenditures. 
A) the amount by which government purchases, transfers, and net interest exceed tax revenues. 
B) the amount by which government purchases and transfers exceed tax revenues. 
C) the deficit plus net interest payments. 
D) total tax revenues minus net interest minus government expenditures.

Question 11

The total value of government bonds outstanding at any particular time is called the

Accepted Answer

A) government debt. 
B) government deficit. 
C) seignorage revenue. 
D) yield curve. 
A) government debt. 
B) government deficit. 
C) seignorage revenue. 
D) yield curve.

Question 12

An increase in the marginal tax rate,with the average tax rate held constant,will

Accepted Answer

A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate. 
A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate.

Question 13

You are given the following budget data for a country that has both a central government and local governments.
   
(a)How much is the deficit for the central government,the local government,and the total of the central and local governments?
(b)How much is the primary deficit for the central government,the local government,and the total of the central and local governments?

Accepted Answer

(a)175,10,

Question 14

Consider an economy that has the following monetary data.
   
The monetary base and the money supply are expected to grow at a constant rate of 20% per year.Inflation and expected inflation are 20% per year.Suppose that bank reserves and currency pay no interest,all currency is held by the public,and bank deposits pay no interest.
(a)What is the cost to the public of the inflation tax?
(b)What is the nominal value of seignorage over the year?
(c)What is the profit to the banks from the inflation?

Accepted Answer

(a)$200
(b

Question 15

Whether real seignorage revenue increases when the rate of money growth increases depends on whether

Accepted Answer

A) the rise in real money holdings outweighs the decline in inflation. 
B) the rise in inflation outweighs the decline in real money holdings. 
C) the rise in inflation ratio outweighs the decline in the real supply of currency. 
D) the rise in the real supply of currency outweighs the decline in inflation. 
A) the rise in real money holdings outweighs the decline in inflation. 
B) the rise in inflation outweighs the decline in real money holdings. 
C) the rise in inflation ratio outweighs the decline in the real supply of currency. 
D) the rise in the real supply of currency outweighs the decline in inflation.

Question 16

When the United States engaged in quantitative easing from 2008 to 2014,________ rose sharply.

Accepted Answer

A) bank reserves 
B) inflation 
C) the unemployment rate 
D) the money supply 
A) bank reserves 
B) inflation 
C) the unemployment rate 
D) the money supply

Question 17

Interest payments by the government as a share of GDP

Accepted Answer

A) have steadily increased from the 1940s to the 2010s. 
B) remained fairly steady from the 1940s to the 2010s. 
C) increased in the 2000s and 2010s, but were fairly steady before that. 
D) increased sharply in the 1940s and 1980s. 
A) have steadily increased from the 1940s to the 2010s. 
B) remained fairly steady from the 1940s to the 2010s. 
C) increased in the 2000s and 2010s, but were fairly steady before that. 
D) increased sharply in the 1940s and 1980s.

Question 18

The inflation tax is primarily a tax on

Accepted Answer

A) government bonds. 
B) Social Security recipients. 
C) money. 
D) real income. 
A) government bonds. 
B) Social Security recipients. 
C) money. 
D) real income.

Question 19

Real money demand in the economy is given by L = 0.5Y - 2500i,
Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.What is the maximum amount of seignorage revenue?

Accepted Answer

A) 11.11 
B) 20.25 
C) 22.25 
D) 24.75 
A) 11.11 
B) 20.25 
C) 22.25 
D) 24.75

Question 20

An increase in the average tax rate,with the marginal tax rate held constant,will

Accepted Answer

A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate. 
A) increase the amount of labor supplied at any real wage. 
B) not affect the amount of labor supplied at any real wage. 
C) decrease the amount of labor supplied at any real wage. 
D) increase the amount of labor supplied at any real wage if the average tax rate is above the marginal tax rate, but decrease the amount of labor supplied at any real wage if the average tax rate is below the marginal tax rate.

If the deficit is 0.02 times GDP,the existing debt-GDP ratio is 0.5,and the growth rate of nominal GDP is 0.03,then the change in the debt-GDP ratio is

Real money demand in the economy is given by L = 0.5Y - 2500i, Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.At what rate of inflation is seignorage maximized?

A decrease in the average tax rate,with the marginal tax rate held constant,will

Classical economists think that lump-sum tax changes

The three main categories of government outlays are

In which case would you be most likely to expect inflation to occur?

Subtracting government investment from government purchases gives us the amount of government

Why is the Social Security system in crisis at a time when it's running large surpluses? What's the source of the problem? What solutions have been proposed?

The primary deficit is equal to

The total value of government bonds outstanding at any particular time is called the

An increase in the marginal tax rate,with the average tax rate held constant,will

Whether real seignorage revenue increases when the rate of money growth increases depends on whether

When the United States engaged in quantitative easing from 2008 to 2014,________ rose sharply.

Interest payments by the government as a share of GDP

The inflation tax is primarily a tax on

Real money demand in the economy is given by L = 0.5Y - 2500i, Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.What is the maximum amount of seignorage revenue?

An increase in the average tax rate,with the marginal tax rate held constant,will

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Filters

Exam 15: Government Spending and Its Financing

If the deficit is 0.02 times GDP,the existing debt-GDP ratio is 0.5,and the growth rate of nominal GDP is 0.03,then the change in the debt-GDP ratio is

Real money demand in the economy is given by L = 0.5Y - 2500i, Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.At what rate of inflation is seignorage maximized?

A decrease in the average tax rate,with the marginal tax rate held constant,will

Classical economists think that lump-sum tax changes

The three main categories of government outlays are

In which case would you be most likely to expect inflation to occur?

Subtracting government investment from government purchases gives us the amount of government

Why is the Social Security system in crisis at a time when it's running large surpluses? What's the source of the problem? What solutions have been proposed?

The primary deficit is equal to

The total value of government bonds outstanding at any particular time is called the

An increase in the marginal tax rate,with the average tax rate held constant,will

Whether real seignorage revenue increases when the rate of money growth increases depends on whether

When the United States engaged in quantitative easing from 2008 to 2014,________ rose sharply.

Interest payments by the government as a share of GDP

The inflation tax is primarily a tax on

Real money demand in the economy is given by L = 0.5Y - 2500i, Where Y is real income and i is the nominal interest rate.In equilibrium,real money demand L equals real money supply M/P.Suppose that Y equals 1000 and the real interest rate is 0.02.What is the maximum amount of seignorage revenue?

An increase in the average tax rate,with the marginal tax rate held constant,will

Introduction to Macroeconomics

The Measurement and Structure of the National Economy

Productivity, output, and Employment

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lmad-As Model

Classical Business Cycle Analysis

Keynesianism: the Macroeconomics of Wage and Price Rigidity

Unemployment and Inflation

Exchange Rates, business Cycles, and Macroeconomic Policy in the Open Economy

Monetary Policy and the Federal Reserve System

Filters