Question 1

Which of the following is correct?

Accepted Answer

A) economic forecasts are precise and aggregate spending responds almost immediately to interest rate changes. 
B) economic forecast are precise and aggregate spending responds to interest rate changes with a lag. 
C) economic forecasts are imprecise and aggregate spending responds almost immediately to interest rate changes. 
D) economic forecast are imprecise and aggregate spending responds to interest rate changes with a lag. 
A) economic forecasts are precise and aggregate spending responds almost immediately to interest rate changes. 
B) economic forecast are precise and aggregate spending responds to interest rate changes with a lag. 
C) economic forecasts are imprecise and aggregate spending responds almost immediately to interest rate changes. 
D) economic forecast are imprecise and aggregate spending responds to interest rate changes with a lag.

Question 2

Which of the following is correct?

Accepted Answer

A) Deficits require people to consume at the expense of their children. 
B) If the government uses funds to pay for useful programs, on net the debt need not burden future generations. 
C) If the government runs a deficit, it is necessarily in debt. 
D) The current government debt is about $120,000 per person. 
A) Deficits require people to consume at the expense of their children. 
B) If the government uses funds to pay for useful programs, on net the debt need not burden future generations. 
C) If the government runs a deficit, it is necessarily in debt. 
D) The current government debt is about $120,000 per person.

Question 3

The average U.S.citizens' share of the government debt represents about 10 percent of her lifetime income.

Accepted Answer

A) True 
 B)False

Question 4

Double taxation means that both

Accepted Answer

A) wage income and interest income are taxed, which is currently the case in the United States. 
B) wage income and interest income are taxed, which is not currently the case in the United States. 
C) the profits of corporations and the dividends shareholders receive are taxed, which is not currently the case in the United States. 
D) the profits of corporations and the dividends shareholders receive are taxed, which is currently the case in the United States. 
A) wage income and interest income are taxed, which is currently the case in the United States. 
B) wage income and interest income are taxed, which is not currently the case in the United States. 
C) the profits of corporations and the dividends shareholders receive are taxed, which is not currently the case in the United States. 
D) the profits of corporations and the dividends shareholders receive are taxed, which is currently the case in the United States.

Question 5

Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004.One of their contributions was to argue that if a central bank could convince people to expect zero inflation,then the Fed would be tempted to raise output by increasing inflation.This possibility is known as

Accepted Answer

A) inflation targeting. 
B) the monetary policy reaction lag. 
C) the time inconsistency of policy. 
D) the sacrifice ratio dilemma. 
A) inflation targeting. 
B) the monetary policy reaction lag. 
C) the time inconsistency of policy. 
D) the sacrifice ratio dilemma.

Question 6

The principal reason that monetary policy has lags is that it takes a long time for

Accepted Answer

A) changes in the interest rate to change aggregate demand. 
B) changes in the money supply to change interest rates. 
C) the Fed to make changes in policy. 
D) None of the above is correct. 
A) changes in the interest rate to change aggregate demand. 
B) changes in the money supply to change interest rates. 
C) the Fed to make changes in policy. 
D) None of the above is correct.

Question 7

Proponents of zero inflation argue that a successful program to reduce inflation

Accepted Answer

A) eventually reduces inflation expectations. 
B) eventually raises real interest rates. 
C) permanently decreases output. 
D) permanently raises unemployment. 
A) eventually reduces inflation expectations. 
B) eventually raises real interest rates. 
C) permanently decreases output. 
D) permanently raises unemployment.

Question 8

Means-tested programs tend to favor

Accepted Answer

A) those with high income as would a consumption tax. 
B) those with high income while a consumption tax would favor those with low income. 
C) those with low income as would a consumption tax. 
D) those with low income while a consumption tax would favor those with high income. 
A) those with high income as would a consumption tax. 
B) those with high income while a consumption tax would favor those with low income. 
C) those with low income as would a consumption tax. 
D) those with low income while a consumption tax would favor those with high income.

Question 9

Explain the time inconsistency of monetary policy.

Accepted Answer

Time inconsistency refers to the idea th

Question 10

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Accepted Answer

A) high, and the reduction is unexpected. 
B) high, and the reduction is expected. 
C) low, and the reduction is unexpected. 
D) low, and the reduction is expected. 
A) high, and the reduction is unexpected. 
B) high, and the reduction is expected. 
C) low, and the reduction is unexpected. 
D) low, and the reduction is expected.

Question 11

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 12

Inflation reduction has the lowest cost when the efforts are

Accepted Answer

A) credible so that the sacrifice ratio is low. 
B) credible so that the sacrifice ratio is high. 
C) unexpected so that the sacrifice ratio is high. 
D) unexpected so that the sacrifice ratio is low. 
A) credible so that the sacrifice ratio is low. 
B) credible so that the sacrifice ratio is high. 
C) unexpected so that the sacrifice ratio is high. 
D) unexpected so that the sacrifice ratio is low.

Question 13

In fiscal year 2001,the U.S.government ran a surplus of about $127 billion.In fiscal year 2002,the government ran a deficit of $159 billion.This change would be expected to have

Accepted Answer

A) decreased interest rates and investment. 
B) decreased interest rates and increased investment. 
C) increased interest rates and investment. 
D) increased interest rates and decreased investment. 
A) decreased interest rates and investment. 
B) decreased interest rates and increased investment. 
C) increased interest rates and investment. 
D) increased interest rates and decreased investment.

Question 14

Monetary policymakers are allowed

Accepted Answer

A) almost no discretion and so there is no political business cycle. 
B) a lot of discretion which makes it unlikely that there is a political business cycle. 
C) almost no discretion so there is no political business cycle. 
D) a lot of discretion which makes it possible to have a political business cycle. 
A) almost no discretion and so there is no political business cycle. 
B) a lot of discretion which makes it unlikely that there is a political business cycle. 
C) almost no discretion so there is no political business cycle. 
D) a lot of discretion which makes it possible to have a political business cycle.

Question 15

Over time continued Budget deficits lead to

Accepted Answer

A) a higher capital stock and higher real wages. 
B) a higher capital stock and lower real wages. 
C) a lower capital stock and higher real wages. 
D) a lower capital stock and lower real wages. 
A) a higher capital stock and higher real wages. 
B) a higher capital stock and lower real wages. 
C) a lower capital stock and higher real wages. 
D) a lower capital stock and lower real wages.

Question 16

Proponents of zero inflation argue that reducing inflation has

Accepted Answer

A) permanent costs and temporary benefits. 
B) temporary costs and permanent benefits. 
C) permanent costs and benefits. 
D) temporary costs and benefits. 
A) permanent costs and temporary benefits. 
B) temporary costs and permanent benefits. 
C) permanent costs and benefits. 
D) temporary costs and benefits.

Question 17

In essence,a consumption tax puts all saving into tax-advantaged savings accounts.

Accepted Answer

A) True 
 B)False

Question 18

Someone would be less hurt by an unexpectedly higher inflation rate if

Accepted Answer

A) they held much currency and owned few bonds. 
B) they held much currency and owned many bonds. 
C) they held little currency and owned few bonds. 
D) they held little currency and owned many bonds. 
A) they held much currency and owned few bonds. 
B) they held much currency and owned many bonds. 
C) they held little currency and owned few bonds. 
D) they held little currency and owned many bonds.

Question 19

Explain why policy lags could make stabilization policies counterproductive.

Accepted Answer

As the textbook explains,it takes time t

Question 20

President George W.Bush and congress cut taxes and raised government expenditures in 2003.Which of the following is not correct?

Accepted Answer

A) At the time the economy was just moving into a recession. 
B) While there was subsequent improvement in economic performance, it's not entirely clear that this was due to the policy. 
C) In general monetary policy can be implemented faster than fiscal policy. 
D) In general it is easier to reverse monetary policy than to reverse fiscal policy. 
A) At the time the economy was just moving into a recession. 
B) While there was subsequent improvement in economic performance, it's not entirely clear that this was due to the policy. 
C) In general monetary policy can be implemented faster than fiscal policy. 
D) In general it is easier to reverse monetary policy than to reverse fiscal policy.

Exam 36: Five Debates Over Macroeconomic Policy

Which of the following is correct?

Which of the following is correct?

The average U.S.citizens' share of the government debt represents about 10 percent of her lifetime income.

Double taxation means that both

Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004.One of their contributions was to argue that if a central bank could convince people to expect zero inflation,then the Fed would be tempted to raise output by increasing inflation.This possibility is known as

The principal reason that monetary policy has lags is that it takes a long time for

Proponents of zero inflation argue that a successful program to reduce inflation

Means-tested programs tend to favor

Explain the time inconsistency of monetary policy.

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Time inconsistency will cause the

Inflation reduction has the lowest cost when the efforts are

In fiscal year 2001,the U.S.government ran a surplus of about $127 billion.In fiscal year 2002,the government ran a deficit of $159 billion.This change would be expected to have

Monetary policymakers are allowed

Over time continued Budget deficits lead to

Proponents of zero inflation argue that reducing inflation has

In essence,a consumption tax puts all saving into tax-advantaged savings accounts.

Someone would be less hurt by an unexpectedly higher inflation rate if

Explain why policy lags could make stabilization policies counterproductive.

President George W.Bush and congress cut taxes and raised government expenditures in 2003.Which of the following is not correct?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: 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

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade Off Between Inflation and Unemployment

Filters