Exam 23: Six Debates Over Macroeconomic Policy

The Federal Reserve operates under a rule that requires money supply growth to increase by one percentage point for every percentage point that unemployment rises above its natural rate.

A permanent reduction in inflation would

If there is an increase in the money supply, in the short run

At the end of 2010, the government had a debt of about $9.4 trillion. If during 2011 real GDP were to rise 3.2% and inflation were 1.6%, what is the largest deficit the government could have run without raising the debt-to-GDP ratio?

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

Which of the following support the idea that monetary policy should be made by a rule?

If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output, they could

The argument that an increase in government expenditures will have a larger impact on aggregate demand than tax cuts is based on the idea that

If a reduction in taxes on savings reduced the amount of private saving, then the

From the end of 2003 to the end of 2004, the United States ran a deficit of about $121 billion. The debt at the start of this period was about $3,924 billion. Which of the following combinations of inflation and real GDP would have allowed the government to run a deficit and kept the ratio of real GDP to the deficit about the same?

"Leaning against the wind" is exemplified by a

If an increase in government expenditures makes taxpayers believe that taxes and the distortion then

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

Some economists believe that there are positives from a little inflation and that it may "grease the wheels"

Which inflation costs could the government take actions to reduce without reducing inflation?