Exam 23: Six Debates Over Macroeconomic Policy

Means-tested government benefits base benefits on

What is the political business cycle and how does it relate to whether the central bank should have discretion or use a rule?

Suppose that the government goes into deficit in order to help local school districts build better schools. Does this burden future generations?

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

Suppose aggregate demand fell. In order to stabilize the economy, the government might

If tax rates are raised to avoid a deficit during a recession, then

Fluctuations in employment and output result from changes in

The Federal Reserve

The Federal Reserve will tend to tighten monetary policy when

IRA, 401(k), 403(b), and Keogh plans

Forward-looking parents can reverse the adverse effects of government debt by saving more and leaving a larger bequest to their children.

If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

If the central bank has discretion to make policy, it may create economic fluctuations that reflect the electoral calendar. This is called the political business cycle.

Stimulus spending in 2009 was used for

The cost of inflation reduction is a large, permanent increase in unemployment.

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

Part of the lag in monetary policy effects is due to

If the budget deficit were reduced

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.