Exam 23: Six Debates Over Macroeconomic Policy: Part A

Why might the response of far-sighted consumers reduce the multiplier effect of an increase in government expenditures?

Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations.What are some things policymakers can do to boost the economy when aggregate demand is inadequate to ensure full employment?

Why do many economists advocate a consumption tax rather than an income tax?

By law what goals are the Federal Reserve to pursue? What,if any,specific weights are given for these goals?

According to a 1977 amendment to the Federal Reserve Act of 1913,what are the goals the Fed should promote?

Some economists argue that policymakers can use monetary and fiscal policy to reduce the severity of economic fluctuations.In practice,however,there are obstacles to the use of such policies.What are the primary difficulties with using monetary and fiscal policy to stabilize the economy?

Why might government expenditures be more appropriate than tax cuts to counter recessions? Is there any evidence for this thinking?

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

If businesses become more pessimistic about the future,what fiscal policies could the government take to stabilize the economy?

Is it possible that deficits do not burden future generations?

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

In addition to the tax code,other policies reduce the incentives for people to save Provide an example.

Explain the main arguments in favor of economic stabilization.

Using typical estimates of the sacrifice ratio,how much output would likely be sacrificed to reduce inflation from 4 percent to 2 percent?

Explain how it is possible for the government debt to grow forever.

What is meant by the political business cycle?

According to traditional Keynesian analysis,which has a greater impact on aggregate demand,changing taxes or changing government expenditures? Why?

Those who believe the central bank should aim for zero inflation argue that reducing inflation is a policy with temporary costs and permanent benefits.What are the primary costs and benefits they are referring to?

List two costs of inflation.

Describe three costs of inflation.