Question 1

Which of the following could the government do to decrease the costs of inflation without lowering the inflation rate?

Accepted Answer

A)  Avoid unexpected changes in the inflation rate. 
B)  Rewrite the tax laws so that nominal gains were taxed instead of real gains. 
C)  Make policy that would discourage firms from issuing indexed bonds. 
D)  All of the above are correct. 
A)  Avoid unexpected changes in the inflation rate. 
B)  Rewrite the tax laws so that nominal gains were taxed instead of real gains. 
C)  Make policy that would discourage firms from issuing indexed bonds. 
D)  All of the above are correct.

Question 2

Are there any situations in which running a budget deficit is justified? Explain.

Accepted Answer

The two primary justifications for runni

Question 3

If aggregate demand shifts because of a wave of pessimism about stock prices, those who favor a policy that "leans against the wind" would advocate the

Accepted Answer

A)  Federal Reserve increase the money supply or the government increase taxes. 
B)  Federal Reserve increase the money supply or the government decrease taxes. 
C)  Federal Reserve decrease the money supply or the government increase taxes. 
D)  Federal Reserve decrease the money supply or the government decrease taxes. 
A)  Federal Reserve increase the money supply or the government increase taxes. 
B)  Federal Reserve increase the money supply or the government decrease taxes. 
C)  Federal Reserve decrease the money supply or the government increase taxes. 
D)  Federal Reserve decrease the money supply or the government decrease taxes.

Question 4

Which of the following would likely increase private saving?

Accepted Answer

A)  Both expansion of IRA type accounts and a consumption tax. 
B)  Expansion of IRA type accounts, but not a consumption tax. 
C)  A consumption tax, but not expansion of IRA type accounts. 
D)  Neither expansion of IRA type accounts nor a consumption tax. 
A)  Both expansion of IRA type accounts and a consumption tax. 
B)  Expansion of IRA type accounts, but not a consumption tax. 
C)  A consumption tax, but not expansion of IRA type accounts. 
D)  Neither expansion of IRA type accounts nor a consumption tax.

Question 5

Suppose that a country has an inflation rate of about 3 percent per year and a real GDP growth rate of about 3 percent per year. How large of a deficit can the government run as a percentage of GDP) without raising the debt- to-income ratio?

Accepted Answer

The government could run a def

Question 6

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

Accepted Answer

A) True 
 B)False

Question 7

In response to recession, who primarily raised expenditures rather than cut taxes?

Accepted Answer

A)  President George W. Bush and President Barack Obama 
B)  President George W. Bush but not President Barack Obama 
C)  President Barack Obama but not President George W. Bush 
D)  Neither President George W. Bush nor President Barack Obama 
A)  President George W. Bush and President Barack Obama 
B)  President George W. Bush but not President Barack Obama 
C)  President Barack Obama but not President George W. Bush 
D)  Neither President George W. Bush nor President Barack Obama

Question 8

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Accepted Answer

A)  price level and real GDP change by more than otherwise. 
B)  price level change by more than otherwise and real GDP change by less than otherwise. 
C)  price level change by less than otherwise and real GDP change by more than otherwise. 
D)  price level and real GDP change by more than otherwise 
A)  price level and real GDP change by more than otherwise. 
B)  price level change by more than otherwise and real GDP change by less than otherwise. 
C)  price level change by less than otherwise and real GDP change by more than otherwise. 
D)  price level and real GDP change by more than otherwise

Question 9

Is it possible that deficits do not burden future generations?

Accepted Answer

Some programs, such as Social Security,

Question 10

A permanent reduction in inflation would

Accepted Answer

A)  permanently reduce shoeleather costs and permanently lower unemployment 
B)  permanently reduce shoeleather costs and temporarily raise unemployment 
C)  temporarily reduce shoeleather costs and temporarily lower unemployment 
D)  temporarily reduce shoeleather costs and temporarily raise unemployment 
A)  permanently reduce shoeleather costs and permanently lower unemployment 
B)  permanently reduce shoeleather costs and temporarily raise unemployment 
C)  temporarily reduce shoeleather costs and temporarily lower unemployment 
D)  temporarily reduce shoeleather costs and temporarily raise unemployment

Question 11

An increase in government spending financed by borrowing changes people's expectations about future taxation such that current consumption expenditures

Accepted Answer

A)  fall. The increase in expenditures makes it likely that future taxes will create smaller distortions. 
B)  fall. The increase in expenditures makes it likely that future taxes will create larger distortions. 
C)  rise. The increase in expenditures makes it likely that future taxes will create smaller distortions. 
D)  rise. The increase in expenditures makes it likely that future taxes will create larger distortions. 
A)  fall. The increase in expenditures makes it likely that future taxes will create smaller distortions. 
B)  fall. The increase in expenditures makes it likely that future taxes will create larger distortions. 
C)  rise. The increase in expenditures makes it likely that future taxes will create smaller distortions. 
D)  rise. The increase in expenditures makes it likely that future taxes will create larger distortions.

Question 12

To counter the recession of 2008-2009 President Obama and congress created a large increase in government expenditures.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  the political business cycle and the time-inconsistency problem 
B)  the political business cycle but not the time-inconsistency problem 
C)  the time-inconsistency problem, but not the political business cycle 
D)  neither the political business cycle nor the time-inconsistency problem 
A)  the political business cycle and the time-inconsistency problem 
B)  the political business cycle but not the time-inconsistency problem 
C)  the time-inconsistency problem, but not the political business cycle 
D)  neither the political business cycle nor the time-inconsistency problem

Question 14

Which of the following is not a typical justification for running a budget deficit?

Accepted Answer

A)  financing a war 
B)  dealing with a recession 
C)  fighting inflation 
D)  dealing with unemployment 
A)  financing a war 
B)  dealing with a recession 
C)  fighting inflation 
D)  dealing with unemployment

Question 15

A law that requires the money supply to grow by a fixed percentage each year would eliminate

Accepted Answer

A)  the time inconsistency problem, but not political business cycles. 
B)  the political business cycle, but not the time inconsistency problem. 
C)  both the time inconsistency problem and political business cycles. 
D)  neither the time inconsistency problem nor political business cycles. 
A)  the time inconsistency problem, but not political business cycles. 
B)  the political business cycle, but not the time inconsistency problem. 
C)  both the time inconsistency problem and political business cycles. 
D)  neither the time inconsistency problem nor political business cycles.

Question 16

The average person's share of the U.S. government debt as a percentage of lifetime income is

Accepted Answer

A)  less than 1 percent. 
B)  more than 1 percent but less than 2 percent 
C)  about 4 percent 
D)  over 6 percent 
A)  less than 1 percent. 
B)  more than 1 percent but less than 2 percent 
C)  about 4 percent 
D)  over 6 percent

Question 17

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

Accepted Answer

A) True 
 B)False

Question 18

What is meant by the political business cycle?

Accepted Answer

Central banks sympathetic to i

Question 19

Last year a country's real GDP grew by 4%, it's inflation rate was 2.5%, and it's government budget deficit was about $250 billion. It's debt to GDP ratio was unchanged. About what was it's debt at the start of last year?

Accepted Answer

A)  16.7 trillion 
B)  10.0 trillion 
C)  6.25 trillion 
D)  3.85 trillion 
A)  16.7 trillion 
B)  10.0 trillion 
C)  6.25 trillion 
D)  3.85 trillion

Question 20

An economist would be more likely to argue against reducing inflation if she thought that

Accepted Answer

A)  the central bank lacked credibility and if bonds were usually not indexed for inflation. 
B)  the central bank lacked credibility and if bonds were usually indexed for inflation. 
C)  the central bank had credibility and if bonds were usually not indexed for inflation. 
D)  the central bank had credibility and if bonds were usually indexed for inflation. 
A)  the central bank lacked credibility and if bonds were usually not indexed for inflation. 
B)  the central bank lacked credibility and if bonds were usually indexed for inflation. 
C)  the central bank had credibility and if bonds were usually not indexed for inflation. 
D)  the central bank had credibility and if bonds were usually indexed for inflation.

Which of the following could the government do to decrease the costs of inflation without lowering the inflation rate?

Are there any situations in which running a budget deficit is justified? Explain.

If aggregate demand shifts because of a wave of pessimism about stock prices, those who favor a policy that "leans against the wind" would advocate the

Which of the following would likely increase private saving?

Suppose that a country has an inflation rate of about 3 percent per year and a real GDP growth rate of about 3 percent per year. How large of a deficit can the government run as a percentage of GDP) without raising the debt- to-income ratio?

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

In response to recession, who primarily raised expenditures rather than cut taxes?

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Is it possible that deficits do not burden future generations?

A permanent reduction in inflation would

An increase in government spending financed by borrowing changes people's expectations about future taxation such that current consumption expenditures

To counter the recession of 2008-2009 President Obama and congress created a large increase in government expenditures.

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

Which of the following is not a typical justification for running a budget deficit?

A law that requires the money supply to grow by a fixed percentage each year would eliminate

The average person's share of the U.S. government debt as a percentage of lifetime income is

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

What is meant by the political business cycle?

Last year a country's real GDP grew by 4%, it's inflation rate was 2.5%, and it's government budget deficit was about $250 billion. It's debt to GDP ratio was unchanged. About what was it's debt at the start of last year?

An economist would be more likely to argue against reducing inflation if she thought that

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

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Exam 18: Six Debates Over Macroeconomic Policy

Which of the following could the government do to decrease the costs of inflation without lowering the inflation rate?

Are there any situations in which running a budget deficit is justified? Explain.

If aggregate demand shifts because of a wave of pessimism about stock prices, those who favor a policy that "leans against the wind" would advocate the

Which of the following would likely increase private saving?

Suppose that a country has an inflation rate of about 3 percent per year and a real GDP growth rate of about 3 percent per year. How large of a deficit can the government run as a percentage of GDP) without raising the debt- to-income ratio?

People's skepticism about central bankers' announcements of their intentions stems from the fact that policymakers may act in a fashion that is time inconsistent.

In response to recession, who primarily raised expenditures rather than cut taxes?

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

Is it possible that deficits do not burden future generations?

A permanent reduction in inflation would

An increase in government spending financed by borrowing changes people's expectations about future taxation such that current consumption expenditures

To counter the recession of 2008-2009 President Obama and congress created a large increase in government expenditures.

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

Which of the following is not a typical justification for running a budget deficit?

A law that requires the money supply to grow by a fixed percentage each year would eliminate

The average person's share of the U.S. government debt as a percentage of lifetime income is

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

What is meant by the political business cycle?

Last year a country's real GDP grew by 4%, it's inflation rate was 2.5%, and it's government budget deficit was about $250 billion. It's debt to GDP ratio was unchanged. About what was it's debt at the start of last year?

An economist would be more likely to argue against reducing inflation if she thought that

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment and Its Natural Rate

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 Tradeoff Between Inflation and Unemployment

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