Exam 18: Six Debates Over Macroeconomic Policy

Some economists argue that since inflation

If the Fed announced its intention to sell bonds, then it would be signaling that it was going to

Explain what is meant by saying that capital income is taxed twice.

If the natural rate of unemployment is 6%, but the Fed thinks it is 5% and attempts to use monetary policy to move unemployment from 6% to 5%, then in the short run which of the following variables will the Fed's policy raise?

Supporters of using government expenditures to respond to recession

In fiscal year 2008, the U.S. government ran a deficit of about $459 billion. In fiscal year 2009, the government ran a deficit of about $1,413 billion. Other things the same, this change would be expected to have

Proponents of zero inflation argue that reducing inflation has

The Federal Reserve

A policymaker against stabilizing the economy would be likely to believe

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate supply shifts left, the central bank must

The six debates over macroeconomic policy exist mostly because

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

Double taxation means that both

If the budget deficit were reduced

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

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

Suppose a 25-year-old worker purchases a $5,000 bond that pays 6% interest per year which she plans to withdraw when she retires in 40 years. How much will the $5,000 accumulate to in 40 years? If the worker faces a marginal tax rate of 30% on interest income, how much will the $5,000 accumulate to in 40 years?

For which of the following policies is there a significant implementation lag?

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.

When the government has a deficit, a burden is necessarily imposed on future generations of taxpayers.