Question 1

Which part of the Federal Reserve determines monetary policy? How often does it meet? What does it set a target for?

Accepted Answer

The Federal Open Mar

Question 2

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

Accepted Answer

A lag of six months

Question 3

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

Accepted Answer

The benefits of the project ac

Question 4

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

Accepted Answer

A)  shoeleather costs 
B)  unintended changes in tax liabilities 
C)  menu costs 
D)  none of the above is correct. 
A)  shoeleather costs 
B)  unintended changes in tax liabilities 
C)  menu costs 
D)  none of the above is correct.

Question 5

Once state and federal taxes are added together, a typical worker faces about a 40 percent marginal tax-rate on interest income.

Accepted Answer

A) True 
 B)False

Question 6

An increase in the tax rate on interest income

Accepted Answer

A)  raises the amount earned on savings. Saving will rise if the income effect of the increase in the tax rate is larger than the substitution effect. 
B)  raises the amount earned on savings. Saving will rise if the income effect of the increase in the tax rate is smaller than the substitution effect. 
C)  reduces the amount earned on savings. Saving will fall if the income effect of the increase in the tax rate is larger than the substitution effect. 
D)  reduces the amount earned on savings. Saving will fall if the income effect of the increase in the tax rate is smaller than the substitution effect. 
A)  raises the amount earned on savings. Saving will rise if the income effect of the increase in the tax rate is larger than the substitution effect. 
B)  raises the amount earned on savings. Saving will rise if the income effect of the increase in the tax rate is smaller than the substitution effect. 
C)  reduces the amount earned on savings. Saving will fall if the income effect of the increase in the tax rate is larger than the substitution effect. 
D)  reduces the amount earned on savings. Saving will fall if the income effect of the increase in the tax rate is smaller than the substitution effect.

Question 7

Which of the following would transfer wealth from old to young?

Accepted Answer

A)  Increases in the budget deficit. 
B)  Decreased building of highways and bridges. 
C)  More generous education subsidies. 
D)  Indexation of Social Security benefits to inflation. 
A)  Increases in the budget deficit. 
B)  Decreased building of highways and bridges. 
C)  More generous education subsidies. 
D)  Indexation of Social Security benefits to inflation.

Question 8

Which of the programs below would not transfer wealth from young to old generations?

Accepted Answer

A)  Taxes are reduced as a result of cutting expenditures on education. 
B)  Taxes are raised to improve government infrastructure such as roads and bridges. 
C)  Taxes are raised to provide more generous Social Security benefits. 
D)  Taxes are raised to provide more generous Medicare benefits. 
A)  Taxes are reduced as a result of cutting expenditures on education. 
B)  Taxes are raised to improve government infrastructure such as roads and bridges. 
C)  Taxes are raised to provide more generous Social Security benefits. 
D)  Taxes are raised to provide more generous Medicare benefits.

Question 9

Which of the following is not correct?

Accepted Answer

A)  Government debt can continue to rise forever. 
B)  If the government uses funds to pay for investment programs, on net the debt need not burden future generations. 
C)  Social Security does not transfer wealth from younger generations to older generations. 
D)  The average U.S. citizens' share of the government debt represents less than 2 percent of her lifetime income. 
A)  Government debt can continue to rise forever. 
B)  If the government uses funds to pay for investment programs, on net the debt need not burden future generations. 
C)  Social Security does not transfer wealth from younger generations to older generations. 
D)  The average U.S. citizens' share of the government debt represents less than 2 percent of her lifetime income.

Question 10

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

Accepted Answer

The amendment indicates the Fe

Question 11

Suppose tax policies are changed to encourage saving. Explain how the income effect and substitution effect influence the amount saved.

Accepted Answer

Tax policies designed to encourage savin

Question 12

If a central bank were required to target inflation at zero, then when there was an unanticipated increase in aggregate supply the central bank

Accepted Answer

A)  would have to increase the money supply. This would move unemployment closer to the natural rate. 
B)  would have to increase the money supply. This would move unemployment further from the natural rate. 
C)  would have to decrease the money supply. This would move unemployment closer to the natural rate. 
D)  would have to decrease the money supply. This would move unemployment further from the natural rate. 
A)  would have to increase the money supply. This would move unemployment closer to the natural rate. 
B)  would have to increase the money supply. This would move unemployment further from the natural rate. 
C)  would have to decrease the money supply. This would move unemployment closer to the natural rate. 
D)  would have to decrease the money supply. This would move unemployment further from the natural rate.

Question 13

Which costs of inflation could the government reduce without reducing inflation?

Accepted Answer

A)  shoeleather and menu costs 
B)  menu costs and relative price variability 
C)  unintended changes in tax liabilities and arbitrary redistributions of wealth 
D)  none of the above is correct. 
A)  shoeleather and menu costs 
B)  menu costs and relative price variability 
C)  unintended changes in tax liabilities and arbitrary redistributions of wealth 
D)  none of the above is correct.

Question 14

In 2009 President Barack Obama responded to recession

Accepted Answer

A)  only by cutting taxes. 
B)  by cutting taxes and reducing government expenditures. 
C)  only by raising government expenditures. 
D)  by cutting taxes and by raising government expenditures. 
A)  only by cutting taxes. 
B)  by cutting taxes and reducing government expenditures. 
C)  only by raising government expenditures. 
D)  by cutting taxes and by raising government expenditures.

Question 15

A nation's saving rate is not a primary determinant of its long-run economic prosperity.

Accepted Answer

A) True 
 B)False

Question 16

In the early 1980's the Fed tightened monetary policy. Over the next few years

Accepted Answer

A)  inflation remained high and unemployment rose. 
B)  inflation fell but unemployment rose temporarily. 
C)  inflation and unemployment fell. 
D)  inflation and unemployment rose. 
A)  inflation remained high and unemployment rose. 
B)  inflation fell but unemployment rose temporarily. 
C)  inflation and unemployment fell. 
D)  inflation and unemployment rose.

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

The debt can grow because the economy gr

Question 19

As opposed to an increase in government expenditures, a tax cut

Accepted Answer

A)  is likely to impact spending faster and according to traditional theory has a larger multiplier. 
B)  is likely to impact spending faster, but according to traditional theory has a smaller multiplier. 
C)  is likely to impact spending with a longer lag, but according to traditional theory has a larger multiplier. 
D)  is likely to impact spending with a longer lag and according to traditional theory has a smaller multiplier 
A)  is likely to impact spending faster and according to traditional theory has a larger multiplier. 
B)  is likely to impact spending faster, but according to traditional theory has a smaller multiplier. 
C)  is likely to impact spending with a longer lag, but according to traditional theory has a larger multiplier. 
D)  is likely to impact spending with a longer lag and according to traditional theory has a smaller multiplier

Question 20

Of means tested programs and IRA's, which lower the rate of return on saving?

Accepted Answer

A)  Both means-tested programs and IRA's. 
B)  Means-tested programs, but not IRA's. 
C)  IRA's but not means-tested programs. 
D)  Neither means-tested program, or IRA's. 
A)  Both means-tested programs and IRA's. 
B)  Means-tested programs, but not IRA's. 
C)  IRA's but not means-tested programs. 
D)  Neither means-tested program, or IRA's.

Which part of the Federal Reserve determines monetary policy? How often does it meet? What does it set a target for?

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

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

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

Once state and federal taxes are added together, a typical worker faces about a 40 percent marginal tax-rate on interest income.

An increase in the tax rate on interest income

Which of the following would transfer wealth from old to young?

Which of the programs below would not transfer wealth from young to old generations?

Which of the following is not correct?

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

Suppose tax policies are changed to encourage saving. Explain how the income effect and substitution effect influence the amount saved.

If a central bank were required to target inflation at zero, then when there was an unanticipated increase in aggregate supply the central bank

Which costs of inflation could the government reduce without reducing inflation?

In 2009 President Barack Obama responded to recession

A nation's saving rate is not a primary determinant of its long-run economic prosperity.

In the early 1980's the Fed tightened monetary policy. Over the next few years

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.

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

As opposed to an increase in government expenditures, a tax cut

Of means tested programs and IRA's, which lower the rate of return on saving?

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 part of the Federal Reserve determines monetary policy? How often does it meet? What does it set a target for?

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

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

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

Once state and federal taxes are added together, a typical worker faces about a 40 percent marginal tax-rate on interest income.

An increase in the tax rate on interest income

Which of the following would transfer wealth from old to young?

Which of the programs below would not transfer wealth from young to old generations?

Which of the following is not correct?

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

Suppose tax policies are changed to encourage saving. Explain how the income effect and substitution effect influence the amount saved.

If a central bank were required to target inflation at zero, then when there was an unanticipated increase in aggregate supply the central bank

Which costs of inflation could the government reduce without reducing inflation?

In 2009 President Barack Obama responded to recession

A nation's saving rate is not a primary determinant of its long-run economic prosperity.

In the early 1980's the Fed tightened monetary policy. Over the next few years

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.

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

As opposed to an increase in government expenditures, a tax cut

Of means tested programs and IRA's, which lower the rate of return on saving?

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

Filters