Question 1

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Accepted Answer

A)  increase the money supply, increase taxes 
B)  increase the money supply, cut taxes 
C)  decrease the money supply, increase taxes 
D)  decrease the money supply, cut taxes 
A)  increase the money supply, increase taxes 
B)  increase the money supply, cut taxes 
C)  decrease the money supply, increase taxes 
D)  decrease the money supply, cut taxes

Question 2

Policymakers following a "lean against the wind" policy would

Accepted Answer

A)  increase government expenditures when output is low and decrease them when output is high. 
B)  increase government expenditures when output is low and do nothing when output is high. 
C)  decrease government expenditures when output is low and increase them when output is high. 
D)  decrease government expenditures when output is high and do nothing when output is low. 
A)  increase government expenditures when output is low and decrease them when output is high. 
B)  increase government expenditures when output is low and do nothing when output is high. 
C)  decrease government expenditures when output is low and increase them when output is high. 
D)  decrease government expenditures when output is high and do nothing when output is low.

Question 3

"Leaning against the wind" is exemplified by an)

Accepted Answer

A)  tax increase when there is a recession. 
B)  increase in the money supply when there is a recession. 
C)  decrease in government expenditures when there is a recession. 
D)  All of the above are correct. 
A)  tax increase when there is a recession. 
B)  increase in the money supply when there is a recession. 
C)  decrease in government expenditures when there is a recession. 
D)  All of the above are correct.

Question 4

Economists agree that at least in the short run disinflation

Accepted Answer

A)  leads to a period of higher unemployment. They also agree that the costs of even moderate inflation is high. 
B)  leads to a period of higher unemployment. They disagree about the cost of moderate inflation. 
C)  leads to a period of lower unemployment. They also agree that the cost of even moderate inflation is high. 
D)  leads to a period of lower unemployment. They disagree about the cost of moderate inflation. 
A)  leads to a period of higher unemployment. They also agree that the costs of even moderate inflation is high. 
B)  leads to a period of higher unemployment. They disagree about the cost of moderate inflation. 
C)  leads to a period of lower unemployment. They also agree that the cost of even moderate inflation is high. 
D)  leads to a period of lower unemployment. They disagree about the cost of moderate inflation.

Question 5

Which of the following is an important advantage of discretionary monetary policy?

Accepted Answer

A)  Influencing the political business cycle 
B)  Flexibility to deal with changing economic conditions 
C)  Limiting the opportunities for abuse of power by policymakers 
D)  Avoiding the time inconsistency of policy problem 
A)  Influencing the political business cycle 
B)  Flexibility to deal with changing economic conditions 
C)  Limiting the opportunities for abuse of power by policymakers 
D)  Avoiding the time inconsistency of policy problem

Question 6

Between 1980 and 1995 government debt as a percentage of GDP

Accepted Answer

A)  increased from about 25% to 50%. 
B)  decreased from about 50% to 25%. 
C)  decreased from about 25% to almost zero. 
D)  increased from about 10% to 20%. 
A)  increased from about 25% to 50%. 
B)  decreased from about 50% to 25%. 
C)  decreased from about 25% to almost zero. 
D)  increased from about 10% to 20%.

Question 7

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

Accepted Answer

According to the traditional Keynesian m

Question 8

nominal federal funds rate, y is real GDP, y* is an estimate of the natural rate of output, π is the inflation rate, and π* is the inflation target. Other things the same, if the economy starts at y* and π* and then y rises and exceeds y* by 1% and π rises 2% points above π*, the rule would require the Fed to raise the federal funds rate by

Accepted Answer

A)  1.5 percentage points 
B)  2.5 percentage points 
C)  3.5 percentage points 
D)  5.5 percentage points 
A)  1.5 percentage points 
B)  2.5 percentage points 
C)  3.5 percentage points 
D)  5.5 percentage points

Question 9

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

Accepted Answer

Some government benefits are m

Question 10

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Accepted Answer

A)  only price stability 
B)  only maximum employment 
C)  only price stability and maximum employment 
D)  price stability, maximum employment, and moderate long-term interest rates 
A)  only price stability 
B)  only maximum employment 
C)  only price stability and maximum employment 
D)  price stability, maximum employment, and moderate long-term interest rates

Question 11

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

Accepted Answer

The political business cycle describes t

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Identify three government policies that discourage saving.

Accepted Answer

First, the returns to saving are heavily

Question 14

List two costs of inflation.

Accepted Answer

shoeleather costs, menu costs,

Question 15

If a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then

Accepted Answer

A)  the long-run Phillips curve would shift right. 
B)  the long-run Phillips curve would shift left. 
C)  the short-run Phillips curve would shift up. 
D)  the short-run Phillips curve would shift down. 
A)  the long-run Phillips curve would shift right. 
B)  the long-run Phillips curve would shift left. 
C)  the short-run Phillips curve would shift up. 
D)  the short-run Phillips curve would shift down.

Question 16

Reforming tax laws to encourage saving is motivated by which of the Ten Principles of Economics from Chapter 1?

Accepted Answer

A)  The cost of something is what you give up to get it Principle 2). 
B)  Trade can make everyone better off Principle 5). 
C)  Markets are usually a good way to organize economic activity Principle 6). 
D)  A country's standard of living depends on its ability to produce goods and services Principle 8). 
A)  The cost of something is what you give up to get it Principle 2). 
B)  Trade can make everyone better off Principle 5). 
C)  Markets are usually a good way to organize economic activity Principle 6). 
D)  A country's standard of living depends on its ability to produce goods and services Principle 8).

Question 17

If net exports fall, what actions could a central bank take to stabilize the economy?

Accepted Answer

Increase t

Question 18

Provide two specific ways in which reducing inflation might leave "permanent scars" on the economy.

Accepted Answer

Reducing inflation leads to a temporary

Question 19

An individual would suffer higher losses from an unexpectedly higher inflation rate if

Accepted Answer

A)  she held much currency and owned few bonds. 
B)  she held much currency and owned many bonds. 
C)  she held little currency and owned few bonds. 
D)  she held little currency and owned many bonds. 
A)  she held much currency and owned few bonds. 
B)  she held much currency and owned many bonds. 
C)  she held little currency and owned few bonds. 
D)  she held little currency and owned many bonds.

Question 20

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

Accepted Answer

A)  both the tax cut and the increase in government expenditures 
B)  the tax cut but not the increase in government expenditures 
C)  the increase in government expenditures but not the tax cut 
D)  neither the increase in government expenditures nor the tax cut 
A)  both the tax cut and the increase in government expenditures 
B)  the tax cut but not the increase in government expenditures 
C)  the increase in government expenditures but not the tax cut 
D)  neither the increase in government expenditures nor the tax cut

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Policymakers following a "lean against the wind" policy would

"Leaning against the wind" is exemplified by an)

Economists agree that at least in the short run disinflation

Which of the following is an important advantage of discretionary monetary policy?

Between 1980 and 1995 government debt as a percentage of GDP

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

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

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

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

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

Identify three government policies that discourage saving.

List two costs of inflation.

If a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then

Reforming tax laws to encourage saving is motivated by which of the Ten Principles of Economics from Chapter 1?

If net exports fall, what actions could a central bank take to stabilize the economy?

Provide two specific ways in which reducing inflation might leave "permanent scars" on the economy.

An individual would suffer higher losses from an unexpectedly higher inflation rate if

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

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

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Policymakers following a "lean against the wind" policy would

"Leaning against the wind" is exemplified by an)

Economists agree that at least in the short run disinflation

Which of the following is an important advantage of discretionary monetary policy?

Between 1980 and 1995 government debt as a percentage of GDP

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

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

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

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

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

Identify three government policies that discourage saving.

List two costs of inflation.

If a government managed to reduce the time inconsistency problem by mandating that the central bank target inflation at a low rate, then

Reforming tax laws to encourage saving is motivated by which of the Ten Principles of Economics from Chapter 1?

If net exports fall, what actions could a central bank take to stabilize the economy?

Provide two specific ways in which reducing inflation might leave "permanent scars" on the economy.

An individual would suffer higher losses from an unexpectedly higher inflation rate if

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

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