Question 1

Which of the following statements is not true?

Accepted Answer

A)  The U.S. has sometimes run budget deficits during times when it was not fighting war and the economy was expanding. 
B)  The U.S. federal debt in 2012 was about $11.3 trillion. 
C)  Government debt per person represents more than 5 percent of a typical worker's lifetime resources. 
D)  Forward-looking parents can reverse adverse effects of government debt on their children. 
A)  The U.S. has sometimes run budget deficits during times when it was not fighting war and the economy was expanding. 
B)  The U.S. federal debt in 2012 was about $11.3 trillion. 
C)  Government debt per person represents more than 5 percent of a typical worker's lifetime resources. 
D)  Forward-looking parents can reverse adverse effects of government debt on their children.

Question 2

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Accepted Answer

A)  some forms of capital income are taxed twice 
B)  if they are large enough, bequests are taxed 
C)  both a and b 
D)  neither a nor b 
A)  some forms of capital income are taxed twice 
B)  if they are large enough, bequests are taxed 
C)  both a and b 
D)  neither a nor b

Question 3

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise real GDP?

Accepted Answer

A)  both the shift of aggregate demand and the shift of aggregate supply 
B)  the shift of aggregate demand, but not the shift of aggregate supply 
C)  the shift of aggregate supply, but not the shift of aggregate demand 
D)  neither the shift of aggregate demand nor the shift of aggregate supply 
A)  both the shift of aggregate demand and the shift of aggregate supply 
B)  the shift of aggregate demand, but not the shift of aggregate supply 
C)  the shift of aggregate supply, but not the shift of aggregate demand 
D)  neither the shift of aggregate demand nor the shift of aggregate supply

Question 4

Proponents of tax-law changes to encourage saving would

Accepted Answer

A)  argue that corporate tax rates should be decreased. 
B)  increase the number of government benefits which are means-tested. 
C)  argue that state sales tax should be replaced with state income tax. 
D)  favor none of the above programs. 
A)  argue that corporate tax rates should be decreased. 
B)  increase the number of government benefits which are means-tested. 
C)  argue that state sales tax should be replaced with state income tax. 
D)  favor none of the above programs.

Question 5

A consumption tax that replaces an income tax

Accepted Answer

A)  only taxes a household on the money it spends. 
B)  discourages saving. 
C)  would likely result in a lower level of saving than an income tax. 
D)  ultimately taxes income twice - once when the household pays income tax and once when the household makes a purchase. 
A)  only taxes a household on the money it spends. 
B)  discourages saving. 
C)  would likely result in a lower level of saving than an income tax. 
D)  ultimately taxes income twice - once when the household pays income tax and once when the household makes a purchase.

Question 6

Which of the following would likely increase private saving?

Accepted Answer

A)  both expansion of means testing and a consumption tax 
B)  expansion of means testing, but not a consumption tax 
C)  a consumption tax, but not expansion of means testing 
D)  neither expansion of means testing nor a consumption tax 
A)  both expansion of means testing and a consumption tax 
B)  expansion of means testing, but not a consumption tax 
C)  a consumption tax, but not expansion of means testing 
D)  neither expansion of means testing nor a consumption tax

Question 7

From the end of 2005 to the end of 2006, the United States ran a deficit of about $309 billion. The debt at the start of this period was about $4,592 billion. Which of the following combinations of inflation and real GDP growth would have allowed the government to run this deficit while keeping the ratio of real GDP to the debt about the same?

Accepted Answer

A)  about 3% inflation and about 2.2% real GDP growth 
B)  about 3% inflation and about 3.2% real GDP growth 
C)  about 3.4% inflation and about 3.3% real GDP growth 
D)  about 3.4% inflation and about 4% real GDP growth 
A)  about 3% inflation and about 2.2% real GDP growth 
B)  about 3% inflation and about 3.2% real GDP growth 
C)  about 3.4% inflation and about 3.3% real GDP growth 
D)  about 3.4% inflation and about 4% real GDP growth

Question 8

Social Security transfers wealth from younger generations to older generations.

Accepted Answer

A) True 
 B)False

Question 9

The Federal Open Market Committee

Accepted Answer

A)  must submit its policies to the President and Senate for approval. 
B)  operates with almost complete discretion over monetary policy. 
C)  is required to target short-term interest rates in a mechanical way based on an equation that takes into account both price stability and output fluctuations. 
D)  is required to set and publicize targets for money supply growth. 
A)  must submit its policies to the President and Senate for approval. 
B)  operates with almost complete discretion over monetary policy. 
C)  is required to target short-term interest rates in a mechanical way based on an equation that takes into account both price stability and output fluctuations. 
D)  is required to set and publicize targets for money supply growth.

Question 10

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

Accepted Answer

A)  lower the discount rate and sell bonds. 
B)  lower the discount rate and buy bonds. 
C)  raise the discount rate and sell bonds. 
D)  raise the discount rate and buy bonds. 
A)  lower the discount rate and sell bonds. 
B)  lower the discount rate and buy bonds. 
C)  raise the discount rate and sell bonds. 
D)  raise the discount rate and buy bonds.

Question 11

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

Accepted Answer

A)  small and an increase in private saving tends to have a small impact on the capital stock. 
B)  small and an increase in private saving tends to have a large impact on the capital stock. 
C)  large and an increase in private saving tends to have a small impact on the capital stock. 
D)  large and an increase in private saving tends to have a large impact on the capital stock. 
A)  small and an increase in private saving tends to have a small impact on the capital stock. 
B)  small and an increase in private saving tends to have a large impact on the capital stock. 
C)  large and an increase in private saving tends to have a small impact on the capital stock. 
D)  large and an increase in private saving tends to have a large impact on the capital stock.

Question 12

The laws that created the Fed give it some specific recommendations about what goals it should pursue so it has little discretion in making policy.

Accepted Answer

A) True 
 B)False

Question 13

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?

Accepted Answer

Both monetary and fiscal policy work wit

Question 14

Accumulated over a long span of time, the tax rate on interest income

Accepted Answer

A)  removes all benefits from saving. 
B)  reduces the benefits from saving by a small amount. 
C)  reduces the benefits from saving by a large amount. 
D)  does nor reduce any of the benefits from saving. 
A)  removes all benefits from saving. 
B)  reduces the benefits from saving by a small amount. 
C)  reduces the benefits from saving by a large amount. 
D)  does nor reduce any of the benefits from saving.

Question 15

Means-tested government programs tend to reduce saving. What are means-tested programs and how do they reduce saving?

Accepted Answer

Means-tested benefits give assistance, o

Question 16

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

Accepted Answer

maximum employment, stable pri

Question 17

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Accepted Answer

Those who oppose stabilization policy mo

Question 18

If inflation were reduced, then it is

Accepted Answer

A)  likely that real incomes would rise more rapidly and labor markets would be more flexible. 
B)  likely that real incomes would rise more rapidly but unlikely that labor markets would be more flexible. 
C)  likely that labor markets would be more flexible but unlikely that real incomes would rise more rapidly. 
D)  unlikely that real incomes would rise more rapidly and unlikely that labor markets would be more flexible. 
A)  likely that real incomes would rise more rapidly and labor markets would be more flexible. 
B)  likely that real incomes would rise more rapidly but unlikely that labor markets would be more flexible. 
C)  likely that labor markets would be more flexible but unlikely that real incomes would rise more rapidly. 
D)  unlikely that real incomes would rise more rapidly and unlikely that labor markets would be more flexible.

Question 19

Which of the following is an argument against trying to use policy to stabilize the economy?

Accepted Answer

A)  Recessions represent a waste of resources. 
B)  Pessimism on the part of households and firms may become a self-fulfilling prophecy. 
C)  "Leaning against the wind" requires policymakers to increase aggregate demand in recessions and reduce aggregate demand in booms. 
D)  Macroeconomic forecasting is not developed sufficiently to allow policymakers to change aggregate demand at the proper time. 
A)  Recessions represent a waste of resources. 
B)  Pessimism on the part of households and firms may become a self-fulfilling prophecy. 
C)  "Leaning against the wind" requires policymakers to increase aggregate demand in recessions and reduce aggregate demand in booms. 
D)  Macroeconomic forecasting is not developed sufficiently to allow policymakers to change aggregate demand at the proper time.

Question 20

Suppose aggregate demand fell. In order to stabilize the economy, the government might

Accepted Answer

A)  decrease the money supply. 
B)  decrease government expenditures. 
C)  decrease taxes. 
D)  do nothing. 
A)  decrease the money supply. 
B)  decrease government expenditures. 
C)  decrease taxes. 
D)  do nothing.

Which of the following statements is not true?

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise real GDP?

Proponents of tax-law changes to encourage saving would

A consumption tax that replaces an income tax

Which of the following would likely increase private saving?

Social Security transfers wealth from younger generations to older generations.

The Federal Open Market Committee

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

The laws that created the Fed give it some specific recommendations about what goals it should pursue so it has little discretion in making policy.

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?

Accumulated over a long span of time, the tax rate on interest income

Means-tested government programs tend to reduce saving. What are means-tested programs and how do they reduce saving?

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

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

If inflation were reduced, then it is

Which of the following is an argument against trying to use policy to stabilize the economy?

Suppose aggregate demand fell. In order to stabilize the economy, the government might

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 statements is not true?

Which of the following are currently provisions of the U.S. tax system and discourage saving?

Suppose a tax cut affects aggregate demand and aggregate supply. Which of the shifts raise real GDP?

Proponents of tax-law changes to encourage saving would

A consumption tax that replaces an income tax

Which of the following would likely increase private saving?

Social Security transfers wealth from younger generations to older generations.

The Federal Open Market Committee

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

A decrease in the tax rate is more likely to increase the standard of living if the income effect of a change in the interest rate is

The laws that created the Fed give it some specific recommendations about what goals it should pursue so it has little discretion in making policy.

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?

Accumulated over a long span of time, the tax rate on interest income

Means-tested government programs tend to reduce saving. What are means-tested programs and how do they reduce saving?

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

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

If inflation were reduced, then it is

Which of the following is an argument against trying to use policy to stabilize the economy?

Suppose aggregate demand fell. In order to stabilize the economy, the government might

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