Exam 23: Six Debates Over Macroeconomic Policy

If people in a country that has had persistently high inflation expect it to remain high and are skeptical of promises the central bank makes, then the Phillips curve is

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

Which of the following is not a valid point in debating the merits of increasing government expenditures or cutting taxes during a recession?

Explain why fiscal policy actions typically work with a lag.

Consider the following rule for monetary policy: r = 2 percent + π + 1/2y - y*)/y* + 1/2π - π*), where r is the 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 inflation rate rises by 1 percentage point this rule says the Fed should increase the nominal federal funds rate by

Some people believe that monetary policy should be made by rule rather than by discretion. One of their beliefs is that

Social Security transfers wealth from younger generations to older generations.

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

Which of the following are justifications for running a budget deficit?

Means-tested programs tend to favor

While traditional Keynesian analysis indicates that increases in government purchases are a more potent tool than decreases in taxes to stimulate the economy, what are some of the reasons why tax cuts might be preferred to increased government spending?

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Means-tested college aid, base college aid primarily on

An opponent of monetary policy decisions by rule would point to which of the following as support of his case?

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

Suppose a country has a real growth rate of 3%. Government spending is 75 billion units of currency and its tax revenues are 60 billion units of currency. The current national debt is 300 billion units of currency. At what inflation rate will its debt-to-income ratio remain unchanged?

Suppose a country has had a high and relatively stable inflation rate for a long time. How might this affect the costs and benefits of inflation reduction?

Which of the following would likely increase private saving?

Higher inflation results in

"Leaning against the wind" is exemplified by an)