Exam 23: Six Debates Over Macroeconomic Policy

According to computer estimates using a traditional macroeconomic model, the Obama administration found that the multiplier for tax cuts and government expenditures were respectively

Which of the following would those in favor of increasing government spending rather than decreasing taxes to prop up aggregate demand probably not agree with?

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

In effect, a consumption tax would put all saving automatically into a tax-advantaged savings account similar to an Individual Retirement Account IRA).

If the unemployment rate rises, which policies would be appropriate to reduce it?

To counter the recession of 2008-2009 President Obama and congress created a large increase in government expenditures.

A higher return on saving the amount a household needs to save to achieve any target level of future consumption. This effect on saving is called the effect. If the income effect is large enough, then a reduction in taxes on saving might tax revenues.

Many studies indicate changes in monetary policy have most of their effect on aggregate demand about six months after the change is made.

If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

Studies have shown significant spending changes arise from interest rate changes after

Policies that reduce the incentive for households to save include

Proponents of zero inflation argue that a successful program to reduce inflation

An added benefit of inflation is that it allows for the possibility of

Part of the lag in monetary policy effects is due to

When the Federal Open Market Committee meets it

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

Government deficits mean that

Over time, continued budget deficits lead to

A permanent reduction in inflation would

Those who believe the central bank should aim for zero inflation argue that reducing inflation is a policy with temporary costs and permanent benefits. What are the primary costs and benefits they are referring to?