Exam 23: Six Debates Over Macroeconomic Policy

Suppose that a country has an inflation rate of about 3 percent per year and a real GDP growth rate of about 3 percent per year. How large of a deficit can the government run as a percentage of GDP) without raising the debt- to-income ratio?

In June of 2010, the government had a debt of about $8.6 trillion. Over the next year real GDP grew by about 1.6% and inflation was about 2%. What is the largest deficit the government could have run over this time without raising the debt-to-GDP ratio?

Economists

In fiscal year 1997, the U.S. government ran a deficit of about $21.9 billion. In fiscal year 1998, the government ran a surplus of about $69.3 billion. Other things the same, we would expect this change

When wages are fixed by contract, inflation reduces

Why might reforms to encourage saving lead to a less egalitarian society?

Some economists believe that there are positives from a little inflation and that it may "grease the wheels"

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

Suppose a tax cut affected aggregate demand and aggregate supply. The shift in aggregate supply would make the

An economist would be more likely to argue for reducing inflation if she thought that

Which of the following is correct?

Which of the following is an argument in favor of a balanced budget rule?

List two costs of inflation.

Inflation reduction has the highest cost when the efforts are

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

For which of the following policies is there a significant implementation lag?

Which of the following reduces the potential burden of an increase in debt on future generations?

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

The average person's share of the U.S. government debt as a percentage of lifetime income is

Real interest rates