Exam 36: Six Debates Over Macroeconomic Policy

Those who desire that policymakers stabilize the economy would advocate which of the following when aggregate demand is insufficient to ensure full employment?

Carefully explain how monetary policy can be used to counter a recession. Explain what the central bank does as well as how its actions affect the economy. Under what circumstances is fiscal policy especially useful?

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

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

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

According to traditional Keynesian analysis, which has a greater impact on aggregate demand, changing taxes or changing government expenditures? Why?

Means-tested college aid, base college aid primarily on

Social Security transfers wealth from younger generations to older generations.

Economists

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

When the government has a deficit, a burden is necessarily imposed on future generations of taxpayers.

A balanced budget would require that when real GDP was growing rapidly,

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

A permanent reduction in inflation would

In the summer of 2008, consumers indicated that they were less optimistic about the future of the economy. Such a change in sentiment is likely to

The political business cycle refers to

Which part of the Federal Reserve determines monetary policy? How often does it meet? What does it set a target for?

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

Which of the following is not an argument in favor of reforming the tax laws to encourage saving?

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