Question 1

Time inconsistency will cause the

Accepted Answer

A)  short-run Phillips curve to be higher than otherwise. 
B)  short-run Phillips curve to be lower the otherwise. 
C)  long-run Phillips curve to be farther to the right than otherwise. 
D)  long-run Phillips curve to be farther left than otherwise. 
A)  short-run Phillips curve to be higher than otherwise. 
B)  short-run Phillips curve to be lower the otherwise. 
C)  long-run Phillips curve to be farther to the right than otherwise. 
D)  long-run Phillips curve to be farther left than otherwise.

Question 2

Forward-looking parents can reverse the adverse effects of government debt by saving more and leaving a larger bequest to their children.

Accepted Answer

A) True 
 B)False

Question 3

During recessions, even with no changes in policy, the deficit tends to ______ because _____________.

Accepted Answer

rise, income falls so tax reve

Question 4

Inflation reduction has the highest cost when the efforts are

Accepted Answer

A)  credible so that the sacrifice ratio is low. 
B)  credible so that the sacrifice ratio is high. 
C)  unexpected so that the sacrifice ratio is high. 
D)  unexpected so that the sacrifice ratio is low. 
A)  credible so that the sacrifice ratio is low. 
B)  credible so that the sacrifice ratio is high. 
C)  unexpected so that the sacrifice ratio is high. 
D)  unexpected so that the sacrifice ratio is low.

Question 5

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

According to the political business cycle, after an election, unless the central bank acts inflation is likely to

Accepted Answer

A)  have risen. To counter this the central bank would raise interest rates. 
B)  have risen. To counter this the central bank would lower interest rates. 
C)  have fallen. To counter this the central bank would raise interest rates. 
D)  have fallen. To counter this the central bank would lower interest rates. 
A)  have risen. To counter this the central bank would raise interest rates. 
B)  have risen. To counter this the central bank would lower interest rates. 
C)  have fallen. To counter this the central bank would raise interest rates. 
D)  have fallen. To counter this the central bank would lower interest rates.

Question 8

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

Accepted Answer

A)  increased the money supply because it was concerned about unemployment. 
B)  increased the money supply because it was concerned about inflation. 
C)  decreased the money supply because it was concerned about unemployment. 
D)  decreased the money supply because it was concerned about inflation. 
A)  increased the money supply because it was concerned about unemployment. 
B)  increased the money supply because it was concerned about inflation. 
C)  decreased the money supply because it was concerned about unemployment. 
D)  decreased the money supply because it was concerned about inflation.

Question 9

Stimulus spending in 2009 was used for

Accepted Answer

A)  building roads and bridges. 
B)  providing aid to local and state governments. 
C)  making payments to the unemployed. 
D)  All of the above are correct. 
A)  building roads and bridges. 
B)  providing aid to local and state governments. 
C)  making payments to the unemployed. 
D)  All of the above are correct.

Question 10

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 11

When aggregate demand is too low to ensure full employment, those in favor of using monetary and fiscal policy to stabilize the economy might recommend

Accepted Answer

A)  cutting government spending. 
B)  raising taxes. 
C)  having the Fed purchase government bonds. 
D)  reducing the money supply. 
A)  cutting government spending. 
B)  raising taxes. 
C)  having the Fed purchase government bonds. 
D)  reducing the money supply.

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

Exam 36: Six Debates Over Macroeconomic Policy

Time inconsistency will cause the

Forward-looking parents can reverse the adverse effects of government debt by saving more and leaving a larger bequest to their children.

During recessions, even with no changes in policy, the deficit tends to ______ because _____________.

Inflation reduction has the highest cost when the efforts are

The Obama administration believed that transfer payments to the unemployed would have a larger impact on aggregate demand than tax cuts.

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

According to the political business cycle, after an election, unless the central bank acts inflation is likely to

The Fed lowered interest rates in 2001 and 2002. This implies, other things the same, that the Fed

Stimulus spending in 2009 was used for

When aggregate demand is too low to ensure full employment, those in favor of using monetary and fiscal policy to stabilize the economy might recommend

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.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

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 Trade-Off Between Inflation and Unemployment

Filters

During recessions, even with no changes in policy, the deficit tends to because _______.