Question 1

Which of the following is true concerning IRA's, 401(k) and 403(b) plans?

Accepted Answer

A)  Not everyone is eligible to put funds into them. 
B)  There are restrictions on the amount of funds that can be put into them. 
C)  Except under unusual circumstances, there are penalties for withdrawals before retirement. 
D)  All of the above are correct. 
A)  Not everyone is eligible to put funds into them. 
B)  There are restrictions on the amount of funds that can be put into them. 
C)  Except under unusual circumstances, there are penalties for withdrawals before retirement. 
D)  All of the above are correct.

Question 2

In 2009 President Barack Obama responded to recession

Accepted Answer

A)  only by cutting taxes. 
B)  by cutting taxes and reducing government expenditures. 
C)  only by raising government expenditures. 
D)  by cutting taxes and by raising government expenditures. 
A)  only by cutting taxes. 
B)  by cutting taxes and reducing government expenditures. 
C)  only by raising government expenditures. 
D)  by cutting taxes and by raising government expenditures.

Question 3

Assuming that the substitution effect is large relative to the income effect, tax reform designed to increase saving

Accepted Answer

A)  increases the interest rate and decreases spending on capital goods. 
B)  increases the interest rate and increases spending on capital goods. 
C)  decreases the interest rate and increases spending on capital goods. 
D)  decreases the interest rate and decreases spending on capital goods. 
A)  increases the interest rate and decreases spending on capital goods. 
B)  increases the interest rate and increases spending on capital goods. 
C)  decreases the interest rate and increases spending on capital goods. 
D)  decreases the interest rate and decreases spending on capital goods.

Question 4

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

Accepted Answer

A)  increase the money supply, increase taxes 
B)  increase the money supply, cut taxes 
C)  decrease the money supply, increase taxes 
D)  decrease the money supply, cut taxes 
A)  increase the money supply, increase taxes 
B)  increase the money supply, cut taxes 
C)  decrease the money supply, increase taxes 
D)  decrease the money supply, cut taxes

Question 5

What is meant by the political business cycle?

Accepted Answer

Central banks sympathetic to i

Question 6

Higher saving is associated with

Accepted Answer

A)  a larger capital stock and higher productivity. 
B)  a larger capital stock but not higher productivity. 
C)  higher productivity but not a higher capital stock. 
D)  neither a higher capital stock nor higher productivity. 
A)  a larger capital stock and higher productivity. 
B)  a larger capital stock but not higher productivity. 
C)  higher productivity but not a higher capital stock. 
D)  neither a higher capital stock nor higher productivity.

Question 7

If inflation falls,

Accepted Answer

A)  people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
B)  people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. 
C)  people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
D)  people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. 
A)  people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
B)  people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. 
C)  people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. 
D)  people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.

Question 8

Tax cuts affect only aggregate demand not aggregate supply.

Accepted Answer

A) True 
 B)False

Question 9

The laws that created the Fed give it only vague recommendations about what goals it should pursue, and they do not tell the Fed how to pursue whatever goals it might choose.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a typical justification for running a budget deficit?

Accepted Answer

A)  financing a war 
B)  dealing with a recession 
C)  fighting inflation 
D)  dealing with unemployment 
A)  financing a war 
B)  dealing with a recession 
C)  fighting inflation 
D)  dealing with unemployment

Question 11

Explain how a higher rate of return on saving could, at least in theory, lead to lower saving.

Accepted Answer

A higher rate of return on saving means

Question 12

Double taxation means that both

Accepted Answer

A)  wage income and interest income are taxed, which is currently the case in the United States. 
B)  wage income and interest income are taxed, which is not currently the case in the United States. 
C)  the profits of corporations and the dividends shareholders receive are taxed, which is currently the case in the United States. 
D)  the profits of corporations and the dividends shareholders receive are taxed, which is not currently the case in the United States. 
A)  wage income and interest income are taxed, which is currently the case in the United States. 
B)  wage income and interest income are taxed, which is not currently the case in the United States. 
C)  the profits of corporations and the dividends shareholders receive are taxed, which is currently the case in the United States. 
D)  the profits of corporations and the dividends shareholders receive are taxed, which is not currently the case in the United States.

Question 13

One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?

Accepted Answer

A temporar

Question 14

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

Accepted Answer

A lag of six months

Question 15

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must

Accepted Answer

A)  increase the money supply so interest rates rise. 
B)  increase the money supply so interest rates fall. 
C)  decrease the money supply so interest rates rise. 
D)  decrease the moneys supply so interest rates fall 
A)  increase the money supply so interest rates rise. 
B)  increase the money supply so interest rates fall. 
C)  decrease the money supply so interest rates rise. 
D)  decrease the moneys supply so interest rates fall

Question 16

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Accepted Answer

Those who oppose stabilization policy mo

Question 17

Which of the following would likely increase private saving?

Accepted Answer

A)  both expansion of means testing and a consumption tax 
B)  expansion of means testing, but not a consumption tax 
C)  a consumption tax, but not expansion of means testing 
D)  neither expansion of means testing nor a consumption tax 
A)  both expansion of means testing and a consumption tax 
B)  expansion of means testing, but not a consumption tax 
C)  a consumption tax, but not expansion of means testing 
D)  neither expansion of means testing nor a consumption tax

Question 18

Demand for workers in some industry declines. These workers are reluctant to have a cut in their nominal wage. However,

Accepted Answer

A)  inflation will raise their real wage and so increase the number of available workers. 
B)  inflation will raise their real wage and so decrease the number of available workers 
C)  inflation will reduce their real wage and so increase the number of available workers. 
D)  inflation will reduce their real wage and so decrease the number of available workers. 
A)  inflation will raise their real wage and so increase the number of available workers. 
B)  inflation will raise their real wage and so decrease the number of available workers 
C)  inflation will reduce their real wage and so increase the number of available workers. 
D)  inflation will reduce their real wage and so decrease the number of available workers.

Question 19

A year ago a country reduced the tax rate on all interest income from 20% to 10%. During the year private saving was $500 billion as compared to $400 billion the year before the tax reform. Taxes on interest income fell by $10 billion. Assuming no other changes in income, or government revenues or spending, which of the following is correct?

Accepted Answer

A)  the substitution effect was larger than the income effect; national saving rose 
B)  the substitution effect was larger than the income effect; national saving fell 
C)  the income effect was larger than the substitution effect; national saving rose 
D)  the income effect was larger than the substitution effect; national saving fell 
A)  the substitution effect was larger than the income effect; national saving rose 
B)  the substitution effect was larger than the income effect; national saving fell 
C)  the income effect was larger than the substitution effect; national saving rose 
D)  the income effect was larger than the substitution effect; national saving fell

Question 20

The principal lag for monetary policy

Accepted Answer

A)  and fiscal policy is the time it takes to implement policy. 
B)  and fiscal policy is the time it takes for policy to change spending. 
C)  is the time it takes to implement policy. The principal lag for fiscal policy is the time it takes for policy to change spending. 
D)  is the time it takes for policy to change spending. The principal lag for fiscal policy is the time it takes to implement it. 
A)  and fiscal policy is the time it takes to implement policy. 
B)  and fiscal policy is the time it takes for policy to change spending. 
C)  is the time it takes to implement policy. The principal lag for fiscal policy is the time it takes for policy to change spending. 
D)  is the time it takes for policy to change spending. The principal lag for fiscal policy is the time it takes to implement it.

Exam 36: Six Debates Over Macroeconomic Policy

Which of the following is true concerning IRA's, 401(k) and 403(b) plans?

In 2009 President Barack Obama responded to recession

Assuming that the substitution effect is large relative to the income effect, tax reform designed to increase saving

If the unemployment rate falls below its long-run level, which policies would be appropriate to stabilize output?

What is meant by the political business cycle?

Higher saving is associated with

If inflation falls,

Tax cuts affect only aggregate demand not aggregate supply.

The laws that created the Fed give it only vague recommendations about what goals it should pursue, and they do not tell the Fed how to pursue whatever goals it might choose.

Which of the following is not a typical justification for running a budget deficit?

Explain how a higher rate of return on saving could, at least in theory, lead to lower saving.

Double taxation means that both

One concern of those who oppose the central bank targeting inflation at zero is that reducing inflation is costly. What is the cost of reducing the inflation rate?

Monetary policy affects aggregate demand with a lag. Approximately how long does it take for monetary policy actions to affect aggregate demand?

Suppose that the central bank must follow a rule that requires it to increase the money supply when the price level falls and decrease the money supply when the price level rises. If the economy starts from long-run equilibrium and aggregate demand shifts right, the central bank must

Suppose that changes in aggregate demand tended to be infrequent and that it takes a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Which of the following would likely increase private saving?

Demand for workers in some industry declines. These workers are reluctant to have a cut in their nominal wage. However,

The principal lag for monetary 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

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