Question 1

IRA,401(k) ,403(b) ,and Keogh plans

Accepted Answer

A)   impose added taxes on those who save.
B)   place no limits on the amount people can deposit into these programs.
C)   impose penalties for withdrawals except under certain circumstances.
D)   None of the above is correct.E) None of the above
F) B) and C)

Question 2

Suppose there is a decrease in short-run aggregate supply.If the Federal Reserve wants to stabilize output it should

Accepted Answer

A)   buy bonds.These purchases also move the price level closer to its original level.
B)   buy bonds.However these purchases move the price level farther from its original level.
C)   sell bonds.These purchases also move the price level closer to its original level.
D)   sell bonds.However these purchase move the price level farther from its original level.E) None of the above
F) B) and C)

Question 3

An opponent of monetary policy decisions by rule would point to which of the following as support of his case?

Accepted Answer

A)   time inconsistency of policy
B)   flexibility to confront unforeseen circumstances
C)   political business cycle
D)   the ability to craft rules that account for all possible contingencies in advanceE) None of the above
F) B) and D)

Question 4

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

Accepted Answer

A)   in the stock market.
B)   in the foreign exchange market.
C)   in the bond market.
D)   in the labor market.E) A) and C)
F) B) and C)

Question 5

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Accepted Answer

A)   high and the reduction is unexpected.
B)   high and the reduction is expected.
C)   low and the reduction is unexpected.
D)   low and the reduction is expected.E) A) and B)
F) B) and C)

Question 6

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation,the short-run Phillips curve will remain far to the

Accepted Answer

A)   left,and the sacrifice ratio will be low.
B)   left,and the sacrifice ratio will be high.
C)   right,and the sacrifice ratio will be low.
D)   right,and the sacrifice ratio will be high.E) B) and C)
F) All of the above

Question 7

Explain how tax provisions to encourage private saving may reduce national saving.

Accepted Answer

Without careful planning it is possible ...

Question 8

If there is an increase in the money supply,in the short run

Accepted Answer

A)   the interest rises.It takes several weeks for spending to fully respond to this change.
B)   the interest rises.It takes several months for spending to fully respond to this change.
C)   the interest falls.It takes several weeks for spending to fully respond to this change.
D)   the interest falls.It takes several months for spending to fully respond to this change.E) A) and B)
F) A) and C)

Question 9

Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.

Accepted Answer

A) True 
 B)False

Question 10

President Barrack Obama and Congress cut taxes and raised government expenditures during the recent financial crisis.According to the aggregate supply and aggregate demand model which of these policies would tend to reduce unemployment?

Accepted Answer

A)   both the tax cut and the increase in government expenditures
B)   the tax cut but not the increase in government expenditures
C)   the increase in government expenditures but not the tax cut
D)   neither the increase in government expenditures nor the tax cutE) All of the above
F) A) and B)

Question 11

As it is usually practiced,inflation targeting sets

Accepted Answer

A)   a specific inflation rate for the central bank to target and prohibits it from deviating from the target even when some shock pushes inflation away from that number.
B)   a specific inflation rate for the central bank to target but allows it to deviate from the target when some shock pushes inflation away from that number.
C)   sets some range of inflation rates for the central bank to target but prohibits it from deviating from that range even when some shock pushes inflation outside the range.
D)   sets some range of inflation rates for the central bank to target but allows it to deviate from that range even when some shock pushes inflation outside the range.E) A) and B)
F) All of the above

Question 12

In response to recession,who primarily raised expenditures rather than cut taxes?

Accepted Answer

A)   President George W.Bush and President Barack Obama
B)   President George W.Bush but not President Barack Obama
C)   President Barack Obama but not President George W.Bush
D)   Neither President George W.Bush and President Barack ObamaE) A) and D)
F) A) and C)

Question 13

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.E) All of the above
F) A) and D)

Question 14

"Leaning against the wind" is exemplified by a

Accepted Answer

A)   tax increase when there is a recession.
B)   decrease in the money supply when there is an expansion.
C)   decrease in government expenditures when there is a recession.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 15

"Leaning against the wind" is exemplified by a

Accepted Answer

A)   tax cut when there is a recession.
B)   decrease in the money supply when there is a recession.
C)   decrease in government expenditures when there is a recession.
D)   increasing money supply when there is a boom.E) A) and B)
F) C) and D)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Means-tested government programs tend to reduce saving.What are means-tested programs and how do they reduce saving?

Accepted Answer

Means-tested benefits give assistance,or...

Question 18

Suppose that the central bank is required to follow a monetary policy rule to stabilize prices.If the economy starts at long-run equilibrium and then aggregate supply shifts right,the central bank would have to

Accepted Answer

A)   increase the money supply,which causes output to move closer to its long-run equilibrium.
B)   increase the money supply,which causes output to move farther from long-run equilibrium.
C)   decrease the money supply,which causes output to move closer to its long-run equilibrium.
D)   decrease the money supply,which causes output to move farther from long-run equilibrium.E) A) and D)
F) A) and C)

Question 19

At the end of 2010,the government had a debt of about $9.4 trillion.If during 2011 real GDP were to rise 3.2% and inflation were 1.6%,what is the largest deficit the government could have run without raising the debt-to-GDP ratio?

Accepted Answer

A)   about $150.4 billion
B)   about $188.0 billion
C)   about $451.2 billion
D)   about $481.3 billionE) A) and C)
F) C) and D)

Question 20

A reduction in the tax rate on income from saving would

Accepted Answer

A)   most directly benefit the poor in the short run.
B)   increase real wages over time.
C)   decrease the capital stock over time.
D)   decrease productivity over time.E) B) and C)
F) A) and B)

Exam 36: Six Debates Over Macroeconomic Policy

Explain how tax provisions to encourage private saving may reduce national saving.

Correct AnswerverifiedWithout careful planning it is possible ...View AnswerShow Answer

As it is usually practiced,inflation targeting sets

Correct AnswerverifiedShow Answer

At the end of 2010,the government had a debt of about $9.4 trillion.If during 2011 real GDP were to rise 3.2% and inflation were 1.6%,what is the largest deficit the government could have run without raising the debt-to-GDP ratio?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An opponent of monetary policy decisions by rule would point to which of the following as support of his case?

Correct AnswerverifiedShow Answer

President Barrack Obama and Congress cut taxes and raised government expenditures during the recent financial crisis.According to the aggregate supply and aggregate demand model which of these policies would tend to reduce unemployment?

Correct AnswerverifiedShow Answer

Means-tested government programs tend to reduce saving.What are means-tested programs and how do they reduce saving?

Correct AnswerverifiedMeans-tested benefits give assistance,or...View AnswerShow Answer

"Leaning against the wind" is exemplified by a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In response to recession,who primarily raised expenditures rather than cut taxes?

Correct AnswerverifiedShow Answer

A program to reduce inflation is likely to have lower costs if the sacrifice ratio is

Correct AnswerverifiedShow Answer

If people in countries that have had persistently high inflation are skeptical about efforts to reduce inflation,the short-run Phillips curve will remain far to the

Correct AnswerverifiedShow Answer

IRA,401(k) ,403(b) ,and Keogh plans

Correct AnswerverifiedShow Answer

Suppose that the central bank is required to follow a monetary policy rule to stabilize prices.If the economy starts at long-run equilibrium and then aggregate supply shifts right,the central bank would have to

Correct AnswerverifiedShow Answer

Suppose there is a decrease in short-run aggregate supply.If the Federal Reserve wants to stabilize output it should

Correct AnswerverifiedShow Answer

Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.

Correct AnswerverifiedShow Answer

If there is an increase in the money supply,in the short run

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

"Leaning against the wind" is exemplified by a

Correct AnswerverifiedShow Answer

A reduction in the tax rate on income from saving would

Correct AnswerverifiedShow Answer

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Without careful planning it is possible ...
View Answer

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Means-tested benefits give assistance,or...
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