Question 1

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Accepted Answer

A)   its substitution effect on saving and its effect on the government budget
B)   its substitution effect on saving but not its effect on the government budget
C)   its effect on the government budget but not its substitution effect on saving
D)   neither its substitution effect on saving nor its effect on the government budgetE) None of the above
F) B) and C)

Question 2

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) None of the above
F) B) and C)

Question 3

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

Accepted Answer

Without careful planning it is possible ...

Question 4

Which of the following are taxed?

Accepted Answer

A)   both corporate profits and dividends paid to stockholders
B)   corporate profits but not dividends paid to stockholders
C)   dividends paid to stockholders but not corporate profits
D)   neither corporate profits nor dividends paid to stock holdersE) All of the above
F) A) and C)

Question 5

Which of the following is not an argument in favor of requiring the government to balance its budget?

Accepted Answer

A)   Government debt imposes higher taxes or more borrowing on future generations.
B)   A balanced budget will smooth the business cycle.
C)   Deficits lower national saving.
D)   Recent history shows that Congress will run deficits even when deficits are not justified by war or recession.E) A) and B)
F) B) and D)

Question 6

Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate.

Accepted Answer

A) True 
 B)False

Question 7

Consider the following rule for monetary policy: r = 2 percent + π\piπ  + 1/2(y - y*) /y* + 1/2( π\piπ - π\piπ *) , where r is the nominal interest rate, y is real GDP, y* is an estimate of the natural rate of output, π\piπ  is the inflation rate, and π\piπ * is the inflation target. Which of the following statements is not correct?

Accepted Answer

A)   If aggregate demand shifts right from long-run equilibrium, this rule unambiguously implies that the Fed increases the nominal interest rate.
B)   If aggregate supply shifts right from long-run equilibrium at the inflation target, we cannot tell without more information whether the Fed should increase or decrease the nominal interest rate.
C)   If output is at its natural level, but inflation is above its target, the Fed must increase the nominal interest rate.
D)   If inflation is at its targeted level, but output is above its natural rate, the Fed must decrease the federal funds rate. E) A) and D)
F) C) and D)

Question 8

Higher inflation results in

Accepted Answer

A)   more frequent price changes and increased variability of relative prices.
B)   more frequent price changes and decreased variability of relative prices.
C)   less frequent price changes and increased variability of relative prices.
D)   less frequent price changes and decreased variability of relative prices.E) B) and C)
F) None of the above

Question 9

Means-tested programs tend to favor

Accepted Answer

A)   those with high income as would a consumption tax.
B)   those with high income while a consumption tax would favor those with low income.
C)   those with low income as would a consumption tax.
D)   those with low income while a consumption tax would favor those with high income.E) None of the above
F) A) and C)

Question 10

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

Accepted Answer

A) True 
 B)False

Question 11

Assume a central bank follows a rule that requires it to take steps to keep the price level constant. If the price level rose because of an increase in aggregate demand and a decrease in aggregate supply that kept output unchanged, then

Accepted Answer

A)   the central bank would have to decrease the money supply which would decrease output.
B)   the central bank would have to decrease the money supply which would increase output.
C)   the central bank would have to increase the money supply which would decrease output.
D)   the central bank would have to increase the money supply which would increase output.E) A) and B)
F) All of the above

Question 12

Why do many economists advocate a consumption tax rather than an income tax?

Accepted Answer

The current income tax means that income...

Question 13

Tax laws do not give preferential treatment to some kinds of retirement saving.

Accepted Answer

A) True 
 B)False

Question 14

If people in a country that has had persistently high inflation expect it to remain high and are skeptical of promises the central bank makes, then the Phillips curve is

Accepted Answer

A)   farther to the left than otherwise. If the central bank tries to reduce inflation unemployment will rise by more than if people had believed its promises.
B)   farther to the left than otherwise. If the central bank tries to reduce inflation unemployment will rise by less than if people had believed its promises.
C)   farther to the right than otherwise. If the central bank tries to reduce inflation unemployment will rise by more than if people had believed its promises
D)   farther to the right than otherwise. If the central bank tries to reduce inflation unemployment will rise by less than if people had believed its promises..E) A) and B)
F) B) and C)

Question 15

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) None of the above
F) B) and D)

Exam 18: Six Debates Over Macroeconomic Policy

Means-tested programs tend to favor

Correct Answer
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Correct Answer
verified

Why do many economists advocate a consumption tax rather than an income tax?

Correct Answer
verified
The current income tax means that income...
View Answer

Which of the following are taxed?

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

Correct Answer
verified

Higher inflation results in

Correct Answer
verified

If people in a country that has had persistently high inflation expect it to remain high and are skeptical of promises the central bank makes, then the Phillips curve is

Correct Answer
verified

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

Correct Answer
verified
Without careful planning it is possible ...
View Answer

Assume a central bank follows a rule that requires it to take steps to keep the price level constant. If the price level rose because of an increase in aggregate demand and a decrease in aggregate supply that kept output unchanged, then

Correct Answer
verified

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

Correct Answer
verified

Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate.

Correct Answer
verified

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 Answer
verified

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Correct Answer
verified

Tax laws do not give preferential treatment to some kinds of retirement saving.

Correct Answer
verified

Which of the following is not an argument in favor of requiring the government to balance its budget?

Correct Answer
verified

Exam 18: Six Debates Over Macroeconomic Policy

Means-tested programs tend to favor

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Why do many economists advocate a consumption tax rather than an income tax?

Correct AnswerverifiedThe current income tax means that income...View AnswerShow Answer

Which of the following are taxed?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Higher inflation results in

Correct AnswerverifiedShow Answer

If people in a country that has had persistently high inflation expect it to remain high and are skeptical of promises the central bank makes, then the Phillips curve is

Correct AnswerverifiedShow Answer

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

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

Assume a central bank follows a rule that requires it to take steps to keep the price level constant. If the price level rose because of an increase in aggregate demand and a decrease in aggregate supply that kept output unchanged, then

Correct AnswerverifiedShow Answer

If real output grows at 3 percent per year and the inflation rate is 3 percent per year then government debt can grow by 6 percent per year and not increase the ratio of debt to income.

Correct AnswerverifiedShow Answer

Proponents of zero-inflation policies acknowledge that the public is unconcerned about the inflation rate.

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

Which of the following might explain a decrease in national saving when the tax rate on savings is reduced?

Correct AnswerverifiedShow Answer

Tax laws do not give preferential treatment to some kinds of retirement saving.

Correct AnswerverifiedShow Answer

Which of the following is not an argument in favor of requiring the government to balance its budget?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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The current income tax means that income...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Without careful planning it is possible ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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