Question 1

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

Question 2

What fiscal policies did the government implement in response to the 2008-2009 recession? Can we be certain that these policies were effective? Explain.

Accepted Answer

The government cut taxes and raised expe...

Question 3

Which of the following does the U.S. currently have?

Accepted Answer

A)  means-tested government benefits and tax laws that tax capital income only once
B)  means-tested government benefits and tax laws that tax some capital income twice
C)  tax laws that tax capital income only once, but not means-tested government benefits
D)  tax laws that tax some capital income twice, but not means-tested government benefitsE) All of the above
F) A) and C)

Question 4

Which of the following things can a government do to lower the costs of inflation?

Accepted Answer

A)  sell inflation-indexed bonds and rewrite tax laws so that real rather than nominal gains are taxed
B)  sell inflation-indexed bonds but not rewrite tax laws so that real rather than nominal gains are taxed
C)  rewrite tax laws so that real rather than nominal gains are taxed, but not sell inflation-indexed bonds
D)  neither sell inflation-indexed bonds nor rewrite tax laws so that real rather than nominal gains are taxedE) B) and C)
F) A) and D)

Question 5

An individual would suffer lower losses or maybe even gain from an unexpectedly higher inflation rate if

Accepted Answer

A)  she held much currency and on net was a lender.
B)  she held much currency and on net was a borrower.
C)  she held little currency and on net was a lender.
D)  she held little currency and on net was a borrower.E) B) and C)
F) A) and D)

Question 6

Tax cuts

Accepted Answer

A)  can easily target investment spending, but investment spending falls by only a small percentage during recessions.
B)  can easily target investment spending, which falls by a large percentage during recessions.
C)  cannot easily target investment spending, but investment spending falls by only a small percentage during recessions.
D)  cannot easily target investment spending, which falls by a large percentage during recessions.E) A) and B)
F) B) and D)

Question 7

Government deficits mean that

Accepted Answer

A)  national saving is negative so public saving is negative.
B)  national saving is negative so public saving is lower than otherwise.
C)  public saving is negative so national saving is negative.
D)  public saving is negative so national saving is lower than otherwise.E) A) and B)
F) A) and C)

Question 8

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

Accepted Answer

A) True 
 B)False

Question 9

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008-2009 recession.

Accepted Answer

"Shovel ready" public works pr...

Question 10

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Accepted Answer

A)  only price stability
B)  only maximum employment
C)  only price stability and maximum employment
D)  price stability, maximum employment, and moderate long-term interest ratesE) A) and B)
F) None of the above

Question 11

According to a 1977 amendment to the Federal Reserve Act of 1913, what weights should the Fed put on the goals of maximum employment, stable prices, and moderate long-term interest rates?

Accepted Answer

While the amendment indicates ...

Question 12

Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?

Accepted Answer

A)  The economy responds very quickly to changes in the interest rate and changes in economic conditions are easy to predict.
B)  The economy responds very quickly to changes in the interest rate and changes in economic conditions are nearly impossible to predict.
C)  The economy responds to changes in the interest rate with a lag and changes in economic conditions are easy to predict.
D)  The economy responds to changes in the interest rate with a lag and changes in economic conditions are nearly impossible to predict.E) None of the above
F) A) and D)

Question 13

Eliminating means requirements for government benefits would

Accepted Answer

A)  raise saving and primarily benefit people with lower incomes.
B)  raise saving but primarily benefit people with higher incomes.
C)  reduce saving but primarily benefit people with lower incomes.
D)  reduce saving and primarily benefit people with higher income.E) C) and D)
F) All of the above

Question 14

The effects of a decline in the value of financial assets, such as stocks, on consumption and the economy might be offset by

Accepted Answer

A)  increasing government spending.
B)  decreasing the money supply.
C)  increasing taxes.
D)  undertaking no policy action.E) A) and C)
F) B) and C)

Question 15

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 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) C) and D)

Question 16

Explain why policy lags could make stabilization policies counterproductive.

Accepted Answer

As the textbook explains, it takes time ...

Question 17

Paul Volcker's inflation reduction efforts

Accepted Answer

A)  failed to reduce inflation.
B)  failed to reduce expected inflation.
C)  resulted in the highest unemployment rate since the Great Depression.
D)  none of the above are correct.E) A) and D)
F) A) and B)

Question 18

When aggregate demand is high, risking higher inflation, those in favor of using monetary and fiscal policy to stabilize the economy might recommend

Accepted Answer

A)  increasing government spending.
B)  expanding the money supply.
C)  lowering taxes.
D)  the Fed sell government bonds.E) B) and C)
F) All of the above

Question 19

Is it possible that deficits do not burden future generations?

Accepted Answer

Some programs, such as Social Security, ...

Question 20

Why might tax cuts be more appropriate than increasing government expenditures to counter recessions? Is there any evidence for this thinking?

Accepted Answer

Tax cuts affect aggregate demand quickly...

Exam 36: Six Debates Over Macroeconomic Policy

Tax cuts

Correct AnswerverifiedShow Answer

Which of the following things can a government do to lower the costs of inflation?

Correct AnswerverifiedShow Answer

Which of the following should be kept in mind when policymakers consider efforts to stabilize the economy?

Correct AnswerverifiedShow Answer

President Barrack Obama and Congress cut taxes and raised government expenditures during the 2008 financial crisis. According to the aggregate supply and aggregate demand, model which of these policies would tend to reduce unemployment?

Correct AnswerverifiedShow Answer

Paul Volcker's inflation reduction efforts

Correct AnswerverifiedShow Answer

Which of the following does the U.S. currently have?

Correct AnswerverifiedShow Answer

Is it possible that deficits do not burden future generations?

Correct AnswerverifiedSome programs, such as Social Security, ...View AnswerShow Answer

The effects of a decline in the value of financial assets, such as stocks, on consumption and the economy might be offset by

Correct AnswerverifiedShow Answer

A 1977 amendment to the Federal Reserve Act of 1913 says the Fed should "promote" which of the following goals?

Correct AnswerverifiedShow Answer

Eliminating means requirements for government benefits would

Correct AnswerverifiedShow Answer

Government deficits mean that

Correct AnswerverifiedShow Answer

When aggregate demand is high, risking higher inflation, those in favor of using monetary and fiscal policy to stabilize the economy might recommend

Correct AnswerverifiedShow Answer

Explain why policy lags could make stabilization policies counterproductive.

Correct AnswerverifiedAs the textbook explains, it takes time ...View AnswerShow Answer

Why might tax cuts be more appropriate than increasing government expenditures to counter recessions? Is there any evidence for this thinking?

Correct AnswerverifiedTax cuts affect aggregate demand quickly...View AnswerShow Answer

According to a 1977 amendment to the Federal Reserve Act of 1913, what weights should the Fed put on the goals of maximum employment, stable prices, and moderate long-term interest rates?

Correct AnswerverifiedWhile the amendment indicates ...View AnswerShow Answer

An individual would suffer lower losses or maybe even gain from an unexpectedly higher inflation rate if

Correct AnswerverifiedShow Answer

Proponents and opponents of balanced-budget policies agree that the government debt cannot continue to increase forever.

Correct AnswerverifiedShow Answer

What fiscal policies did the government implement in response to the 2008-2009 recession? Can we be certain that these policies were effective? Explain.

Correct AnswerverifiedThe government cut taxes and raised expe...View AnswerShow Answer

If inflation falls,

Correct AnswerverifiedShow Answer

List two of the three types of fiscal programs that the President and Congress emphasized in response to the 2008-2009 recession.

Correct Answerverified"Shovel ready" public works pr...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Some programs, such as Social Security, ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
As the textbook explains, it takes time ...
View Answer

Correct Answer
verified
Tax cuts affect aggregate demand quickly...
View Answer

Correct Answer
verified
While the amendment indicates ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The government cut taxes and raised expe...
View Answer

Correct Answer
verified

Correct Answer
verified
"Shovel ready" public works pr...
View Answer