Question 1

Inflation reduction has the lowest 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.E) B) and D)
F) A) and D)

Question 2

Which of the following reduce the incentive for households to save?

Accepted Answer

A)  both means-testing of government benefits and inheritance taxes
B)  means-testing of government benefits but not inheritance taxes
C)  inheritance taxes, but not means-testing of government benefits
D)  neither means-testing of government benefits nor inheritance taxesE) A) and D)
F) B) and D)

Question 3

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

Accepted Answer

The typical estimate of the sacrifice ra...

Question 4

Which of the following is a cost of inflation?

Accepted Answer

A)  shoeleather costs
B)  menu costs
C)  relative price variability
D)  All of the above are correct.E) A) and B)
F) All of the above

Question 5

Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of their contributions was to argue that if a central bank could convince people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. This possibility is known as

Accepted Answer

A)  inflation targeting.
B)  the monetary policy reaction lag.
C)  the time inconsistency of policy.
D)  the sacrifice ratio dilemma.E) A) and B)
F) C) and D)

Question 6

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

Accepted Answer

A)  buy bonds to raise interest rates.
B)  buy bonds to reduce interest rates.
C)  sell bonds to raise interest rates.
D)  sell bonds to reduce interest rates.E) None of the above
F) C) and D)

Question 7

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

Accepted Answer

A) True 
 B)False

Question 8

If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

Accepted Answer

A)  would have to increase the money supply. This would move unemployment closer to the natural rate.
B)  would have to increase the money supply. This would move unemployment further from the natural rate.
C)  would have to decrease the money supply. This would move unemployment closer to the natural rate.
D)  would have to decrease the money supply. This would move unemployment further from the natural rate.E) All of the above
F) B) and C)

Question 9

Opponents of tax reforms intended to raise saving argue that such reforms

Accepted Answer

A)  favor those with high income, and that saving may not rise because of the substitution effect.
B)  favor those with high income, and that saving may not rise because of the income effect.
C)  favor those with low income, and that saving may not rise because of the substitution effect.
D)  favor those with low income, and that saving may not rise because of the income effect.E) A) and C)
F) All of the above

Question 10

Which of the following is not an argument made by those who oppose reforming the tax laws to encourage saving?

Accepted Answer

A)  A public budget surplus can raise national saving.
B)  The substitution effect of a higher return to saving may be about equal to the income effect of a higher return to saving.
C)  Low-income households save a larger fraction of their income than high-income households.
D)  Tax cuts might cause a budget deficit.E) All of the above
F) A) and C)

Question 11

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

Question 12

Proponents of a balanced government budget acknowledge that running a budget deficit is justifiable in time of war.

Accepted Answer

A) True 
 B)False

Question 13

If inflation were reduced, then it is

Accepted Answer

A)  likely that real incomes would rise more rapidly and labor markets would be more flexible.
B)  likely that real incomes would rise more rapidly but unlikely that labor markets would be more flexible.
C)  likely that labor markets would be more flexible but unlikely that real incomes would rise more rapidly.
D)  unlikely that real incomes would rise more rapidly and unlikely that labor markets would be more flexible.E) A) and D)
F) B) and D)

Question 14

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

Accepted Answer

A government deficit means that the gove...

Exam 36: Six Debates Over Macroeconomic Policy

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

Correct Answer
verified
A government deficit means that the gove...
View Answer

Which of the following reduce the incentive for households to save?

Correct Answer
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Which of the following are taxed?

Correct Answer
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Which of the following is not an argument made by those who oppose reforming the tax laws to encourage saving?

Correct Answer
verified

Inflation reduction has the lowest cost when the efforts are

Correct Answer
verified

If inflation were reduced, then it is

Correct Answer
verified

Opponents of tax reforms intended to raise saving argue that such reforms

Correct Answer
verified

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

Correct Answer
verified
The typical estimate of the sacrifice ra...
View Answer

Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of their contributions was to argue that if a central bank could convince people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. This possibility is known as

Correct Answer
verified

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

Correct Answer
verified

If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

Correct Answer
verified

Proponents of a balanced government budget acknowledge that running a budget deficit is justifiable in time of war.

Correct Answer
verified

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

Correct Answer
verified

Which of the following is a cost of inflation?

Correct Answer
verified

Exam 36: Six Debates Over Macroeconomic Policy

What's the basis for arguing that deficits are likely to lead to lower living standards in the future?

Correct AnswerverifiedA government deficit means that the gove...View AnswerShow Answer

Which of the following reduce the incentive for households to save?

Correct AnswerverifiedShow Answer

Which of the following are taxed?

Correct AnswerverifiedShow Answer

Which of the following is not an argument made by those who oppose reforming the tax laws to encourage saving?

Correct AnswerverifiedShow Answer

Inflation reduction has the lowest cost when the efforts are

Correct AnswerverifiedShow Answer

If inflation were reduced, then it is

Correct AnswerverifiedShow Answer

Opponents of tax reforms intended to raise saving argue that such reforms

Correct AnswerverifiedShow Answer

Using typical estimates of the sacrifice ratio, how much output would likely be sacrificed to reduce inflation by 3 percent?

Correct AnswerverifiedThe typical estimate of the sacrifice ra...View AnswerShow Answer

Edward Prescott and Finn Kydland won the Nobel Prize in Economics in 2004. One of their contributions was to argue that if a central bank could convince people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. This possibility is known as

Correct AnswerverifiedShow Answer

Tax cuts proposed by the Kennedy and Reagan administrations were followed by robust economic growth.

Correct AnswerverifiedShow Answer

If a central bank were required to target inflation at zero, then when there was a negative aggregate supply shock the central bank

Correct AnswerverifiedShow Answer

Proponents of a balanced government budget acknowledge that running a budget deficit is justifiable in time of war.

Correct AnswerverifiedShow Answer

According to the political business cycle theory, if the Fed wanted to see a President re-elected, prior to the election it might

Correct AnswerverifiedShow Answer

Which of the following is a cost of inflation?

Correct AnswerverifiedShow Answer

Correct Answer
verified
A government deficit means that the gove...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The typical estimate of the sacrifice ra...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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