Question 1

Suppose aggregate demand fell. In order to stabilize the economy, what might the government do?

Accepted Answer

A)   increase the interest rate
B)   decrease the money supply
C)   increase government spending
D)   decrease the government expendituresE) A) and B)
F) B) and C)

Question 2

Which of the following would transfer wealth from the old to the young?

Accepted Answer

A)   increases in the budget deficit
B)   decreased building of highways and bridges
C)   more generous education subsidies
D)   indexation of pensions to inflationE) All of the above
F) None of the above

Question 3

Explain why policy lags could make stabilization policies counterproductive.

Accepted Answer

As the textbook explains, it takes time ...

Question 4

Suppose the economy goes into recession. Which of the following is a list of things policymakers could do to try to end the recession?

Accepted Answer

A)   increase the money supply, increase taxes, and increase government spending
B)   increase the money supply, increase taxes, and decrease government spending
C)   increase the money supply, decrease taxes, and increase government spending
D)   decrease the money supply, increase taxes, and decrease government spendingE) A) and B)
F) C) and D)

Question 5

Some studies have found that saving is not very sensitive to the rate of return on saving.

Accepted Answer

A) True 
 B)False

Question 6

Identify three of the five costs of inflation.

Accepted Answer

There are several costs of inflation, in...

Question 7

In which of the following situations does the government NOT need to balance its budget?

Accepted Answer

A)   if nominal GDP grows faster than the growth in debt
B)   if nominal GDP grows slower than the growth in debt
C)   if inflation is zero
D)   if inflation is higher than the growth in debtE) A) and B)
F) A) and C)

Question 8

Suppose the budget deficit is rising 2 percent per year and nominal GDP is rising 7 percent per year. Which of the following best describes the debt created by these continuing deficits?

Accepted Answer

A)   sustainable, but the future burden on your children cannot be offset
B)   not sustainable, and the future burden on your children cannot be offset
C)   not sustainable, but the future burden on your children can be offset if you save for them
D)   sustainable, and the future burden on your children can be offset if you save for themE) A) and C)
F) B) and C)

Question 9

Suppose the budget deficit is rising 8 percent per year and nominal GDP is rising 10 percent per year. Which of the following best describes the debt created by these deficits?

Accepted Answer

A)   sustainable, but the future burden on your children cannot be offset
B)   not sustainable, and the future burden on your children cannot be offset
C)   not sustainable, but the future burden on your children can be offset if you save for them
D)   sustainable, and the future burden on your children can be offset if you save for themE) C) and D)
F) A) and D)

Question 10

The Bank of Canada raised interest rates in 1999 and 2000. By doing this, what did the Bank of Canada do to the money supply and why?

Accepted Answer

A)   It increased the money supply because it was concerned about unemployment.
B)   It increased the money supply because it was concerned about inflation.
C)   It decreased the money supply because it was concerned about unemployment.
D)   It decreased the money supply because it was concerned about inflation.E) A) and B)
F) B) and C)

Question 11

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year. Suppose also that it has nominal GDP of about 200 billion units of currency. What is the highest possible deficit it can have without raising the debt-to-income ratio?

Accepted Answer

A)   just under 1 billion units
B)   just under 9 billion units
C)   just under 12 billion units
D)   just under 16 billion unitsE) B) and C)
F) A) and D)

Exam 17: Five Debates Over Macroeconomic Policy

Suppose the budget deficit is rising 2 percent per year and nominal GDP is rising 7 percent per year. Which of the following best describes the debt created by these continuing deficits?

Correct Answer
verified

Identify three of the five costs of inflation.

Correct Answer
verified
There are several costs of inflation, in...
View Answer

In which of the following situations does the government NOT need to balance its budget?

Correct Answer
verified

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year. Suppose also that it has nominal GDP of about 200 billion units of currency. What is the highest possible deficit it can have without raising the debt-to-income ratio?

Correct Answer
verified

Suppose aggregate demand fell. In order to stabilize the economy, what might the government do?

Correct Answer
verified

Which of the following would transfer wealth from the old to the young?

Correct Answer
verified

Explain why policy lags could make stabilization policies counterproductive.

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

Suppose the economy goes into recession. Which of the following is a list of things policymakers could do to try to end the recession?

Correct Answer
verified

Some studies have found that saving is not very sensitive to the rate of return on saving.

Correct Answer
verified

Suppose the budget deficit is rising 8 percent per year and nominal GDP is rising 10 percent per year. Which of the following best describes the debt created by these deficits?

Correct Answer
verified

The Bank of Canada raised interest rates in 1999 and 2000. By doing this, what did the Bank of Canada do to the money supply and why?

Correct Answer
verified

Exam 17: Five Debates Over Macroeconomic Policy

Suppose the budget deficit is rising 2 percent per year and nominal GDP is rising 7 percent per year. Which of the following best describes the debt created by these continuing deficits?

Correct AnswerverifiedShow Answer

Identify three of the five costs of inflation.

Correct AnswerverifiedThere are several costs of inflation, in...View AnswerShow Answer

In which of the following situations does the government NOT need to balance its budget?

Correct AnswerverifiedShow Answer

Suppose that a country has an inflation rate of about 3 percent per year and a real growth rate of about 5 percent per year. Suppose also that it has nominal GDP of about 200 billion units of currency. What is the highest possible deficit it can have without raising the debt-to-income ratio?

Correct AnswerverifiedShow Answer

Suppose aggregate demand fell. In order to stabilize the economy, what might the government do?

Correct AnswerverifiedShow Answer

Which of the following would transfer wealth from the old to the young?

Correct AnswerverifiedShow Answer

Explain why policy lags could make stabilization policies counterproductive.

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

Suppose the economy goes into recession. Which of the following is a list of things policymakers could do to try to end the recession?

Correct AnswerverifiedShow Answer

Some studies have found that saving is not very sensitive to the rate of return on saving.

Correct AnswerverifiedShow Answer

Suppose the budget deficit is rising 8 percent per year and nominal GDP is rising 10 percent per year. Which of the following best describes the debt created by these deficits?

Correct AnswerverifiedShow Answer

The Bank of Canada raised interest rates in 1999 and 2000. By doing this, what did the Bank of Canada do to the money supply and why?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
There are several costs of inflation, in...
View Answer

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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified