Posted: January 20th, 2023

      1. A   reduction in the tax rate on income from saving would (Points : 1

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1. A   reduction in the tax rate on income from saving would (Points : 1)  
  most directly benefit the poor in the short   run.
 
  increase real wages over   time.
 
  decrease the capital stock over   time.
 
  decrease productivity over   time.
 
 
 
 
   2.   According to the political business cycle theory, if the Fed wanted to   see a President re-elected, prior to the election it might (Points : 1)  
  lower the discount rate and sell   bonds.
 
  lower the discount rate and buy   bonds.
 
  raise the discount rate and sell   bonds.
 
  raise the discount rate and buy   bonds.
 
  
 
 
 
   3.   Opponents of using policy to stabilize the economy generally believe   that (Points : 1)   neither fiscal nor monetary policy have much   impact on aggregate demand.
 
  attempts to stabilize the economy decrease the   magnitude of economic fluctuations.
 
  unemployment and inflation are not cause for much   concern.
 
  economic conditions can easily change between the   start of policy action and when it takes   effect.
 
 
 
   4.   “Leaning against the wind” is exemplified by a (Points : 1)  
  tax increase when there is a   recession.
 
  decrease in the money supply when there is an   expansion.
 
  decrease in government expenditures when there is   a recession.
 
  All of the above are   correct.
 
  
 
 
 
   5.   Suppose that the country of Aquilonia has an inflation rate of about 2   percent per year and a real growth rate of about 1 percent per year. Suppose   also that it has nominal GDP of about 200 billion units of currency and   current   nominal national debt of 150 billion units of domestic currency. Which of the   
  following government spending and taxation figures will not raise the   debt-to-income ratio? (Points : 1)   government spending equal to 20 billion units and   tax collections equal to 16 billion units
 
  government spending equal to 20 billion units and   tax collections equal to 14 billion units
 
  government spending equal to 20 billion units and   tax collections equal to 10 billion units
 
  government spending equal to 20 billion units and   tax collections equal to 8 billion units
 
  
 
 
 
   6. If   aggregate demand shifts because of a wave irrational exuberance, those who   favor   a policy that “leans against the wind” would advocate the (Points :   1)  
  Federal Reserve increase the money supply or the   government increase taxes.
 
  Federal Reserve increase the money supply or the   government decrease taxes.
 
  Federal Reserve decrease the money supply or the   government increase taxes.
 
  Federal Reserve decrease the money supply or the   government decrease taxes.
 
  
 
 
 
   7.   Proponents of zero inflation argue that a successful program to reduce   inflation (Points : 1)   eventually reduces inflation   expectations.
 
  eventually raises real interest   rates.
 
  permanently decreases   output.
 
  permanently raises   unemployment.
 
 
 
   8.   Suppose that the central bank must follow a rule that requires it to   increase the money supply when the price level falls and decrease the money   supply when the price level rises. If the economy starts from long-run   equilibrium and aggregate supply shifts left, the central bank must   (Points : 1)   decrease the money supply, which will move output   back towards its long-run level.
 
  decrease the money supply, which will move output   farther from its long-run level.
 
  increase the money supply, which will move output   back towards its long-run level.
 
  increase the money supply, which will move output   farther from its long-run level.
 
  
 
 
 
   9. If a   central bank had to give up its discretion and follow a rule that required it   to   keep inflation low, (Points : 1)   the short-run Phillips curve would shift   up.
  the short-run Phillips curve would   shift down.
 
  the long-run Phillips curve would shift   right.
 
  the long-run Phillips curve would shift   left.
 
 
 
   10.   IRA, 401(k), 403(b), and Keogh plans (Points : 1)  
  impose added taxes on those who   save.
 
  place no limits on the amount people can deposit   into these programs.
 
  impose penalties for withdrawals except under   certain circumstances.
 
  None of the above is   correct.
 
  
 
 
 
   11.   Part of the lag in monetary policy effects is due to (Points :   1)   the long political process of monetary policy   decisions.
 
  precise economic   forecasts.
 
  the time required for firms and households to   alter their spending plans.
 
  changes in the unemployment   rate.
 
  
 
 
 
   12.   Which of the following statements is not   true? (Points :   1)   All budget deficits can be justified as being   due to war or recession.
 
  The U.S. federal debt in 2008 was $5.2   trillion.
 
  Government debt represents about 1 percent of a   typical worker’s lifetime resources.
 
  Forward looking parents can reverse adverse   effects of government debt.
 
  
 
 
 
   13.   Accumulated over a long span of time, the tax rate on interest   income (Points : 1)   removes all benefits from   saving.
 
  reduces the benefits from saving by a small   amount.
 
  reduces the benefits from saving by a large   amount.
 
  does nor reduce any of the benefits from   saving.
 
 
 
 
   14.   Time inconsistency will cause the (Points : 1)  
  short-run Phillips curve to be higher than   otherwise.
 
  short-run Phillips curve to be lower the   otherwise.
 
  long-run Phillips curve to be farther to the   right than otherwise.
 
  long-run Phillips curve to be farther left than   otherwise.
 
  
 
 
 
   15.   Suppose the budget deficit is rising 3 percent per year and nominal GDP   is rising 5 percent per year. The debt created by these continuing deficits   is (Points : 1)   sustainable, but the future burden on your   children cannot be offset.
 
  sustainable, and the future burden on your   children can be offset if you save for them.
 
  not sustainable, and the future burden on your   children cannot be offset.
 
  not sustainable, but the future burden on your   children can be offset if you save for   them.
 
  
 
 
 
   16.   Some economists believe that there are positives from a little   inflation and that it may “grease the wheels” (Points : 1)  
  in the stock market.
 
  in the foreign exchange   market.
 
  in the bond market.
 
  in the labor   market.
 
  
 
 
 
   17.   Which of the following is not correct?   (Points : 1)  
  Deficits give people the opportunity to consume   at the expense of their children, but deficits do not require them to do   so.
 
  Deficits and surpluses could be used to avoid   fluctuations in the tax rate.
 
  The only times deficits have increased have been   during times of war or economic downturns.
 
  Reducing the budget deficit rather than funding   more education spending could, all things considered, make future generations   
  worse off.
 
 
 
   18. The   Federal Open Market Committee meets about (Points : 1)  
  every six days.
 
  every six weeks.
 
  every six months.
 
  every sixteen   months.
 
  
 
 
 
   19. All   of the following are arguments against stabilization policy except   (Points : 1)   Economic forecasting is highly   imprecise.
 
  Long lags may cause stabilization policies to in   fact destabilize the economy.
 
  Monetary policy affects aggregate demand by   changing interest rates.
  Fiscal policy must go through a long   political process.
 
  
 
 
 
   20. The   political business cycle refers to (Points : 1)   the fact that about every four years some   politician advocates greater government control of the   Fed.
 
  the potential for a central bank to increase the   money supply and therefore real GDP to help the incumbent get   re-elected.
 
  the part of the business cycle caused by the   reluctance of politicians to smooth the business cycle.
 
  changes in output created by the monetary rule   the Fed must follow.

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