Filters
Question type
Study Flashcards

Explain how it is possible for the government debt to grow forever.

Correct Answer

verifed

verified

The debt can grow because the economy gr...

View Answer

A reduction in the marginal tax rate includes a substitution effect that tends to increase savings.

A) True
B) False

Correct Answer

verifed

verified

Economists predict the business cycle well enough that stabilization policy is likely to work despite lags in the effects of policy.

A) True
B) False

Correct Answer

verifed

verified

Suppose that the central bank is required to follow a monetary policy rule to stabilize prices. If the economy starts at long-run equilibrium and then aggregate supply shifts right, what should the central bank do, and what will happen to output?


A) The central bank should increase the money supply, which causes output to move closer to its long-run equilibrium.
B) The central bank should increase the money supply, which causes output to move farther from its long-run equilibrium.
C) The central bank should decrease the money supply, which causes output to move closer to its long-run equilibrium.
D) The central bank should decrease the money supply, which causes output to move farther from its long-run equilibrium.

E) All of the above
F) B) and D)

Correct Answer

verifed

verified

Deficits do not necessarily burden future generations. Discuss and provide some examples.

Correct Answer

verifed

verified

Some programs tax younger generations to...

View Answer

Which statement best describes RRSP plans?


A) They impose added taxes on those who save.
B) They are taxed twice.
C) They postpone income taxes.
D) They are never taxed.

E) A) and B)
F) C) and D)

Correct Answer

verifed

verified

Why should the tax laws be reformed to encourage saving?


A) because saving is a key determinant of long-run prosperity
B) because taxes on capital gains are too low
C) because higher-income households are taxed too much
D) because economic theory clearly predicts that a higher rate of return encourages saving

E) A) and D)
F) C) and D)

Correct Answer

verifed

verified

What is a significant cost of inflation?


A) printing more money
B) lower nominal interest rates
C) unintended changes in tax liabilities
D) higher unemployment

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

Proponents of zero inflation argue that reducing inflation involves which of the following?


A) permanent costs and temporary benefits
B) temporary costs and permanent benefits
C) permanent costs and benefits
D) temporary costs and benefits

E) A) and B)
F) B) and C)

Correct Answer

verifed

verified

Which tax policy will lead to a tax system with increased equality?


A) increase the limit on retirement savings plans
B) increase the limit on tax-free savings accounts
C) increase the consumption tax
D) reduce taxation of capital income

E) All of the above
F) C) and D)

Correct Answer

verifed

verified

In the aggregate demand and aggregate supply model, which pair of simultaneous events causes a decrease in output and employment?


A) lower demand and lower supply
B) lower demand and higher supply
C) higher demand and higher supply
D) higher demand and lower supply

E) A) and B)
F) C) and D)

Correct Answer

verifed

verified

Explain the main argument in favour of economic stabilization.

Correct Answer

verifed

verified

Fluctuations in the economy-recessions a...

View Answer

Suppose that at the start of fiscal year 2015 the government had a debt of $6060 billion. Suppose that during the same fiscal year, real GDP grew by about 3 percent and inflation was about 2 percent. What is the largest deficit the government could have run without raising the debt-to-GDP ratio?


A) about $122 billion
B) about $184 billion
C) about $243 billion
D) about $303 billion

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

Suppose that changes in aggregate demand tended to be infrequent and that it took a long time for the economy to return to long-run output. How would this affect the arguments of those who oppose using policy to stabilize output?

Correct Answer

verifed

verified

Those who oppose stabilization policy mo...

View Answer

In which situation does inflation reduction have the lowest cost?


A) when the efforts are credible, so that the sacrifice ratio is low
B) when the efforts are credible, so that the sacrifice ratio is high
C) when the efforts are unexpected, so that the sacrifice ratio is high
D) when the efforts are unexpected, so that the sacrifice ratio is low

E) B) and D)
F) C) and D)

Correct Answer

verifed

verified

A recession has no benefit to society-it represents a sheer waste of resources.

A) True
B) False

Correct Answer

verifed

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 100 billion units of currency. What is the highest deficit it can have without raising the debt-to-income ratio?


A) just under 1 billion units
B) just under 3 billion units
C) just under 6 billion units
D) just under 8 billion units

E) A) and C)
F) B) and D)

Correct Answer

verifed

verified

What effects does a higher rate of return have on saving?


A) A higher rate of return has an income effect that discourages saving and a substitution effect that encourages saving.
B) A higher rate of return has an income effect that encourages saving and a substitution effect that discourages saving.
C) A higher rate of return has income and substitution effects that both decrease saving.
D) A higher rate of return has income and substitution effects that both increase saving.

E) C) and D)
F) All of the above

Correct Answer

verifed

verified

What do opponents of using policy to stabilize the economy generally believe?


A) that neither fiscal nor monetary policy have much impact on aggregate demand
B) that attempts to stabilize the economy can increase the magnitude of economic fluctuations
C) that unemployment and inflation are not cause for much concern
D) that unemployment is a cause for concern, but inflation is not

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

Correct Answer

verifed

verified

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, what must the central bank do, and what will happen to output?


A) The central bank must decrease the money supply, which will move output back toward its long-run level.
B) The central bank must decrease the money supply, which will move output farther from its long-run level.
C) The central bank must increase the money supply, which will move output back toward its long-run level.
D) The central bank must increase the money supply, which will move output farther from its long-run level.

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

Showing 41 - 60 of 111

Related Exams

Exam 1

Ten Principles of Economics

218 Questions

Exam 2

Thinking Like an Economist

239 Questions

Exam 3

Interdependence and the Gains From Trade

202 Questions

Exam 4

The Market Forces of Supply and Demand

347 Questions

Exam 5

Measuring a Nations Income

169 Questions

Exam 6

Measuring the Cost of Living

173 Questions

Exam 7

Production and Growth

182 Questions

Exam 8

Saving, Investment, and the Financial System

214 Questions

Exam 9

Unemployment and Its Natural Rate

194 Questions

Exam 10

The Monetary System

188 Questions

Exam 11

Money Growth and Inflation

196 Questions

Exam 12

Open-Economy Macroeconomics: Basic Concepts

218 Questions

Exam 13

A Macroeconomic Theory of the Small Open Economy

195 Questions

Exam 14

Aggregate Demand and Aggregate Supply

256 Questions

Exam 15

The Influence of Monetary and Fiscal Policy on Aggregate Demand

223 Questions

Exam 16

The Short-Run Tradeoff Between Inflation and Unemployment

205 Questions

Show Answer