Question 1

The primary deficit is

Accepted Answer

A) government spending minus interest on the debt. 
B) government spending minus net tax revenues. 
C) government spending plus interest on the debt minus net tax revenues. 
D) government spending plus net tax revenues minus interest on the debt. 
E)  interest on the debt minus net tax revenues. 
A) government spending minus interest on the debt. 
B) government spending minus net tax revenues. 
C) government spending plus interest on the debt minus net tax revenues. 
D) government spending plus net tax revenues minus interest on the debt. 
E)  interest on the debt minus net tax revenues.

Question 2

The official measure of the deficit is equal to

Accepted Answer

A) iB + G - T. 
B) iB + T - G. 
C) rB - G + T. 
D) (i - π)B + G - T. 
E)  none of the above 
A) iB + G - T. 
B) iB + T - G. 
C) rB - G + T. 
D) (i - π)B + G - T. 
E)  none of the above

Question 3

Suppose the central bank decreases the rate of growth of the money supply.What effect will this decrease in money growth have on seignorage in: (1)the short run; and (2)the medium run? Explain.

Accepted Answer

Seignorage equals the rate of growth of

Question 4

A major reason to be concerned about any U.S.budget deficit is that

Accepted Answer

A) if it were maintained, it would lead to an ever-increasing debt-to-GDP ratio. 
B) it would exacerbate the problem of the low U.S. saving rate. 
C) under current legislation, it would lead to budget surpluses in the future. 
D) if it were to increase, Ricardian equivalence will no longer hold. 
E)  since large deficits are associated with wars, the deficit might encourage the U.S. to become more adventuristic in its foreign policy. 
A) if it were maintained, it would lead to an ever-increasing debt-to-GDP ratio. 
B) it would exacerbate the problem of the low U.S. saving rate. 
C) under current legislation, it would lead to budget surpluses in the future. 
D) if it were to increase, Ricardian equivalence will no longer hold. 
E)  since large deficits are associated with wars, the deficit might encourage the U.S. to become more adventuristic in its foreign policy.

Question 5

The deficit at natural level of output is called

Accepted Answer

A) full-employment deficit. 
B) mid-cycle deficit. 
C) structural deficit. 
D) cyclically adjusted deficit. 
E)  all of the above 
A) full-employment deficit. 
B) mid-cycle deficit. 
C) structural deficit. 
D) cyclically adjusted deficit. 
E)  all of the above

Question 6

In 2010,the debt-to-GDP ratio for the United States was approximately equal to

Accepted Answer

A) 90%. 
B) 17%. 
C) 37%. 
D) 67%. 
A) 90%. 
B) 17%. 
C) 37%. 
D) 67%.

Question 7

In the medium run,an increase in government spending that causes an increase in the budget deficit

Accepted Answer

A) affects the level of output but not its composition. 
B) affects both the level and composition of output. 
C) will not affect the composition of output but will affect the price level. 
D) is neutral. 
E)  none of the above 
A) affects the level of output but not its composition. 
B) affects both the level and composition of output. 
C) will not affect the composition of output but will affect the price level. 
D) is neutral. 
E)  none of the above

Question 8

If the Ricardian equivalence proposition is correct,then an increase in the deficit will lead to

Accepted Answer

A) an increase in private saving. 
B) a decrease in investment spending. 
C) a lower standard of living in the future. 
D) all of the above 
E)  none of the above 
A) an increase in private saving. 
B) a decrease in investment spending. 
C) a lower standard of living in the future. 
D) all of the above 
E)  none of the above

Question 9

In virtually all hyperinflations,rapid money growth begins to occur because of

Accepted Answer

A) a war. 
B) a change of government. 
C) union demands for higher wages. 
D) large and / or growing budget deficits. 
E)  the introduction of wage indexation in labor contracts. 
A) a war. 
B) a change of government. 
C) union demands for higher wages. 
D) large and / or growing budget deficits. 
E)  the introduction of wage indexation in labor contracts.

Question 10

A higher deficit in the current year will lead to increased debt in the future only if

Accepted Answer

A) the deficit is greater than the previous year's deficit. 
B) the deficit-to-GDP ratio is greater than the debt-to-GDP ratio. 
C) it causes a drop in private saving. 
D) it causes an increase in private saving. 
E)  none of the above 
A) the deficit is greater than the previous year's deficit. 
B) the deficit-to-GDP ratio is greater than the debt-to-GDP ratio. 
C) it causes a drop in private saving. 
D) it causes an increase in private saving. 
E)  none of the above

Question 11

Very high debt burdens can result in

Accepted Answer

A) fine tuning. 
B) automatic stabilizer. 
C) the structural deficit. 
D) tax smoothing. 
E)  debt repudiation. 
A) fine tuning. 
B) automatic stabilizer. 
C) the structural deficit. 
D) tax smoothing. 
E)  debt repudiation.

Question 12

Hyperinflation refers to inflation in excess of ________ per month.

Accepted Answer

A) 30% 
B) 10% 
C) 20% 
D) 25% 
A) 30% 
B) 10% 
C) 20% 
D) 25%

Question 13

Which of the following will cause an increase in the debt-to-GDP ratio?

Accepted Answer

A) a reduction in the real interest rate 
B) a reduction in the ratio of the primary deficit to GDP 
C) a reduction in the growth rate of output 
D) all of the above 
A) a reduction in the real interest rate 
B) a reduction in the ratio of the primary deficit to GDP 
C) a reduction in the growth rate of output 
D) all of the above

Question 14

What are the primary causes of hyperinflations? Explain.

Accepted Answer

A hyperinflation simply means a very hig

Question 15

Explain fiscal dominance.

Accepted Answer

Most of the time,fiscal and monetary pol

Question 16

The difference between the official and correct measures of the deficit will be greater,

Accepted Answer

A) the lower is inflation. 
B) the lower is the level of debt, B. 
C) the higher is growth of output. 
D) all of the above 
E)  none of the above 
A) the lower is inflation. 
B) the lower is the level of debt, B. 
C) the higher is growth of output. 
D) all of the above 
E)  none of the above

Question 17

In the medium run,a tax increase that causes a reduction in the budget deficit will

Accepted Answer

A) affect only the price level. 
B) not affect the price level but will alter the composition of output. 
C) not affect the level of output, but will affect the composition of output. 
D) affect both the level and composition of output. 
A) affect only the price level. 
B) not affect the price level but will alter the composition of output. 
C) not affect the level of output, but will affect the composition of output. 
D) affect both the level and composition of output.

Question 18

A reduction in money growth,holding all other factors constant,will cause

Accepted Answer

A) a reduction in seignorage. 
B) an increase in seignorage. 
C) no change in seignorage. 
D) an ambiguous effect on seignorage. 
A) a reduction in seignorage. 
B) an increase in seignorage. 
C) no change in seignorage. 
D) an ambiguous effect on seignorage.

Question 19

The debt-to-GDP ratio will tend to decline over time when

Accepted Answer

A) r > g. B) r < g. C) the primary deficit increases. D) the initial level of debt increases. A) r > g. B) r < g. C) the primary deficit increases. D) the initial level of debt increases.

Question 20

First,explain what seignorage is.Second,write out and explain the expression that represents seignorage.And finally,what policies can a central bank implement to increase seignorage?

Accepted Answer

Seignorage is the revenue from money cre

Exam 22: Fiscal Policy: a Summing up

The primary deficit is

The official measure of the deficit is equal to

Suppose the central bank decreases the rate of growth of the money supply.What effect will this decrease in money growth have on seignorage in: (1)the short run; and (2)the medium run? Explain.

A major reason to be concerned about any U.S.budget deficit is that

The deficit at natural level of output is called

In 2010,the debt-to-GDP ratio for the United States was approximately equal to

In the medium run,an increase in government spending that causes an increase in the budget deficit

If the Ricardian equivalence proposition is correct,then an increase in the deficit will lead to

In virtually all hyperinflations,rapid money growth begins to occur because of

A higher deficit in the current year will lead to increased debt in the future only if

Very high debt burdens can result in

Hyperinflation refers to inflation in excess of ________ per month.

Which of the following will cause an increase in the debt-to-GDP ratio?

What are the primary causes of hyperinflations? Explain.

Explain fiscal dominance.

The difference between the official and correct measures of the deficit will be greater,

In the medium run,a tax increase that causes a reduction in the budget deficit will

A reduction in money growth,holding all other factors constant,will cause

The debt-to-GDP ratio will tend to decline over time when

First,explain what seignorage is.Second,write out and explain the expression that represents seignorage.And finally,what policies can a central bank implement to increase seignorage?

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

Financial Markets Ii: the Extended Is-Lm Model

The Labor Market

The Phillips Curve, the Natural Rate of Unemployment, and Inflation

From the Short to the Medium Run: the Is-Lm-Pc Model

The Facts of Growth

Saving, capital Accumulation, and Output

Technological Progress and Growth

Technological Progress: the Short, the Medium, and the Long Run

Financial Markets and Expectations

Expectations, consumption, and Investment

Expectations, output, and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output, the Interest Rate, and the Exchange Rate

Exchange Rate Regimes

Should Policy Makers Be Restrained

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

Appendix

Filters