Question 1

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. C

Question 2

If the government runs a primary deficit in year zero of B0,and,in year 1,decides to stabilize the debt (i.e.,prevent the deficit from rising any further),then in year 1 and beyond,it must run a primary surplus equal to

Accepted Answer

A) zero. 
B) B0. 
C)  (1+r)B0. 
D) r. 
E) none of the above 
A) zero. 
B) B0. 
C)  (1+r)B0. 
D) r. 
E) none of the above D

Question 3

Seignorage is defined as which of the following?

Accepted Answer

A) the part of a budget deficit financed by the issuance of bonds sold to the private sector 
B) revenue from money creation 
C) the increase in income tax revenues that occurs during a hyperinflation 
D) the increase in income tax revenues that occurs as a result nominal income tax brackets not being adjusted to changes in 
E) the part of a budget deficit financed with foreign lending 
A) the part of a budget deficit financed by the issuance of bonds sold to the private sector 
B) revenue from money creation 
C) the increase in income tax revenues that occurs during a hyperinflation 
D) the increase in income tax revenues that occurs as a result nominal income tax brackets not being adjusted to changes in 
E) the part of a budget deficit financed with foreign lending B

Question 4

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

Question 5

The primary deficit is represented by which of the following?

Accepted Answer

A) G - T 
B) iB - G + T 
C) iB + G - T 
D) rB - G + T 
E) rB + G - T 
A) G - T 
B) iB - G + T 
C) iB + G - T 
D) rB - G + T 
E) rB + G - T

Question 6

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

Accepted Answer

A) the higher is government spending. 
B) the higher is the level of debt,B. 
C) the smaller is inflation. 
D) none of the above 
A) the higher is government spending. 
B) the higher is the level of debt,B. 
C) the smaller is inflation. 
D) none of the above

Question 7

Explain the economic costs of hyperinflation.

Accepted Answer

The transaction system works l

Question 8

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 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

Using taxes to finance a war,rather than deficits,

Accepted Answer

A) leads to a greater future capital stock. 
B) is generally not proposed by economists. 
C) shares less of the burden of the war with future generations. 
D) all of the above 
E) none of the above 
A) leads to a greater future capital stock. 
B) is generally not proposed by economists. 
C) shares less of the burden of the war with future generations. 
D) all of the above 
E) none of the above

Question 11

If the government thinks the natural unemployment rate is 5%,when it is really 6%,then the government will

Accepted Answer

A) overestimate the actual deficit. 
B) underestimate the actual deficit. 
C) overestimate the cyclically adjusted deficit. 
D) underestimate the cyclically adjusted deficit. 
E) none of the above 
A) overestimate the actual deficit. 
B) underestimate the actual deficit. 
C) overestimate the cyclically adjusted deficit. 
D) underestimate the cyclically adjusted deficit. 
E) none of the above

Question 12

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 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

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 15

To reduce distortions in the economy,it is probably better to finance temporary large government spending with

Accepted Answer

A) deficits. 
B) taxes. 
C) exports. 
D) all of the above 
E) none of the above 
A) deficits. 
B) taxes. 
C) exports. 
D) all of the above 
E) none of the above

Question 16

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 17

Which of the following would increase the cyclically adjusted deficit?

Accepted Answer

A) an increase in income. 
B) a decrease in income. 
C) an increase in the primary deficit. 
D) a decrease in the primary deficit. 
E) none of the above 
A) an increase in income. 
B) a decrease in income. 
C) an increase in the primary deficit. 
D) a decrease in the primary deficit. 
E) none of the above

Question 18

The large increases in the deficit during the 1980s in the United States were associated with

Accepted Answer

A) large increases in public saving. 
B) no change in public saving. 
C) large increases in private saving. 
D) all of the above 
E) none of the above 
A) large increases in public saving. 
B) no change in public saving. 
C) large increases in private saving. 
D) all of the above 
E) none of the above

Question 19

Explain what can occur to cause an increase in the debt ratio.

Accepted Answer

The debt ratio is simply the ratio of th

Question 20

Hyperinflation typically leads to

Accepted Answer

A) a reduction in barter. 
B) a reduction in real money balances. 
C) a preference for domestic over foreign currency. 
D) an increase in real tax revenues collected by the government. 
E) all of the above 
A) a reduction in barter. 
B) a reduction in real money balances. 
C) a preference for domestic over foreign currency. 
D) an increase in real tax revenues collected by the government. 
E) all of the above

Exam 23: Fiscal Policy: a Summing up

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

If the government runs a primary deficit in year zero of B0,and,in year 1,decides to stabilize the debt (i.e.,prevent the deficit from rising any further),then in year 1 and beyond,it must run a primary surplus equal to

Seignorage is defined as which of the following?

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?

The primary deficit is represented by which of the following?

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

Explain the economic costs of hyperinflation.

The primary deficit is

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

Using taxes to finance a war,rather than deficits,

If the government thinks the natural unemployment rate is 5%,when it is really 6%,then the government will

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.

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

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

To reduce distortions in the economy,it is probably better to finance temporary large government spending with

Very high debt burdens can result in

Which of the following would increase the cyclically adjusted deficit?

The large increases in the deficit during the 1980s in the United States were associated with

Explain what can occur to cause an increase in the debt ratio.

Hyperinflation typically leads to

A Tour of the World

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

The Labor Market

Putting All Markets Togetherthe As-Ad Model

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

The Crisis

The Facts of Growth

Saving,capital Accumulation,and Output

Technological Progress and Growth

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

Expectations: the Basic Tools

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

an Introduction to National Income and Product Accounts

an Introduction to Econometrics

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