Question 1

The debt-to-GDP ratio is higher,

Accepted Answer

A) the lower the real interest rate. 
B) the lower is the ratio of the primary deficit to GDP. 
C) the higher is the growth rate of output. 
D) all of the above 
E) none of the above 
A) the lower the real interest rate. 
B) the lower is the ratio of the primary deficit to GDP. 
C) the higher is the growth rate of output. 
D) all of the above 
E) none of the above

Question 2

The official measure of the deficit becomes more inaccurate as

Accepted Answer

A) the inflation rate rises. 
B) the total debt falls. 
C) taxes rise. 
D) all of the above 
E) none of the above 
A) the inflation rate rises. 
B) the total debt falls. 
C) taxes rise. 
D) all of the above 
E) none of the above

Question 3

First,define and explain the cyclically adjusted deficit.Second,explain what effect a recession caused,for example,by a reduction in consumer confidence will have on the size of the cyclically adjusted deficit.

Accepted Answer

The cyclically adjusted deficit is the d

Question 4

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 5

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 6

An increase 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 7

Explain what is meant by automatic stabilizers and how they work to minimize fluctuations in economic activity.

Accepted Answer

Automatic stabilizers refer to the effec

Question 8

The "official measure" of the deficit (the one reported by the government)

Accepted Answer

A) tells us the change in government nominal debt. 
B) is equal to nominal interest payments on the debt plus the primary deficit. 
C) overestimates the real budget deficit whenever the inflation rate is positive. 
D) all of the above 
E) none of the above 
A) tells us the change in government nominal debt. 
B) is equal to nominal interest payments on the debt plus the primary deficit. 
C) overestimates the real budget deficit whenever the inflation rate is positive. 
D) all of the above 
E) none of the above

Question 9

For this question,assume that Ricardian Equivalence proposition does NOT hold.Briefly discuss the short-run,medium-run and long-run effects of a fiscal expansion (e.g.tax cut).

Accepted Answer

Answers could be quite long.In the short

Question 10

The correct measure of the deficit is also called

Accepted Answer

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

Question 11

The debt-ratio is the ratio of the debt to

Accepted Answer

A) government spending. 
B) saving. 
C) taxes. 
D) personal disposable income. 
E) GDP. 
A) government spending. 
B) saving. 
C) taxes. 
D) personal disposable income. 
E) GDP.

Question 12

Suppose the central bank increases the rate of growth of the money supply.What effect will this increase 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

The government budget constraint tells us that the budget deficit is equal to

Accepted Answer

A) interest on the debt. 
B) the primary deficit. 
C) the primary deficit plus interest on the debt. 
D) imports minus exports. 
E) the primary deficit plus the trade deficit plus interest on the debt. 
A) interest on the debt. 
B) the primary deficit. 
C) the primary deficit plus interest on the debt. 
D) imports minus exports. 
E) the primary deficit plus the trade deficit plus interest on the debt.

Question 14

If the government runs a primary deficit in year zero of B0,and decides to repay it in year t (i.e.,bring the debt back down to its pre-existing level),then in year t it must run a primary surplus equal to

Accepted Answer

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

Question 15

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 16

Explain "haircuts" when a government defaults its debt.

Accepted Answer

Default is often partial and c

Question 17

Explain seignorage.

Accepted Answer

The real revenue from money cr

Question 18

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

Exam 23: Fiscal Policy: a Summing up

The debt-to-GDP ratio is higher,

The official measure of the deficit becomes more inaccurate as

First,define and explain the cyclically adjusted deficit.Second,explain what effect a recession caused,for example,by a reduction in consumer confidence will have on the size of the cyclically adjusted deficit.

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

The official measure of the deficit is equal to

An increase in money growth,holding all other factors constant,will cause

Explain what is meant by automatic stabilizers and how they work to minimize fluctuations in economic activity.

The "official measure" of the deficit (the one reported by the government)

For this question,assume that Ricardian Equivalence proposition does NOT hold.Briefly discuss the short-run,medium-run and long-run effects of a fiscal expansion (e.g.tax cut).

The correct measure of the deficit is also called

The debt-ratio is the ratio of the debt to

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

The government budget constraint tells us that the budget deficit is equal to

If the government runs a primary deficit in year zero of B0,and decides to repay it in year t (i.e.,bring the debt back down to its pre-existing level),then in year t it must run a primary surplus equal to

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

Explain "haircuts" when a government defaults its debt.

Explain seignorage.

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

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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