Macro

A “pay-as-you-go” rule, which requires that any tax cut or increase in entitle- ment spending be offset by an increase in other taxes or reduction in other entitlement spending, is an example of which fiscal policy stance?

• Neutral

• Expansionary

• Contractionary

The most likely argument against high national debt levels is that:

• the debt is owed internally to fellow citizens.

• they may finance investment in physical and human capital

• they create disincentive for economic activity

Given an independent central bank, monetary policy actions are more likely

than fiscal policy actions to be:

• implementable quickly.

• effective when a specific group is targeted.

• effective when combating a deflationary economy.

• less effective when facing high inflation

The least likely explanation for why fiscal policy cannot stabilize aggregate demand completely is that:

• private sector behavior changes over time.

• policy changes are implemented very quickly.

• fiscal policy focuses more on inflation than on unemployment.

• fiscal policy need a huge budget leading to higher public debt.

Raising the reserve requirement is most likely an example of which type of monetary policy?

• Neutral

• Expansionary

• Contractionary

What of the following is most likely example(s) of a tool of fiscal policy?

• Public financing of a power plant

• Regulation of the payment system

• Central bank's purchase of government bond

• Personal & Corporate tax

• public investment

A central bank that decides the desired levels of interest rates and inflation and the horizon over which the inflation objective is to be achieved is most accurately described as being:

• target independent and operationally independent.

• target independent but not operationally independent.

• operationally independent but not target independent.

• not target independent and not operationally independent

Which is the most accurate statement regarding the demand for money?

• Precautionary money demand is directly related to GDP.

• Transactions money demand is inversely related to returns on bonds.

• Speculative demand is inversely related to the perceived risk of other assets.

• All are correct

Equality between aggregate expenditure and aggregate output implies that the government’s fiscal deficit must equal:

• Private saving – Investment + Net exports.

• Investment – Private saving + Net exports.

• Private saving – Investment – Net exports.

• Investment + Private saving – Net exports.

Which of the following statements is the most appropriate description of gross domestic product (GDP)?

• The total market value of resalable and final goods and services produced within the economy over a given time period.

• The total amount spent on all final goods and services produced within the economy over a given time period.

• The total income earned by all households, firms, and the government whose value can be verified.

• The total income earned by residents from oversea.