Question 1

Inflation-indexed government bonds have all of the following benefits except:

Accepted Answer

A)   eliminating inflation.
B)   reducing the government's incentive to produce surprise inflation.
C)   encouraging financial innovation.
D)   eliminating inflation risk.

Question 2

According to the traditional view of government debt,a tax cut without a cut in government spending:

Accepted Answer

A)   stimulates consumer spending and reduces national saving.
B)   stimulates consumer spending and reduces private saving.
C)   has no effect on consumer spending but reduces national saving.
D)   has no effect on consumer spending but reduces private saving.

Question 3

______ are considered part of the federal debt.

Accepted Answer

A)   Treasury bills
B)   Future CPP-QPP benefits
C)   Student loans,which may go into default
D)   Potential liabilities of credit unions

Question 4

Monetary policy is linked to fiscal policy when government spending is financed by:

Accepted Answer

A)   taxes.
B)   borrowing from banks.
C)   borrowing from foreigners.
D)   printing money.

Question 5

If the government levies a one-time temporary tax on the young and gives the proceeds to the elderly,and both generations follow the life-cycle consumption pattern and are altruistically linked:

Accepted Answer

A)   both the young and the old will consume more.
B)   there will be a net increase in overall consumption.
C)   there will be a net decrease in overall consumption.
D)   there will be no change in overall consumption.

Question 6

Proponents of Ricardian equivalence argue that if taxes are cut without cutting government spending and taxes are not expected to increase in the future until after an individual expects to be dead,then the individual will:

Accepted Answer

A)   spend all of the increase in income.
B)   spend some of the increase in income and save the rest.
C)   use the increase in income to buy government bonds to help finance the deficit.
D)   save all of the increase in income and leave it as a bequest to his or her children.

Question 7

Indexed bonds produce all of the benefits except:

Accepted Answer

A)   less inflation risk.
B)   more financial innovation.
C)   better government incentives.
D)   lower rates of inflation.

Question 8

Using fiscal policy,including automatic stabilizers,to stabilize output over a business cycle is not consistent with:

Accepted Answer

A)   rational expectations.
B)   inflation targeting.
C)   the natural-rate hypothesis.
D)   a strict balanced-budget rule.

Question 9

Proponents of Ricardian equivalence argue that the relevant decisionmaking unit is the:

Accepted Answer

A)   individual.
B)   household.
C)   infinitely lived family.
D)   community.

Question 10

Graphically illustrate the traditional view of the long-run impacts of a debt-financed tax cut on:
a.saving,investment,and real interest rate using the classical model (Chapter 3),and
b.steady-state capital per worker and output per worker using the Solow growth model.

Accepted Answer

Graph (A)shows that in the long run th...

Question 11

Assume that the nominal interest rate is 11 percent,the inflation rate is 8 percent,and government debt at the beginning of the year equals $4 trillion.By how much is the government budget deficit overstated as a result of inflation?

Accepted Answer

A)   $0.12 trillion
B)   $0.32 trillion
C)   $0.44 trillion
D)   $0.80 trillion

Exam 16: Government Debt and Budget Deficits

______ are considered part of the federal debt.

Correct Answer
verified

Proponents of Ricardian equivalence argue that the relevant decisionmaking unit is the:

Correct Answer
verified

According to the traditional view of government debt,a tax cut without a cut in government spending:

Correct Answer
verified

Proponents of Ricardian equivalence argue that if taxes are cut without cutting government spending and taxes are not expected to increase in the future until after an individual expects to be dead,then the individual will:

Correct Answer
verified

Using fiscal policy,including automatic stabilizers,to stabilize output over a business cycle is not consistent with:

Correct Answer
verified

Graphically illustrate the traditional view of the long-run impacts of a debt-financed tax cut on: a.saving,investment,and real interest rate using the classical model (Chapter 3),and b.steady-state capital per worker and output per worker using the Solow growth model.

Correct Answer
verified

Graph (A)shows that in the long run th...
View Answer

Inflation-indexed government bonds have all of the following benefits except:

Correct Answer
verified

If the government levies a one-time temporary tax on the young and gives the proceeds to the elderly,and both generations follow the life-cycle consumption pattern and are altruistically linked:

Correct Answer
verified

Indexed bonds produce all of the benefits except:

Correct Answer
verified

Monetary policy is linked to fiscal policy when government spending is financed by:

Correct Answer
verified

Assume that the nominal interest rate is 11 percent,the inflation rate is 8 percent,and government debt at the beginning of the year equals $4 trillion.By how much is the government budget deficit overstated as a result of inflation?

Correct Answer
verified

Exam 16: Government Debt and Budget Deficits

______ are considered part of the federal debt.

Correct AnswerverifiedShow Answer

Proponents of Ricardian equivalence argue that the relevant decisionmaking unit is the:

Correct AnswerverifiedShow Answer

According to the traditional view of government debt,a tax cut without a cut in government spending:

Correct AnswerverifiedShow Answer

Proponents of Ricardian equivalence argue that if taxes are cut without cutting government spending and taxes are not expected to increase in the future until after an individual expects to be dead,then the individual will:

Correct AnswerverifiedShow Answer

Using fiscal policy,including automatic stabilizers,to stabilize output over a business cycle is not consistent with:

Correct AnswerverifiedShow Answer

Graphically illustrate the traditional view of the long-run impacts of a debt-financed tax cut on: a.saving,investment,and real interest rate using the classical model (Chapter 3),and b.steady-state capital per worker and output per worker using the Solow growth model.

Correct Answerverified Graph (A)shows that in the long run th...View AnswerShow Answer

Inflation-indexed government bonds have all of the following benefits except:

Correct AnswerverifiedShow Answer

If the government levies a one-time temporary tax on the young and gives the proceeds to the elderly,and both generations follow the life-cycle consumption pattern and are altruistically linked:

Correct AnswerverifiedShow Answer

Indexed bonds produce all of the benefits except:

Correct AnswerverifiedShow Answer

Monetary policy is linked to fiscal policy when government spending is financed by:

Correct AnswerverifiedShow Answer

Assume that the nominal interest rate is 11 percent,the inflation rate is 8 percent,and government debt at the beginning of the year equals $4 trillion.By how much is the government budget deficit overstated as a result of inflation?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Graph (A)shows that in the long run th...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified