Question

exam3 #12

CBO expects higher​ long-term deficits

The Congressional Budget Office​ (CBO) says the national debt is on an upward path and will hit 122 percent of GDP in 2040. Healthcare programs and Social Security benefits are the large drivers of spending over the coming decades.

​Source:

The

Wall Street

Journal​,

July​ 12, 2016

If the government decided to slow the growth of debt by cutting transfer payments and raising taxes by the same​ amount, how would this fiscal policy influence the budget deficit and real​ GDP?

Cutting transfer payments and raising taxes by the same amount​ _______.

A.

decreases the budget​ deficit, decreases aggregate​ demand, and decreases real GDP

B.

does not change the budget deficit

C.

increases the budget​ deficit, increases aggregate​ demand, and increases real GDP

D.

decreases the budget​ deficit, decreases aggregate​ demand, and has no influence on real GDP

The​ supply-side effect of an increase in taxes​ _______ employment and​ _______ real GDP.

A.

does not​ change; does not change

B.

​decreases; increases

C.

​increases; increases

D.

​decreases; decreases

#15

In order to raise the federal funds​ rate, the Fed​ ________ government securities in open market​ operations, so that​ banks' reserves​ ________ and the quantity of money​ ________.

A.

​sells; increase; decreases

B.

​sells; decrease; decreases

C.

​buys; decrease; increases

D.

​buys; increase; increases

E.

​buys; increase; decreases

#17

Induced taxes are taxes that vary with​ _____.

A.

real GDP

B.

interest rate

C.

revenue

D.

profits

quiz33 #4

Premature to rule out an interest rate increase this year

Federal Reserve Bank of New York President William Dudley says that in the current state of the​ economy, it would be worse for the Fed to raise rates too soon than moving slightly too late and adjusting by raising rates more quickly.

​Source:

Wall

Street

Journal​,

August​ 1, 2016

What are some of the problems that could arise if the Fed raises interest rates too soon or too​ late?

If the Fed raises interest rates too​ soon, _______.

A.

the recovery will be too strong and the inflation rate will be too high

B.

the recovery will be too weak and the unemployment rate will be too high for too long

C.

it will avoid the​ short-run tradeoff between unemployment and inflation

D.

potential GDP growth will slow

If the Fed raises interest rates too​ late, _______.

A.

the natural unemployment rate will rise

B.

the recovery will be too strong and the inflation rate will be too high

C.

it will face a​ long-run tradeoff between unemployment and inflation

D.

the recovery will be too weak and the unemployment rate will be too high for too long

Answer 1