Hyperinflations typically occur when governments:
A) attempt to keep the unemployment rate below the natural rate
B) finance spending with the inflation tax
C) set inflation targets too high
D) use discretionary monetary policy to stabilize out put
B) finance spending with the inflation tax
A deficit adjusted for inflation should include only government spending to pay _____ interest payments.
A) real
B) nominal
C) foreign
D) domestic
A) real
Monetary policy is linked to fiscal policy when government spending is financed by:
A) taxes
B) borrowing for banks.
C) borrowing from foreigners
D) printing money
D) printing money
Suppose a household considers only current income in making consumption decisions. This is an example
A) Ricardian equivalence
B) the permanent income hypothesis
C) myopia
D) the life-cycle model
C) myopia
A strict balanced-budget rule would:
A) permit the use of fiscal policy for stabilization
B) allow the use of tax smoothing to reduce tax distortions
C) redistribute tax burdens across generations
D) restrain political incompetence and opportunism
D) restrain political incompetence and opporunism
Inflation indexed government bonds have all of the following benefits except:
A) eliminating inflation
B) reducing the government's incentive to produce surprise inflation
C) encouraging financial innovation
D) eliminating inflation risk
A) eliminating inflation
One item that is considered part of the federal debt is :
A) Treasury bills
B) future Social Security benefits
C) student loans which may go into default
D) potential liabilities of saving and loan associations
A) Treasury bills
Given a reduction in income tax withheld, but no change in income tax owed, households that act according to Ricardian equivalence would ______ the extra take-home pay, while those facing binding borrowing constraints would_____ the extra take_home pay
save; spend
The international impacts of a debt-financed tax cut, according to the traditional view, are an ______ in net experts and a domestic currency _____.
A) increase; appreciation
B) increase; depreciation
C) decrease; depreciation
D) decrease; appreciation
decrease; appreciation
Historically, the primary cause of increases in government debt is:
A) printing too much money
B) cutting taxes
C) increasing interest rates
D) financing wars
financing wars
If capital budgeting procedures were employed, then a budget deficit would be measured as;
A) the sum of government debt
B) the change in government debt
C) the change in government debt minus the change in government capital assets
D) the change in gover
the change in government debt minus the change in government capital assets
The debt of the U.S. government in under reported in the view of many economists because all of the following liabilities are excluded except:
A) future pensions of government employees
B) debt owed to foreigners
C) future Social Security
D) government gu
debt owed to foreigners
Indexed bonds produce all of the following benefits except:
A) less inflation risk
B) more financial innovation
C) better government incentives
D) lower rates of inflation
D) lower rates of inflation
The experience of the 1980s
A) clearly contradicted the Ricardian equivalence view because national saving was very low.
B) clearly supported the Ricardian equivalence view, for people saved little only because they were optimistic, as confirmed by the st
D) may be used to argue both in favor of and against the Ricardian equivalence view of the tax cuts.
Under capital budgeting, all of the following transactions would affect the federal budget deficit except the federal government's
A) sending a check to a welfare recipient
B) sending a check to the state of Masschusetts.
C) selling a highway to the state
C) selling a highway to the state of New York and using the proceeds to retire federal debt