A) It means that once people have formed expectations of low inflation based on a promise by the central bank, the central bank is tempted to raise inflation to lower unemployment.
B) It means that at some times central banks think it is more important to keep unemployment low; at other times, they think it is more important to keep inflation low.
C) It means that monetary policy is not consistent across time because it is influenced by politics.
D) It means that monetary policy cannot be consistent across time because the rate of inflation is fluctuating.
F) C) and D)
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A) They impose added taxes on those who save.
B) They are taxed twice.
C) They impose penalties for withdrawals except under certain circumstances.
D) They are taxed more than other forms of savings.
F) C) and D)
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A) They reduce private savings.
B) If deficits accumulate, people consume at the expense of their children.
C) They lead to high inflation.
D) They increase unemployment.
F) C) and D)
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A) by a tax cut when there is an expansion
B) by a decrease in the money supply when there is a recession
C) by an increase in government expenditures when there is a recession
D) by an increase in government spending when there is an expansion
F) A) and D)
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A) because economic forecasting is highly imprecise
B) because long lags may cause stabilization policies to have an opposite effect
C) because monetary policy affects aggregate demand by changing interest rates
D) because fiscal policy must go through a long political process
F) A) and D)
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A) For both fiscal and monetary policy, it is the time it takes to change policy.
B) For both fiscal and monetary policy, it is the time it takes for policy to affect aggregate demand.
C) For monetary policy it is the time it takes to change policy, while for fiscal policy the longest lag is the time it takes for policy to affect aggregate demand.
D) For fiscal policy it is the time it takes to change policy, while for monetary policy the longest lag is the time it takes for policy to affect aggregate demand.
F) None of the above
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A) It would most directly benefit the poor in the short run.
B) It would increase real wages over time.
C) It would decrease the capital stock over time.
D) It would decrease productivity over time.
F) None of the above
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A) that saving is not very responsive to changes in the tax rate
B) that saving is not an important determinant of a nation's ability to produce output
C) that reducing the budget deficit instead of changing the tax laws could raise saving
D) that changes in the tax laws to induce saving would distribute the tax burden less fairly
F) A) and D)
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A) the fact that about every four years some politician advocates greater government control of the Bank of Canada
B) the potential for a central bank to increase the money supply and so output to help the incumbent get re-elected
C) the part of the business cycle caused by the reluctance of politicians to smooth the business cycle
D) the changes in output created by the monetary rule the Bank of Canada must follow
F) C) and D)
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A) just under 18 billion units
B) just under 12 billion units
C) just under 9 billion units
D) just under 1 billion units
F) A) and D)
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A) the time inconsistency problem, but not political business cycles
B) the political business cycle, but not the time inconsistency problem
C) both the time inconsistency problem and political business cycles
D) neither the time inconsistency problem nor political business cycles
F) C) and D)
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A) to keep the natural rate of unemployment low
B) because the social costs of moderate inflation are high
C) because it is very difficult to maintain a zero rate of inflation in the long run
D) to avoid the presumably high costs of lowering inflation to zero
F) A) and B)
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B) False
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A) changes in aggregate demand only
B) changes in aggregate supply only
C) changes in aggregate demand and aggregate supply
D) changes in neither aggregate demand nor aggregate supply
F) B) and C)
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B) False
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A) increases in the budget deficit
B) decreased building of highways and bridges
C) more generous education subsidies
D) indexation of pensions to inflation
F) C) and D)
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A) They would argue that corporate tax rates should be increased.
B) They would argue in favour of eliminating or reducing the means tests for government benefits.
C) They would argue that provincial sales tax should be replaced with provincial income tax.
D) They would favour the idea of taxing more the rich and less the poor.
F) None of the above
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A) when the efforts are credible, so that the sacrifice ratio is low
B) when the efforts are credible, so that the sacrifice ratio is high
C) when the efforts are unexpected, so that the sacrifice ratio is high
D) when the efforts are unexpected, so that the sacrifice ratio is low
F) C) and D)
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