Question 1

What is the Ricardian equivalence theorem?

Accepted Answer

The theoretical finding that, for given ...

Question 2

The governments sources of funds include:

Accepted Answer

A)  transfer payments.
B)  printing money.
C)  paying interest on the government debt.
D)  all of the above.E) A) and D)
F) None of the above

Question 3

Why might a budget deficit make households feel wealthier after a tax cut?

Accepted Answer

One reason households might feel wealthi...

Question 4

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Accepted Answer

A)  real GDP does not change.
B)  real consumption increases.
C)  real gross investment falls.
D)  all of the above.E) B) and C)
F) None of the above

Question 5

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A)  reduces current national savings.
B)  raises investment.
C)  raises the future capital stock.
D)  all of the above.E) A) and D)
F) All of the above

Question 6

If government budget is in deficit, then real government saving is in surplus.

Accepted Answer

A) True 
 B)False  True

Question 7

The standard view of the budget deficit is that a deficit:

Accepted Answer

A)  does not affect the economy in the long run.
B)  and the public debt are a burden on the economy.
C)  does not affect the economy in the short run.
D)  encourages economic growth.E) B) and C)
F) A) and B)

Question 8

The governments uses of funds include:

Accepted Answer

A)  printing money.
B)  transfer payments.
C)  taxes.
D)  all of the above.E) None of the above
F) B) and C)

Question 9

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A)  increases consumption.
B)  reduces the capital stock in the long run.
C)  reduces national saving.
D)  all of the above.E) B) and C)
F) A) and B)

Question 10

The standard view of the budget deficit is that it:

Accepted Answer

A)  increases the GDP in the long run.
B)  increases investment.
C)  reduces the capital stock in the long run.
D)  all of the above.E) B) and C)
F) A) and D)

Question 11

If the government reduces taxes by €1 this year without raising taxes or printing more money, then

Accepted Answer

A)  future tax liabilities will rise by €1 plus the interest, R, that must be paid on the borrowing.
B)  future tax liabilities will rise by €1 less the interest, R, that must be paid on the borrowing.
C)  future tax liabilities will fall by €1 plus the interest, R, that must be paid on the borrowing.
D)  future tax liabilities will fall by €1 less the interest, R, that must be paid on the borrowing.E) A) and B)
F) A) and C)

Question 12

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A)  raises investment.
B)  reduces GDP in the long run.
C)  raises private saving.
D)  all of the above.E) A) and B)
F) A) and C)

Question 13

What are public, private and national saving and what is the implication of real national saving?

Accepted Answer

Real government saving is the negative of the government deficit: -(B^g_t - B^g_t_-1)/P. Real private or total household saving is: K_t - K_t-1 + (B^g_t - B^g_t-1)/P_t. Real national saving is the total of real government saving and real private savings which is: K_t - K_t-1. The implication of this is that real national saving equals real net investment.

Question 14

A budget deficit caused by changing labour income taxes changes the labour and production.

Accepted Answer

A) True 
 B)False  True

Question 15

When a country has a deficit, its debt is growing.

Accepted Answer

A) True 
 B)False

Question 16

What are the effects of the government lowering taxes by €1 for one period in the market clearing model with no transfer payments, the money stock fixed, no inflation and with a given time path of government purchases?

Accepted Answer

Households now hold the €1 government bo...

Question 17

If households ignore effects on future generations, a pay as you go social security system:

Accepted Answer

A)  decreases consumption.
B)  reduces the capital stock in the long run.
C)  raises national saving.
D)  all of the above.E) C) and D)
F) B) and C)

Question 18

Ricardian equivalence implies that a government budget deficit:

Accepted Answer

A)  increases current consumption.
B)  increases future tax liabilities.
C)  reduces national saving.
D)  all of the above.E) B) and D)
F) A) and B)

Question 19

Households may feel wealthier due to a tax cut, if:

Accepted Answer

A)  they are not able to borrow as much against future earnings as they wish.
B)  they are not able to lend present earnings as much as they wish.
C)  they care a lot about future generations.
D)  they plan to leave a bequest to their heirs.E) A) and D)
F) B) and D)

Question 20

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Accepted Answer

A)  real GDP does rise.
B)  real consumption does not change.
C)  real gross investment rises.
D)  all of the above.E) A) and B)
F) A) and C)

Exam 15: Public Debt

What is the Ricardian equivalence theorem?

Correct Answer
verified
The theoretical finding that, for given ...
View Answer

The governments sources of funds include:

Correct Answer
verified

Why might a budget deficit make households feel wealthier after a tax cut?

Correct Answer
verified
One reason households might feel wealthi...
View Answer

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Correct Answer
verified

If households ignore effects on future generations, a pay as you go social security system:

Correct Answer
verified

If government budget is in deficit, then real government saving is in surplus.

Correct Answer
verified
True

The standard view of the budget deficit is that a deficit:

Correct Answer
verified

The governments uses of funds include:

Correct Answer
verified

If households ignore effects on future generations, a pay as you go social security system:

Correct Answer
verified

The standard view of the budget deficit is that it:

Correct Answer
verified

If the government reduces taxes by €1 this year without raising taxes or printing more money, then

Correct Answer
verified

If households ignore effects on future generations, a pay as you go social security system:

Correct Answer
verified

What are public, private and national saving and what is the implication of real national saving?

A budget deficit caused by changing labour income taxes changes the labour and production.

Correct Answer
verified
True

When a country has a deficit, its debt is growing.

Correct Answer
verified

What are the effects of the government lowering taxes by €1 for one period in the market clearing model with no transfer payments, the money stock fixed, no inflation and with a given time path of government purchases?

Correct Answer
verified
Households now hold the €1 government bo...
View Answer

If households ignore effects on future generations, a pay as you go social security system:

Correct Answer
verified

Ricardian equivalence implies that a government budget deficit:

Correct Answer
verified

Households may feel wealthier due to a tax cut, if:

Correct Answer
verified

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Correct Answer
verified

Exam 15: Public Debt

What is the Ricardian equivalence theorem?

Correct AnswerverifiedThe theoretical finding that, for given ...View AnswerShow Answer

The governments sources of funds include:

Correct AnswerverifiedShow Answer

Why might a budget deficit make households feel wealthier after a tax cut?

Correct AnswerverifiedOne reason households might feel wealthi...View AnswerShow Answer

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Correct AnswerverifiedShow Answer

If households ignore effects on future generations, a pay as you go social security system:

Correct AnswerverifiedShow Answer

If government budget is in deficit, then real government saving is in surplus.

Correct AnswerverifiedTrue

The standard view of the budget deficit is that a deficit:

Correct AnswerverifiedShow Answer

The governments uses of funds include:

Correct AnswerverifiedShow Answer

If households ignore effects on future generations, a pay as you go social security system:

Correct AnswerverifiedShow Answer

The standard view of the budget deficit is that it:

Correct AnswerverifiedShow Answer

If the government reduces taxes by €1 this year without raising taxes or printing more money, then

Correct AnswerverifiedShow Answer

If households ignore effects on future generations, a pay as you go social security system:

Correct AnswerverifiedShow Answer

What are public, private and national saving and what is the implication of real national saving?

A budget deficit caused by changing labour income taxes changes the labour and production.

Correct AnswerverifiedTrue

When a country has a deficit, its debt is growing.

Correct AnswerverifiedShow Answer

What are the effects of the government lowering taxes by €1 for one period in the market clearing model with no transfer payments, the money stock fixed, no inflation and with a given time path of government purchases?

Correct AnswerverifiedHouseholds now hold the €1 government bo...View AnswerShow Answer

If households ignore effects on future generations, a pay as you go social security system:

Correct AnswerverifiedShow Answer

Ricardian equivalence implies that a government budget deficit:

Correct AnswerverifiedShow Answer

Households may feel wealthier due to a tax cut, if:

Correct AnswerverifiedShow Answer

If the time path of government purchases does not change and the government cuts lump sum taxes, then:

Correct AnswerverifiedShow Answer

Correct Answer
verified
The theoretical finding that, for given ...
View Answer

Correct Answer
verified

Correct Answer
verified
One reason households might feel wealthi...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified
Households now hold the €1 government bo...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified