Which of the following would not act as an automatic stabilizer?
a. Government purchases
b. Unemployment insurance
c. Corporate income taxes
d. Personal income taxes
Answer: A
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Government Deficits and Debt
- Whether real seignorage revenue increases when the rate of money growth increases depends on whether
- Consider an economy that has the following monetary data.
- Consider an economy that has the following monetary data.
- Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. What is the maximum amount of seignorage revenue?
- Real money demand in the economy is given by L = 0.5Y - 2500i, where Y is real income and i is the nominal interest rate. In equilibrium, real money demand L equals real money supply M/P. Suppose that Y equals 1000 and the real interest rate is 0.02. At what rate of inflation is seignorage maximized?
- Assume that in an all-currency economy the real interest rate is 4%, the expected rate of inflation is 8%, and the nominal interest rate is 12%. The real monetary base equals $50 billion. The real seignorage revenue collected by the government would equal
- The real seigniorage collected by the government in an all-currency economy is the product of
- In an all-currency economy in which real output and the real interest rate are fixed and the rates of money growth and inflation are constant, the inflation rate equals
- State governments in the United States can raise revenue by all the following means except
- In which case would you be most likely to expect inflation to occur?
- The relationship between the government deficit and the change in the monetary base is
- Seigniorage is the revenue a government raises by
- Deficits are a burden on future generations if they
- According to the Ricardian equivalence proposition, current deficits
- A decreased government deficit created by a lump-sum tax increase will increase national saving if
- If the deficit is 0.02 times GDP, the existing debt/GDP ratio is 0.5, and the growth rate of nominal GDP is 0.03, then the change in the debt-GDP ratio is
- Increases in the debt-GDP ratio are primarily caused by
- The total value of government bonds outstanding at any particular time is called the
- The average cost of the distortion created by taxes
- Assume that the lost output due to tax distortions is proportional to the square of the tax rate. If the average cost of the distortion created by taxes is currently $1000, and the tax rate is increased from 40% to 50%, the average cost of the distortion created by taxes will increase to
- Taxes distort economic behavior because they
- Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people working per day N is
- Suppose that all workers place a value on their leisure of 40 goods per day. The production function relating output per day Y to the number of people working per day N is
- A decrease in the average tax rate, with the marginal tax rate held constant, will
- An increase in the marginal tax rate, with the average tax rate held constant, will
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