5. True or False: The national debt is unlikely to be fully paid off at some...

5. True or False: The national debt is unlikely to be fully paid off at some time in the future because budget deficits and borrowing allow politicians to supply voters with immediate benefits without imposing higher taxes.

6. Does it make any difference whether the federal debt is financed by domestic citizens or foreigners?

A. No, because interest payments on both foreign and domestic borrowing will be received by foreigners.

B. Yes, because interest payments on foreign borrowing will be received by foreigners, whereas interest payment on domestic borrowing will be received by U.S. residents.

C. No, because interest payments on both foreign and domestic borrowing will be received by U.S. residents.

D. Yes, because foreign borrowing will influence future generations primarily through its impact on capital formation, whereas domestic borrowing will not.

7. Which of the following best explains why prior to the mid-1970s, many economists thought that inflation would lead to a lower rate of unemployment? Check all that apply.

A. Data indicated a direct relationship between the rate of inflation and the rate of unemployment.

B. Most macroeconomists acknowledged the potential impact of expectations.

C. Data indicated an inverse relationship between the rate of inflation and the rate of unemployment.

D. Most macroeconomists ignored the potential impact of expectations

8. Can expansionary monetary policy stimulate a higher growth rate of real output in the long run?

A. No, people adjust their inflationary expectations to actual inflation, so that sustained expansionary policies will lead to inflation without permanently increasing output and employment.

B. Yes, people never fully adjust their inflationary expectations to actual inflation, so that sustained expansionary policies will increase inflation and increase output and employment.

Expert Solution

Rahul Sunny answered 1 year ago

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