Macroeconomic Policy, Economic Stability, and the Federal Debt

Macroeconomic policy refers to the actions and decisions taken by governments and central banks to influence the overall performance of an economy. This can include monetary policy, such as setting interest rates, and fiscal policy, such as managing government spending and taxation. The goal of macroeconomic policy is to promote economic stability, which includes low inflation, low unemployment, and steady economic growth.

Economic stability is important because it creates an environment that is conducive to business and investment, and enables households and businesses to make economic decisions with more confidence.

Federal debt refers to the total amount of money that the government owes to its creditors, such as bondholders. The debt can be financed through the issuance of government bonds, which are bought by investors and traded in financial markets.

The relationship between macroeconomic policy, economic stability, and the federal debt is complex. In the short term, expansionary monetary and fiscal policy can be used to stimulate economic growth, but these policies can also lead to higher levels of inflation and an increase in the federal debt. In the long term, the government must balance the need to promote economic growth with the need to manage the federal debt. This can involve implementing policies to reduce the debt, such as cutting government spending and increasing taxes, but doing so can slow economic growth. Overall, balancing these competing goals is a key challenge for policymakers.

1.Computer forecasting models are most accurate at predicting the growth rate of real gross domestic product in an economy when:
2.Identify the correct statement about the adaptive-expectations and rational-expectations hypotheses.
3.Identify the correct statement with regard to the share of the national debt held by private investors.
4.Which of the following is true under the rational-expectations hypothesis?
5.Identify the correct statement about the U.S. economy during the 1970s.
6.Suppose the prices in an economy had increased at an annual rate of 5 percent during each of the past five years and people believe that there is a relationship between the growth rate of the money supply and rising prices. They note that the money supply has expanded at a rate of 10 percent annually in the last ten months, up from 5 percent during the prior five years. According to the rational-expectations hypothesis, the anticipated inflation rate in the economy will:
7.Which of the following is true of the government debt held by private investors?
8.The financing of the federal debt by borrowing from foreigners will lead to a(n):
9.Identify the correct statement about the adaptive-expectations hypothesis.
10.Measured as a share of GDP, the national debt of the United States:
11.According to the adaptive-expectations hypothesis, people will alter their expectations regarding the future rate of inflation if they observe:
12.If decision makers adjust fully to demand stimulus policies, persistent expansionary macro-policy will lead to
13.In order to make effective policy changes, policy makers need to know
14.According to the modern view of the Phillips curve, which of the following is likely to happen when the actual rate of inflation in an economy is greater than the anticipated rate?
15.In the 1960s, macroeconomists generally believed that:
16.Which of the following was a contributing factor underlying the adoption of expansionary macroeconomic policies in the United States during the 1970s?
17.The time period after the need for a policy change is recognized but before the policy is actually implemented is called the:
18.The time period between a change in economic conditions and the identification of that change by policy-makers is known as the:
19.Which of the following is true when federal expenditures exceed tax revenues?
20.In contrast with the Phillips curve view of the 1960s, the modern view indicates that if policy-makers want to keep the unemployment rate in an economy low, they should follow:
21.Which of the following is true according to the adaptive-expectations hypothesis?
22.Which of the following is true of the Phillips curve?
23.Which of the following is true of the Treasury bonds purchased and held by the Fed?
24.Under the adaptive-expectations hypothesis, a shift to a more expansionary monetary policy will likely cause the real gross domestic product of the economy to:
25.As measured by the amount of time spent in recession, the 1983-2019 period was
26.Identify the correct statement about the U.S. economy.
27.Which of the following is true with regard to the various time lags accompanying changes in macroeconomic policy?
28.Which of the following would make it more difficult for the United States to deal with its current high national debt to GDP ratio?
29.The Fed would be most likely to adopt a restrictive policy if there is a(n):
30.Which of the following is true according to the modern view of the Phillips curve?
31.The Phillips curve shows the relationship between:
32.Activists are economists who believe that:
33.The rational-expectations hypothesis implies that:
34.During the period 1950–1970, the national debt held by the U.S. government as a share of the gross domestic product of the economy fell because:
35.Which of the following correctly describes the difference between the adaptive-expectations and rational-expectations hypotheses?
36.Identify the correct statement about the Phillips curve within the expectations framework.
37.According to the proponents of the adaptive-expectations hypothesis, expansionary macroeconomic policy is likely to result in a:
38.Since 1950, fluctuations in real GDP in the United States have been:
39.The time period between the implementation of a macroeconomic policy change and when the policy change exerts its primary impact on an economy is called the:
40.Reducing the economic fluctuations in business cycles can be accomplished by policies designed to:
41.If a country with a large government debt uses money creation to service and repay the debt, this will lead to
42.Which of the following is a similarity between the adaptive-expectations and rational-expectations hypotheses?
43.The index of leading indicators is:
44.According to the proponents of the rational-expectations hypothesis, when decision-makers anticipate fully and adjust rapidly to changes in the demand–stimulus policies in an economy, there will be a(n):
45.According to the rational-expectations hypothesis, any errors in predicting inflation will:
46.Which of the following is most likely to occur when the inflation rate has been low and steady in recent years?
47.After an extended period of low and steady inflation,
48.Which of the following is most likely to be true when a large share of the federal debt is financed by borrowing from foreigners?
49.Under adaptive expectations, an unanticipated shift to a more expansionary macroeconomic policy will result in a(n):
50.Nonactivists are economists who argue that:

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