A. Which of the following is NOT an argument for a positive rate of inflation?
a. It permits real interest rates to be negative.
b. It increases the variability of relative prices.
c. It allows real wages to fall without cuts in nominal wages.
d. It would be costly to reduce inflation to zero.
B. Throughout U.S. history, what has been the most common cause of substantial increases in
government debt?
a. recessions
b. wars
c. financial crises
d. tax cuts
C. Throughout U.S. history, what has been the most common cause of substantial increases in
government debt?
a. recessions
b. wars
c. financial crises
d. tax cuts
D. Advocates of taxing consumption rather than income argue that
a. the current tax code discourages people from saving.
b. the rich consume a higher fraction of income than the poor.
c. a consumption tax is a better automatic stabilizer.
d. taxing consumption does not cause any deadweight losses.
