1.In the long-run framework, budget surpluses:

)should be run on a permanent basis since they boost saving and investment and stimulate economic growth.

B)should be run whenever output dips below potential output.

are better than budget deficits over the long run because unlike budget deficits, they increase saving and investment.

should never be run since they crowd out investment in the short run.

2.When the government runs a deficit, it will:

raise taxes immediately.

sell bonds to finance the deficit.

reduce the money supply to finance the deficit.

buy bonds to finance the deficit.

3.The real deficit is the nominal deficit adjusted for changes in:

A)output.

B)interest rates.

C)the general price level.

D)potential output.

4.If inflation is correctly anticipated, those who buy government bonds will:

A)suffer losses because they will be compensated by lower interest payments.

B)not suffer losses because they will be compensated by higher interest payments.

C)suffer losses regardless of inflation because interest paid on government bonds is set by Congress.

D)not suffer losses because inflation does not affect the purchasing power.

5.Government debt is defined as:

A)a shortfall of incoming revenue under outgoing payment.

B)accumulated deficits plus accumulated surpluses.

C)accumulated deficits minus accumulated surpluses.

D)a shortfall of outgoing payments under incoming revenue.

6.This is for the OECD article.

OECD

Governments stopped raising taxes in an effort to narrow budget deficits in 2015 and switched to targeted tax cuts designed to support economic growth, the Organization for Economic Cooperation and Development said Thursday.

The change in emphasis is another sign that governments in developed economies are moving away from the budget policies that characterized the years following the 2008 financial crisis, and were known by their many critics as "austerity" measures.

With economic growth yet to return to precrisis levels and central banksclose to exhausting their stimulus arsenals(Links to an external site.)

, governments have agreed to play a greater role in supporting growth, following years of spending cuts and tax rises designed to bring their surging debts under control.

While most attention has focused on raising government investment spending, the OECD said changes to the tax system to aid growth had already begun last year.

"While tax reforms were largely motivated by fiscal consolidation objectives following the crisis, encouraging growth seems to have been the main objective of tax reforms in 2015," said the Paris-based research body in the first of what is intended to be a series of annual reports on tax policy.

The OECD considers cuts in income and corporate taxes to be positive for growth, and has long argued for greater emphasis on taxing consumption and property. It noted that five governments had cut their corporate tax rates during the year, while four have announced reductions in coming years.

The OECD, which advises its 35 member governments on economic policy, said a post-crisis rise in the tax wedgethe difference between what businesses pay to employ a worker, and what that worker receives after income taxes and social security contributions from both employers and workerscame to an end in 2015.

"Many of the reforms legislated or announced in 2015 and coming into effect in 2016 point to a trend of declining tax burdens on labor income," it said.

A number of governments raised tax rates on dividends and other sources of income from capital, moves the OECD said may be a response to concerns about rising income inequality and the fact that income from capital is generally taxed less heavily than income from working.

But it noted there were few increases in taxes on property, and indeed some tax cuts.

"This seems to suggest the potential to raise revenues in an efficient way through property taxes, especially through recurrent taxes on residential property, is not being fully exploited," it said.

The most recent data on tax collections available to the OECD comes from 2014, and that showed the U.S. continues to be one of the least taxed of the developed economies. Taxes as a share of gross domestic product stood at 26% in that year, above South Korea, Chile and Mexico, but below the OECD average of 34.4% and far short of Denmark's ratio, which was the highest at 50.9%.

Per the article, what type of policy is being discussed to allow countries to have more growth?

A)Contractionary fiscal policy

B)Expansionary fiscal policy

C)Contractionary monetary policy

D)Expansionary monetary policy

7.This is for the OECD article. Per the article, what did countries do to limit their debt level from growing?

A)Decreased government spending and increased taxes

B)Increased government spending and increased taxes

C)Decreased government spending and decreased taxes

D)Increased government spending and decreased taxes

8.This is for the OECD article. The article talks about reducing __________. This falls under the Classical model for economic ___________________.

A)Taxes; growth

B)Taxes; stability

C)Interest rate; growth

D)Required reserves; growth

E)Interest rate; stability

F)Required reserves; stability

9.This is for the Fiscal Revolution article.

Fiscal Revolution

Donald Trump's U.S. election victory has shattered assumptions in global markets. The potential change from monetary to fiscal stimulus and from free trade to reversing globalization upends nearly every belief held by investors.

In reaction, investors are betting the result is a jump in inflation. The biggest change though may be a return of divergence in global economic growth and the policies that drive it.

Bond markets were already providing awindow into these shifts(Links to an external site.)

. But Mr. Trump's move to the White House make them impossible to ignore. Steeper yield curvesthe gap between U.S. two and 10-year yields has vaulted to its widest since Januaryand higher yields are likely here to stay.

For the first half of this year, global economic policywas surprisingly consistent(Links to an external site.)

. Interest rates in developed markets were stuck at or near zero because any time there was an expectation of tightening, currencies rose, pushing down inflation expectations. Fiscal policy was being talked about, but few believed much would really happen. In markets, global yields convergedparticularly on a currency-hedged basis, where U.S. 10-year yields adjusted for the cost of hedging into euros and yen fell to zero. That has reversed, notes J.P. Morgan Asset Management.

In the U.S., the shift reflects big expectations for potentially higher growth and higher inflation. That puts the expected U.S. policy mix at one end of the spectrum: looser fiscal policy and potentially tighter monetary policy if inflation picks up. In the U.K.,the shift is all about inflation(Links to an external site.)

for now thanks to the collapse in the pound as uncertainty persists about what Brexit will do to underlying growth. It isn't clear that the U.K. has the political or fiscal space to open the fiscal taps. That means U.K. monetary policy stays loose for now, but may not get looser.

In the eurozone, the rise in yields is mostly due to rising rates overseas, and threatens still fragile growth. A key worry is the widening in yield spreads against Germany for countries like Italy and Portugal. The need for fiscal policy to pick up the slack from increasingly ineffective monetary policy has been talked about forever, but the currency bloc's rules make a big switch hard to contemplate.

Japan, meanwhile, is at the other end of the spectrum. TheBank of Japan(Links to an external site.)

's shift to targeting the yield curve means the country could get loose monetary and fiscal policy in concert.

A good deal of policy uncertainty lies ahead: markets may be overreacting now. But that still argues for higher yields to reflect rising risks after a period where global central banks were all singing the same market-friendly melody and governments were more passive. It is time to throw out old assumptions.

Per the article, in the U.S. we are going to start seeing_________________ policy coordination with ______________________________.

A)More; monetary and fiscal policy

B)More; regulation and credit policy

C)Less; fiscal and financial regulation policy

D)Less; monetary and fiscal policy

10.This is for the Fiscal Revolution article. Per the article, if ___________________ is implemented in the U.S. we would then expect, through the change in the currency valuation, the inflation rate in the U.S. to (assuming other things are the same) _______________.

***Think about this: If interest rates increases in the U.S. then the US dollar will increase in value relative to other countries. When this occurs then the U.S. will import more or less from other countries? If this happens then how will that affect US demand for foreign goods/services. Consequently, then demand for U.S. goods/services from U.S. consumers will do what? Combine these two things and you'll see how this will affect the inflation rate in the U.S.***

A)Contractionary monetary policy; Increase

B)Contractionary monetary policy; Decrease

C)Expansionary monetary policy; Decrease

D)Expansionary monetary policy; Increase