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Social Security is a "pay-as-you-go" plans. This means that

most of the current revenues from the Social Security tax are paid to current Social Security retirees.

As a percentage of GDP, the total U.S. public debt is the highest such debt among the world's advanced nations

False

The Federal Reserve and federal government agencies hold more than three-fourths of the public debt

False

As a percentage of GDP, the total U.S. public debt held by the public was larger in 2010 than it was in 1990.

True

Deficits increased substantially in 2008 because of

fiscal stimulus after the financial collapse

Refinancing of the public debt might drive up real interest rates because

government borrowing to finance the debt increases demand for funds and competes with private borrowing.

Why is the debt as a percentage of GDP more relevant than the total debt?

Debt as a percentage of GDP measures the economy's ability to manage debt correct.

An internally held public debt is like a debt of the left hand owed to the right hand.

True

For a person who thinks the public sector is too large, the fiscal options for ending recession would include

a cut in taxes.

The long-run fiscal imbalance in the Social Security retirement system is the result of

an aging population and declining worker-beneficiary ratio.

For a person who wants to preserve the size of government, the fiscal options for ending a recession include

an increase in government spending.

Expectations of a near-term policy reversal weaken fiscal policy because

consumers may hesitate to increase their spending because they believe that tax rates will rise again.

The problem of time lags in enacting and applying fiscal policy is that

in the time it takes to identify the situation, enact a policy, and allow it to work, economic circumstances may have changed.

The Social Security trust fund

includes assets held by these programs to help pay for future projected tax revenue shortfalls.

The government's fiscal policy options for moving the economy out of a recession include

increasing government spending, decreasing taxes, or both.

Total U.S. debt is the total amount of money debt held by the public is

owed by the federal government to all security holders a portion of U.S. debt.

A political business cycle happens because

politicians are more interested in reelection than in stabilizing the economy.

The crowding-out effect is the

reduction in investment spending caused by the increase in interest rates, arising from an increase in government spending.

In requesting a tax cut in the early 1960s, President Kennedy said, "It is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise tax revenues in the long run is to cut tax rates now." This statement recognizes that

tax cuts increase production, GDP, and tax revenues.

Built-in, or automatic, stabilizers work by changing

tax revenue and government payouts correct so that GDP changes are reduced.

If the annual interest payments on the debt sharply increased as a percentage of the GDP,

the government would have to use more tax revenues for interest or go deeper into debt.

Budget deficits in 2002 were due to

the recession and tax cuts