Chapter 17
If the debt of the U.S. federal government in 2016 was divided equally among the people in the United States, then the debt per person would equal approximately:
$44,000.
To force politicians to judge whether government spending is worth the costs, some economists have argued for:
a balanced-budget rule for fiscal policy.
Assume that a government has a balanced budget when the economy is at full employment. If the economy then enters a recession, with no change in tax or spending laws, then the budget of the government is most likely to:
be in deficit.
The cyclically adjusted budget deficit:
estimates what the deficit would be if the economy were operating at the natural rate of output.
Each of the following changes would allow the measured budget deficit to provide a truer picture of fiscal policy except:
excluding some liabilities altogether.
Government tax policy can affect aggregate supply as well as aggregate demand because changes in taxes change the:
incentives to work and invest.
A debt-financed tax cut will ______ current consumption in the traditional view and ______ current consumption in the view of Ricardian equivalence.
increase; not change
When the federal government incurs additional debt to acquire an asset, under current budgeting procedures the deficit ______, while under capital budgeting procedures the deficit ______.
increases; does not change
According to the traditional view of government debt, if taxes are cut without cutting government spending, then the international effect initially will be a capital ______ and a trade ______.
inflow; deficit
Monetary policy is linked to fiscal policy when government spending is financed by:
printing money.
A deficit adjusted for inflation should include only government spending used to make _____ interest payments.
real
Given a reduction in income tax withheld, but no change in income tax owed, households that act according to Ricardian equivalence would ______ the extra take-home pay, while those facing binding borrowing constraints would ______ the extra-take home pay.
save; spend
Assume that nobody cares about the economic well-being of future generations. Then the Ricardian equivalence view of the effect of debt-financed tax cuts is:
still partially valid because most of the taxpayers will live and pay taxes for a substantial number of years after the tax cut.
According to the traditional viewpoint of government debt, a tax cut without a cut in government spending:
stimulates consumer spending in the short run and reduces national saving.
Government debt equals the:
sum of past budget deficits and surpluses.
If government debt is not changing, then:
the government's budget must be balanced.
Ricardian equivalence refers to the same impact of financing government:
whether by debt or taxes.
Holding other factors constant, the ratio of government debt to GDP can decrease as a result of any of the following changes except:
decreases in tax revenues.