Chapter 20
The national debt is the amount
of debt outstanding that arises from past budget deficits.
If real GDP exceeds potential GDP, to move the economy to potential GDP the Fed
raises the federal funds rate to decrease real GDP but not potential GDP.
Automatic changes in tax revenues and expenditures that occur as a result of fluctuations in real GDP are referred to as automatic
stabilizers.
Control of monetary policy rests with
the Federal Reserve.
The national debt is
the amount borrowed by the government to finance past budget deficits. Your answer is correct.
In the short run, when the Fed increases the federal funds rate
the real interest rate rises and investment decreases.
The balanced budget multiplier is based on the point that the ________ multiplier is larger than the ________ multiplier so that an equal increase in government expenditure and taxes ________ aggregate demand.
expenditure; tax; increases
When tax revenues minus outlays is i. positive, the government has a budget surplus. ii. negative, the government has a budget deficit. iii. zero, the government has a balanced budget.
i, ii, and iii
When the Fed ________ the federal funds rate, the opportunity cost of firms' investment ________ and so the quantity of investment ________.
increases; rises; decreases
If the Fed is concerned about a possible recession, it ________ the federal funds rate, which ________ the quantity of reserves and ________ the amount of bank loans.
lowers; increases; increases
When tax revenue ________ outlays is negative, then the government has a budget ________.
minus; deficit
If the Fed increases interest rates, other things remaining the same, foreigners demand ________ dollars thereby ________ the exchange rate.
more; increasing
If the Fed is concerned about a possible recession, it ________ the federal funds rate, which ________ the quantity of reserves and ________ the amount of bank loans.
lowers; increases; increases
If the federal government has a budget deficit, then it is definitely the case that
government outlays exceed tax revenue
The FOMC is the
group within the Fed that makes monetary policy.
When tax revenue exceed the government's outlays, the budget
has a surplus and the national debt is decreasing.
The table above gives a nation's government outlays and tax revenues for 2012 through 2016. During which years did the country have a budget surplus?
2012 and 2013
The table above gives a nation's government outlays and tax revenues for 2012 through 2016. During which years did the country have a budget deficit?
2014 and 2016
When tax revenues equal government outlays, the situation is referred to as
a balanced budget.
In 2009, Congress passed tax laws to reduce income tax rates for some taxpayers. This action is called
a discretionary fiscal policy.
Discretionary fiscal policy is a fiscal policy action, such as
a tax cut, initiated by an act of Congress.
Fiscal policies that move the economy toward potential GDP without a change in policy are called
automatic stabilizers.
The balanced budget multiplier is based on the point that the ________ multiplier is larger than the ________ multiplier so that an equal increase in government expenditure and taxes ________ aggregate demand.
expenditure; tax; increases
If the Fed raises the federal funds rate
exports decrease and imports increase.
If a change in the tax laws leads to a $100 billion decrease in tax revenue, then aggregate demand
increases by more than $100 billion.
If government expenditures on goods and services increases by $20 billion, then aggregate demand
increases by more than $20 billion.
