Macroeconomics Ch. 30

In 2009, the U.S. public debt was about:

$11.9 trillion

answer the question on the basis of the following sequence of events involving fiscal policy: (1) The composite Index of leading indicators turns down word for three consecutive months, suggesting the possibility of a recession; (2) economist reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed in congress and signed by the president; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. refer to the above information. The recognition lag of fiscal policy is reflected in events:

1 and 2

(Last Word) In which year did the government start using Social Security trust funds to make up for the lack of revenue to pay for the promise benefits?

2009

Approximately what percentage of the US public debt is held by foreign individuals and institutions?

29%

answer the question on the basis of the following up events involving fiscal policy: (1) The composite Index of leading indicators turns down word for three consecutive months, suggesting the possibility of a recession; (2) economist reach agreement that the economy is moving into a recession; (3) A tax cut is proposed in Congress; (4) The tax cut is passed in congress and signed by the president; (5) Consumption spending begins to rise, aggregate demand increases, and the economy begins to recover. refer to the above information. The operational lag of fiscal policy is reflected in event(s):

4 to 5

what percentage of the US public debt is held by federal agencies and the federal reserve?

43%

(Last Word) The combined cost of Social Security and Medicare programs was what percentage of US GDP in 2008?

7.6%

The group of three economist appointed by the president to provide fiscal policy recommendations is the:

Council of economic advisers

The operational lag of fiscal policy refers to the time that elapses between the beginning of a recession or inflation and the certain awareness that it is actually happening.

False

debt as a percentage of GDP _____ Significantly in 2008 and 2000 and due to huge deficits and a decrease in GDP.

Increased

any expansionary fiscal policy is shown as a:

Rightward shift in the economy aggregate demand curve

The cyclically-adjusted budget deficit for the United States:

Rose to -7.3% of potential GDP in 2009

and economist who favors smaller government would recommend:

Tax cuts during recession and reductions in government spending during inflation

Changes not directly resulting from congressional action are referred to as nondiscretionary fiscal policy.

True

Public investment makes private investment more attractive.

True

Structural deficits occur when there is a deficit in the cyclically-adjusted budget as well as the actual budget.

True

The more progressive the tax system, the greater the economy built in stability.

True

automatic stability reduces instability, but does not eliminate economic instability.

True

Which of the following is not considered a legitimate concern of a large public debt?

bankruptcy of the federal government

refer to the above diagram in which T is tax revenues and G is government expenditures. All figures are in the billions. This diagram portrays the idea of:

built-in stability

The U.S. public debt:

consists of the historical accumulation of all past federal deficits and surpluses.

which of the following is not a significant contributor to the US public debt?

demand-pull inflation

Fiscal policy is mainly undertaken by the federal reserve.

false

The American recovery and reinvestment act in 2009:

implemented a $787 billion package of tax cuts and government expenditure increases.

An economist who favored expanded government would recommend:

increases in government spending during recession and tax increases during inflation.

Discretionary fiscal policy refers to:

intentional changes in taxes and government expenditures made by Congress to stabilize the economy.

expansionary fiscal policy is so named because it:

is designed to expand real GDP

fiscal policy refers to the:

manipulation of government spending and taxes to stabilize domestic output, employment, and the price level.