9.2 Questions

increases economic output

A basic principle of supply-side theory is that a tax cut

the crowding-out effect, high-interest payments, and the influence of foreign debt-holders

The dangers associated with having a large national debt are

to investors who hold government bonds

To whom does the government owe the national debt?

its ability to levy taxes and borrow money

What gives the federal government its enormous power to influence demand through spending?

It borrows more

What is the most common method the federal government uses to pay for expenditures that exceed revenues?

People with limited savings could not afford to wait for the market, on its own, to restore equilibrium.

When John Maynard Keynes said, "In the long run we are all dead," what serious economic point was he making?

increased spending on defense

Which of the following factors contributed to the deficit spending of the 2000s?

foreign ownership of debt

Which of the following is considered a problem associated with a large national debt?

Milton Friedman

Whose economic ideas and beliefs most closely match this statement: "Let the free enterprise system solve economic problems, not the government"?

Demand should have increased as prices fell, but it did not

During the Great Depression, the U.S. economy seemed to defy the theories of classical economics. Which of the following illustrates this point?

increased spending

During the Great Depression, the federal government followed the ideas of John Maynard Keynes and

through a tax cut

How did President Reagan apply supply-side economics to promote economic recovery in the 1980s?

He instituted policies based on supply-side economics

How did President Reagan bring about a shift in U.S. economic policy?

automatic stabilizers

Look at the graph. Which of the following has most likely played a role in changing in the pattern in annual GDP changes between 1920 and the present?