Eco 111 final part 1 of 4

The last year when there was a surplus in the actual U.S. Federal budget was in?

2001

Foreigners held roughly how many percent of U.S. Federal debt in 2009?

30%

When the Federal government uses taxation and spending actions to stimulate the economy it is conduction?

Fiscal policy

The Federal budget deficit is calculated each year by?

Subtracting government spending from government revenues

Fiscal policy is enacted through changes in?

Taxation and government spending

If the government wishes to increase the level of real GDP, it might reduce?

Taxes

In 2009, interest payments on the public debt as a percentage of GDP were about?

$38,000

As of 2009, most of the U.S. Federal debt was owed to?

Americans

The Social Security Program is designed to pay?

Current retirees using funds from current contributions

If Congress passes legislation to increase government spending to counter the effects of a recession, then this would be an example of an?

Expansionary fiscal policy

The cyclically-adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be?

In deficit

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy?

Is not subject to the timing problems of discretionary policy

Which of the following is an important real consequence of the public debt of the United States?

Its consequent higher interest rates lead to fewer incentives to bear risk and innovate

One of the potential consequences of the public debt is that it may?

Lead to additional future taxes that reduce economic incentives

To track the public debt over time and understand its significance to the economy, it is best?

Measured relative to the gross domestic product

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is?

Nondiscretionary

Most economists believe that fiscal policy is?

Not as good as monetary policy for month-to-month stabilization

If you are told that the government had an actual budget deficit of $50 billion, then you would?

Not be able to determine the direction of fiscal policy from the information given

There is general agreement among economists that a proposed fiscal policy should be evaluated for its?

Potential positive and negative effects on long-run productivity growth

In the later part of 2009, something interesting happened relative to Social Security, in that for the first time?

Social Security contributions fell short of payouts

One timing problem with fiscal policy to counter a recession is a "recognition lag" that occurs between the?

Start of the recession and the time to recognize the recession has started

Which would tend to reduce the crowding-out effect that occurs when the Federal government increases its borrowing to finance a deficit?

The economy is operating at less than full employment

A major concern with the Social Security trust fund is that?

The fund will be insufficient to cover obligations in one or two decades

One important reason why the United States government is not likely to go bankrupt even with a large public debt is that is has?

The power to print money to finance the debt

Which of the following serves as an automatic stabilizer in the economy?

The progressive income tax

A major reason that the public debt cannot bankrupt the Federal government is because?

The public debt can be easily refinanced

Contractionary fiscal policy would tend to make a budget deficit become?

Bigger

The group that often initiates changes in fiscal policy is the?

Council of Economic Advisor

The lag between the time the need for fiscal action is recognized and the time action is taken is referred to as the?

Administrative lag

The goal of expansionary fiscal policy is to increase?

Real GDP

Which of the following nations had the highest public sector debt as a percent of GDP were about?

1.3%

Of the U.S. Federal debt held by foreigners in 2009, China held roughly?

25%

Which of the following fiscal policy changes would be the most contractionary?

A $30 billion increase in taxes and a $10 billion cut in government spending

Which of the following fiscal policy would tend to make a budget deficit become?

A $40 billion increase in government spending

Proponents of the notion of a "political business cycle" suggest that?

A possible cause of economic fluctuations is due to the use of fiscal policy for political purpose

The Great Recession that started in 2007 and the consequent policy response made the?

Actual budget deficit rise faster than the cyclically-adjusted deficit

The economic burden of WW2 for the United States was primarily?

Borne by the persons who lived during the war period

The economy starts out with a balanced Federal budget. If the government then implements expansionary fiscal policy, then there will be a?

Budget deficit

How is the public debt calculated?

By cumulating the annual difference between tax revenues and government spending over the years

When the Federal government cut taxes and increases spending to stimulate the economy during a period of recession, such actions and designed to be?

Countercyclical

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely?

Complement private investment

State and local governments are limited in their ability to respond to recessions because of?

Constitutional and other requirements to balance their budgets

Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget amendment that would require the Federal government to balance its budget during a recession would be?

Contractionary and worsen the effects of the recession

If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a?

Contractionary fiscal policy

If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement?

Contractionary fiscal policy

The built-in stabilizers in the economy tend to?

Dampen the irregular swings in real GDP

The intent of contractionary fiscal policy is to?

Decrease aggregate demand

The set of fiscal policies that would be most contractionary would be an?

Decrease in government spending and an increase in taxes

When the Federal government takes budgetary action to stimulate the economy or rein in inflation, such policy is?

Discretionary Fiscal Policy

Most of the public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt?

Does not impose a large burden on future generations

A Federal budget deficit exists when?

Federal government spending exceeds tax revenues

The crowding-out effect arises when?

Government borrows in the money market, thus causing an increases in interest rates

A Federal budget deficit is financed by the?

Government issuance or sale of Treasury securities

A budget surplus means that?

Government revenues are greater than expenditures in a given year

The more progressive the tax system, the?

Greater is the built-in stability for the economy

The bursting of the Dot.com bubble in 2000, along with the terrorist attacks in 2001, made the U.S. government?

Increase its cyclically-adjusted budget deficit

Assume the economy is at full employment but planned investment exceeds saving. Other things being equal, what fiscal policy actions would best address this problem?

Increase taxes and decrease government spending

Which combination of fiscal policy actions would most likely be offsetting?

Increase taxes and government spending

If the economy is in a recession and prices are relatively stable, then the discretionary fiscal policy or policies that would most likely be recommended to correct this macroeconomic problem would be?

Increased government spending or decreased taxation, or a combination of the two actions

The crowding-out effect suggest that?

Increases in government spending may reduce private investment

The crowding-out effect tends to be stronger when the economy?

Is at, or close to , full employment

The time which elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a?

Recognition lag

The two reasons why bankruptcy is a false concern regarding the public debt are?

Refinancing and taxation

If the economy is to have significant built-in stability, then when real GDP increases, the tax revenues should

Rise proportionately more than the change in GDP

As the economy declines into recession, the collection of personal income tax revenues automatically falls. This relationship best describes how the progressive income tax system?

Serves as an automatic stabilizer for the economy

One timing problem with fiscal policy to counter a recession in an "operational lag" that occurs between the?

Time fiscal action is taken and the time that the action has its effect on the economy

The public debt is the?

Total of all past deficits minus all past surpluses

Up until 2008, Social Security revenues exceeded payouts, and the excess inflow was used to buy?

Treasury securities

If people expected that a tax cut was temporary, then this fiscal policy's effect on the economy will tend to be?

Weaker