Econ chap 12

The economic report of the president is prepared by

The council of economic advisors

Drawbacks of the federal government budget process include:

The use of continuing resolution is that reward last year's programs, without adequate review of performance — one of the problems associated with the federal budget process is the use of continuing resolution in the absence of an approved budget 12-1

Before the great depression, federal deficit occurred primarily during wartime

True Before the great depression, federal deficit occurred, primarily during wartime. Because wars afternoon pose a great hardship on the population, public officials are understandably, reluctant to tax citizens still more to Finance war related spending. 12-2

The U.S. government can continue to run a deficit as long as the cost of servicing the resulting debt remains manageable

True Countries can continue to run deficits as long as the cost of servicing, the resulting that remains manageable 12-4

Crowding out refers to the effect that deficits have on private investment spending

True — an increase in the federal deficit leads to higher interest rate that crowd out some private investment 12-2

Some economist argue that federal government capital projects, which offer benefits over a number of years, should be financed through deficit financing

True — countries can continue to run Davises as long as the cost of servicing the resulting that remains manageable 12-4

In 2009, the U.S. budget deficit was $1.4 trillion

True —-9.8% relative to GDP 12-2

Except for World War II, the U.S. deficits from 2009 to 2012 for the largest deficit in the nations history relative to GDP, even larger than during the great depression.

True —-from 2009 to 2012, deficit relative to GDP were 9.8%, 8.6%, 8.4%, 6.7%, respectively.

If U.S. interest rates are higher than the world interest rates, we would expect the U.S. dollar to appreciate

True —-if United States interest rates are higher than the worlds rates, you are securities, become more attractive, resulting in appreciation of the US dollar relative to foreign currencies

Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP

True —-the federal budget is a plan of outlet in revenues for specified period, usually a year. Federal outlays include both government, purchases and transfer payments. When government outlays exceed government revenue, the budget is a deficit 12-1.

The public sector grew the most in Japan, rising from 35% relative to GDP in 1997 to 39% in 2016

True —-outlay is relative to GDP increase the most in Japan from 35% relative GDP to 39%

In the 1980's, tax rates were cut, and there was a then-historic peacetime deficit

True —-the large United States budget deficits of the 1980s resulted from March tax cuts along with hire defense spending 12-2

Only about one-fourth of the federal budget involves expenditure categories determined by existing obligations and laws

False —-most federal outlays are determined by existing laws

The federal budget has been in deficit in all but nine years since 1960

False — although the federal budget wasn't surplus from 1998 to 2001, before that it had been in deficit every year, but once since 1960 12-2

If a budget deficit is the result of expenditures for programs, such as farm subsidies and Social Security, the burden on future generations is slight

False —-deficit spending as a way of Billing future taxpayers for current spending. Foreigners held nearly half of all federal debt, held by the public in 2015. A reliance on foreigners however, increases the burden of that on future generations of Americans 12-4.

Biennial budgets have replaced the annual budget process for the federal government

False —-federal budget usually run annually

The budget deficit tends to decline during periods of recession, and to increase during period of economic recovery

False —-federal deficit usually fall during the recovery stage of the business cycle

When there are large federal budget deficits, the trade deficits tend to shrink

False ——funding a large deficit pushes up the market interest rates, other things constant. With United States, interest rates, higher, foreigners, find treasury, secretaries, more attractive, resulting in an increase in US import, and a decrease in US exports 12-2.

If discretionary fiscal policy creates a federal budget deficit, the economy must be experiencing falling output.

False — expansionary fiscal policy results in an increase in aggregate demand, leading to greater output, an employment in the short run 12-2

An annually budgeted budget can only be met if automatic stabilizers are effective

False —-an annual budget budget means that spending increases during expansions and declines during recessions

If the U.S. government spent $20 million paying people to dig holes in 2005 and then spent $30 million paying the same people to fill the holes up again that same year, we would expect the net effect to be a(n)

Increase in the budget deficit as government, purchases of goods and services increased by 50 million —-the budget is a deficit when outlays exceed revenues. Federal outlays include both government purchases and transfer payments 12-2.

One way of improving the federal government budget process is to:

Switch to a two year or biennial budget —-a reform that might improve the budget process is switching to a two-year budget 12-1

The difference between the federal budget deficit and the national debt is that the

deficit is a flow variable and the debt is a stock variable. 12-3

Actual federal budgets are not an accurate measure of discretionary fiscal policy because

even without changes in fiscal policy, budget deficits increase during recessions — budget deficit increase during recessions and decrease during expansions 12-2

The beginning of the formal budget process is signified by

the President's submission of the budget of the United States government to Congress —-in late January or early February, the president submits to Congress, the budget of the United States of America, a pile of books detailing spending in revenue proposals for the upcoming fiscal year