ch 12

According to Economist John Keynes, a balanced budget is appropriate:

Only when the economy operates at its full-employment output level.

According to Supplemental Handout #1, what was the largest source of revenue for America's federal government during Fiscal Year 2020?

Personal Income Taxes

According to Supplemental Handout #1, the federal government spent approximately _____ paying interest on the national debt during Fiscal Year 2020.

$345 billion

According to Supplemental Handout #3, between the years 1990 and 2020, the US government's budget:

Experienced a deficit some years and a surplus in other years

A bond is a share of ownership in a private company.

False

According to Supplemental Handout #3, the last time America's federal government had a budget surplus was:

Fiscal Year 2001

According to Supplemental Handout #3, the largest budget deficit in recent history was generated in:

Fiscal Year 2020

External ownership of America's national debt occurs when debt is purchased by:

Foreign consumers, businesses and governments

In the short run, external financing of the national debt allows us to get more public-sector goods without giving up private-sector goods.

True

According to Supplemental Handout #4, the current size of America's National Debt is approximately:

$28 trillion

Identify the most recent time period when the US government was debt free.

1836, during Andrew Jackson's administration.

According to page 252 of the Required Course Textbook, discretionary expenditures account for approximately:

20% of the federal budget

According to Supplemental Handout #5, approximately ___ of the US National Debt is held externally.

33%

According to Supplemental Handout #5, approximately ___ of the US National Debt is held internally.

67%

Internal ownership of America's national debt occurs when debt is purchased by:

The Federal Reserve System Private domestic investors The Social Security Administration

The US government incurred a national debt for the first time during:

The Revolutionary War

The fiscal agent of the US government is the:

The US Treasury Department

The risk of the US economy experiencing Crowding Out becomes greater as:

The economy approaches full employment

The national debt is:

The sum of all outstanding US Treasury bonds.

According to the Required Course Textbook, Fiscal Policy is:

The use of government taxes and spending to alter macroeconomic outcomes.

Because the government must pay interest on the national debt, its ability to balance the budget or fund public-sector activities is reduced.

True

For America's federal government, the fiscal year is:

A twelve-month time period used for accounting purposes, which begins on October 1st.

Which of the following policies will restrain the economy and likely create a budget surplus?

A decrease in government expenditures and an increase in taxes.

Which of the following policies will stimulate the economy and likely create a budget deficit?

An increase in government expenditures and a decrease in taxes.

Statement 1: Deficit spending occurs when borrowed funds are used to finance government expenditures that exceed tax revenues. Statement 2: Most developed countries experience deficit spending.

Both statements are correct.

Statement 1: A budget deficit occurs when tax revenues exceed government expenditures for a given fiscal year. Statement 2: A budget surplus occurs when government expenditures exceed tax revenues for a given fiscal year.

Both statements are incorrect.

Statement 1: The elements of the federal budget determined by past legislative or executive commitments are viewed as discretionary spending items. Statement 2: The elements of the federal budget that are not "locked in" by past legislative or executive commitments are viewed as automatic spending items.

Both statements are incorrect.

An increase in private-sector borrowing and spending caused by decreased government borrowing is known as:

Crowding in

Which of the following would occur if the federal government decided to use a budget surplus to reduce the size of the existing national debt?

Crowding in and private-sector output would increase

A decrease in private-sector borrowing and spending caused by increased government borrowing is known as:

Crowding out

Which of the following events is likely to create a budget deficit?

Recessions Tax cuts Wars

According to the Required Course Textbook, a one percentage point increase in the inflation rate causes:

Government spending to automatically increase for Social Security benefits and interest on the national debt. Tax revenue to automatically increase from personal income taxes and the corporate profit tax.

According to the Required Course Textbook, a one percentage point decrease in the GDP growth rate causes:

Government spending to automatically increase for unemployment compensation and food stamps. Tax revenue to automatically decline from personal income taxes and the corporate profit tax.

According to Supplemental Handout #1, what was the largest expenditure item in the federal government's Fiscal Year 2020 budget?

Income Security

Ultimately, in order to balance America's budget and make progress toward paying down the national debt, policymakers must find ways to ___ the amount of tax revenue flowing into the government and ___ government spending on goods, services, public capital projects and income transfer programs.

Increase; Reduce

Which of the following is not considered to be a desirable use for a budget surplus in the United States?

Investing the surplus in the stock market.

According to Supplemental Handout #5, which country was the largest foreign holder of America's National Debt as of April 2021?

Japan

The national debt represents a/an ___ for the federal government, and it represents a/an ___ for those who purchase US government bonds.

Liability; Asset

The term automatic stabilizers describes:

Programs that respond automatically and counter cyclically to changes in aggregate economic activity.