macroeconomics Quiz 6 chp - 23

If the federal government runs a budget deficit, but the budget deficit as a percent of GDP is less than the growth rate of real output, the:

national debt will decrease as a share of GDP.

The federal budget process begins when federal agencies submit their budget requests to the:

Council of Economic Advisors (CEA).

The national debt is:

the past & current cumulative budget deficits of the federal government.

What is the difference between the federal budget deficit and the national debt?

The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses.

Crowding out refers to the situation in which:

borrowing by the federal government raises interest rates and causes firms to invest less.

The crowding-out effect theorists claim that:

budget deficits don't affect current or future consumption.

Which of the following is true?

A budget deficit will increase the national debt.

As $ appreciates (because of increased "G" by borrowing), the prices of the U.S. produced goods in the world market (relative to the prices of the goods produced elsewhere in the world) increase/decrease which results in reduced U.S. exports (because of their higher/lower prices). And Americans buy more/less of the foreign made goods because they are relatively cheap/expensive which means the U.S. imports increase.

As $ appreciates (because of increased "G" by borrowing), the prices of the U.S. produced goods in the world market (relative to the prices of the goods produced elsewhere in the world) increase which results in reduced U.S. exports (because of their higher prices). And Americans buy more of the foreign made goods because they are relatively cheap which means the U.S. imports increase.

18. Suppose you are an economist and, based on the economic analysis, you have found that, as a result of the current economic policy, the U.S. dollar is expected to depreciate. Further, assuming the U.S. economy is dependent on imported oil. You suggest to the govt that the U.S. dollar needs to appreciate otherwise the economy will bump into Stagflation, which means the economy will experience:

High inflation and high unemployment at the same time.

Which of the following is a valid concern about federal budget deficits?

If the increases in the national debt leads to a significant decrease in the private sector's investment, aggregate demand will reduced.

In order for foreigners to buy this country's assets, for example, let's say, the U.S. assets, they will need to buy U.S. Dollars (in order to buy the U.S. assets with) which means the demand for $ increases/decreases and, consequently, $ appreciates/depreciate.

In order for foreigners to buy this country's assets, for example, let's say, the U.S. assets, they will need to buy U.S. Dollars (in order to buy the U.S. assets with) which means the demand for $ increases and, consequently, $ appreciates.

Increase in govt budget-deficit (increased G by borrowing) leads to deficit/surplus in international trade which means deficit in govt budget & deficit in international trade move in the same/opposite direction(s)!!!

Increase in govt budget-deficit (increased G by borrowing) leads to deficit in international trade which means deficit in govt budget & deficit in international trade move in the same direction!!!

Increasing G by borrowing shifts AD outward/inward because G (one of the AD shifters) increases/decreases. Also, when govt, say, hires teachers/researchers/police officers, these workers, then, buy goods/services and "C" increases which pushes AD outward as well. However, since (X-M) decrease/increases, therefore, this policy of increasing G by borrowing, under a free exchange rate system, is NOT fully effective/is fully effective.

Increasing G by borrowing shifts AD outward because G (one of the AD shifters) increases. Also, when govt, say, hires teachers/researchers/police officers, these workers, then, buy goods/services and "C" increases which pushes AD outward as well. However, since (X-M) decrease, therefore, this policy of increasing G by borrowing, under a free exchange rate system, is NOT fully effective.

When a govt adopts a free exchange rate regime/system, the increase and decrease in the relative value of this currency are called appreciation/revaluation & depreciation/devaluation, respectively. Also, when a govt adopts a managed exchange rate system (intervenes in the foreign exchange market in order to control the value of its currency, the terms used for this practice are revaluation/appreciation (for an increase in the value of the currency) and devaluation/depreciation (for a decrease in such currency's value).

When a govt adopts a free exchange rate regime/system, the increase and decrease in the relative value of this currency are called appreciation & depreciation, respectively. Also, when a govt adopts a managed exchange rate system (intervenes in the foreign exchange market in order to control the value of its currency, the terms used for this practice are revaluation (for an increase in the value of the currency) and devaluation (for a decrease in such currency's value).

When the federal/central govt of "a" country uses an expansionary fiscal policy (of increasing "G" by borrowing) in order to combat recession, the interest rates of this country increase/decrease, which leads to increased/decreased incentives for foreigners to invest in this country's assets (by buying/selling, for example, this country's bonds & the bonds of the corporations owned by the country in question).

When the federal/central govt of "a" country uses an expansionary fiscal policy (of increasing "G" by borrowing) in order to combat recession, the interest rates of this country increase, which leads to increased incentives for foreigners to invest in this country's assets (by buying, for example, this country's bonds & the bonds of the corporations owned by the country in question).

Assuming the U.S. president and congress plan on formulating an expansionary fiscal policy of increasing "G" by borrowing, ceteris paribus. And your analysis indicates that the U.S. needs to expand its exports of goods/services. Which of the following would you use an argument(S) to convince the govt not to use the policy at this specific time:

a. Because this policy will increase the prices of the U.S. produced goods in the world market relatively to the prices of the goods produced elsewhere. b. Because this policy will increase incentives for foreigners to invest in buying the U.S. assets such as the U.S. govt bonds. c. Because this policy will increase deficit in the U.S. international trade. d. Because this policy will appreciate the U.S. Dollar. e. All of the above.

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy:

a. eventually it will become difficult for the country to borrow in global credit markets. b. the country will have to pay higher interest rates in order to induce investors to purchase its bonds. c. at some point, the country will be more or less forced to bring spending into line with revenues in order to maintain the confidence of investors. d. all of the above.

The theory of "Crowding out" suggests that shifting the AD curve through government's budget deficit will likely:

a. increase the national debt. b. increase interest rates. c. decrease borrowing by households and businesses d. reduce the impact of the spending multiplier implies because of crowding out. e. all of these.

The theory of crowding-in effect:

a. is advocated by Keynesians. b. States that during recessions, an increase in "G" by borrowing leads to an increase in "G" as well as "C" & "I". c. States that during recessions, increased "G" by borrowing shifts AD curve outward to the full employment level. d. All of the above.

If remained within a reasonable range, the national debt is unlikely to cause national bankruptcy because the federal government can:

a. raise taxes. c. refinance its debt. d. all of the above.

Relative to the size of its GDP, the current U.S. national debt is:

a. the highest in the developed world. b. the highest in the U.S. history. c. 125 percent of its GDP. d. all of the above e. none of the above is the correct answer.

External debt is that portion of the national debt:

held by foreigners.

Between 1998 and 2001, the federal budget was:

in surplus.

According to the crowding-out view, budget deficits will:

increase interest rates and decrease private investment.