Ch12 Deficits and Debt LearnSmart

which of the following were legislative attempts to reduce the deficit?

1. Budget Enforcement Act (BEA) 2. Gramm-Rudman-Hollings Act

the problems associated with debt refinancing are:

1. changes in the mix of outputs 2. "real economic cost" of government activity 3. interest charges on the debt (debt service)

U.S. Treasury bonds are attractive to foreigners because of their:

1. globally accepted asset status 2.payment of interest 3. relative security

which of the following contributed to the large increases in the public debt during the Great Recession?

1. increased government spending 2. GDP levels decreased 3. federal tax revenues fell

which of the following are examples of fiscal stimulus?

1. increased spending on infrastructure 2. tax cut 3. increased transfers

the 4 potential uses for a budget surplus include:

1. spend it on goods and services 2. cut taxes 3. increase income transfers 4. pay off old debt

which of the following are examples of fiscal restraint?

1. tax increase 2. decreased spending on infrastructure 3. decreased transfers

when the GDP growth rate slows, we expect the budget deficit to increase because of the impacts of the following automatic stabilizers:

1. tax revenues declines 2. transfer payments increase

based on debt ownership in the U.S. economy, which of the following are true?

1. the U.S. private sector holds about 1/5th of the national debt 2. federal agencies hold 13% of the national debt 3. state and local governments hold 3% of the national debt

which of the following are the main reasons that deficits have emerged?

1. war financing 2. fiscal policy 3. recessions

debt refinancing occurs when the U.S. _____ issues old debt to replace new debt

Treasury

When tax revenues exceed government spending, it is called

a budget surplus

_____ private sector borrowing and spending caused by increased government borrowing is called crowding out

a reduction in

anything having exchange value in the marketplace is a(n) ___`

asset

fiscal policy that automatically responds to changes in national income is referred to as a(n)

automatic stabilizer

promissory notes (IOUs) issued by the U.S. Treasury are Treasury ___

bonds

if the economy starts with a balanced Federal budget, a subsequent expansionary fiscal policy will create a _____

budget deficit

if government spending occurs, there will be a(an) _____ of private investors, described as a(n) _____ of that spending

crowding out; opportunity cost

____ are political mechanisms for forgoing compromises on how best to reduce a budget deficits

debt ceilings

the annual interested payments government makes on the accumulated debt is called:

debt servicing

a budget ___ is government spending in excess of tax revenues

deficit

the U.S. public debt as a percentage of GDP increased between 2008 and 2009 because of the huge budget ___ and a falling real GDP

deficits

____ fiscal spending is not determined by past legislation and requires new action

discretionary

U.S. goods and services will be _____ to pay off its external debts

exported

_____ debt allows the public sector to increase spending without sacrificing private sector production thereby allowing output to exceed the production possibilities curve

external

T/F: interest payments themselves have virtually no direct opportunity cost for the economy as a whole

false

the 12 month period used for accounting purposes (begins OCT 1 for the federal government) is the ____ year

fiscal

fiscal stimulus is measured by a(n) ___ structural deficit

increase in the

crowding-in is said to occur when the private sector borrowing and spending ____ because of a decrease in government spending

increases

when GDP growth slows or inflation increases, the cyclical deficit _____

increases

_____ debt is that portion of government debt held by U.S. households and institutions

internal

when government spending expands, some _____ spending may be choked off, giving rise to what is known as the crowding-out effect

investment

bonds represent _____for the federal government since it must repay the borrowed funds, while those same bonds are a(an) _____ to the people that hold them

liabilities; assets

An obligation to make future payment is

liability; bond

___ debt is the total accumulation of the deficits (minus the surpluses) the federal government has incurred through time

national

at any point in time the _____ is the total sum of all outstanding bonds

national debt

the true burden of debt is:

opportunity cost of the activities financed by the debt

the most desirable combination of output attainable with existing resources, technology, and social values describes the ___ mix of output

optimal

during his 2016 campaign for Presidency, candidate President Trump ___ the large national debt. once elected, his administration advocated proposals that ___ the debt

railed against; increase

increased government borrowing to finance deficit spending may cause interest rates to:

rise

the U.S. Treasury's largest creditor (holder of Treasury securities) is presently the:

social security trust fund

according to Keynes, budget deficits were

sometimes necessary to reach full employment

____ deficits are caused by fiscal policy

structural

the total budget balance is comprised of ___ and ___ balances

structural; cyclical

T/F: for the most part, if government incurred a debt between 1790 and the first World War, it was reduced relatively quickly

true

the crowding out effect for an economy operating at or near full employment is a larger problem than the crowding out effect for an economy operating well _____ full employment

under

during a recession, any decrease in interest rates is ___ to cause any change in ___

unlikely; consumer spending

during the 1980s, the national debt increased for all of the following reasons except

wars

national debt creates ____ for bondholders and ___ for the U.S. Treasury

wealth; liabilities

the most explosive jump in the national debt during the 20th century occurred during:

world war 2