Chapter 13: Federal Deficits, Surpluses, and National Debt
Crowding out effect
a reduction in private sector spending as a result of federal deficit. When government borrows it increase interests rates. - crowding is complete if at full employment, but debatable if less than full employment
Crowding in effect
an increase in private sector spending as a result in budget deficit. All less than than full employment consumers hold on to securities causes them to spend more, and business investment increases due to expectations
Internal National Debt
is the percentage of the national debt a nation owes to its citizens "we owe it to ourselves" (27%)
Debt Ceiling
method use to restrict the growth of national debt
Net Public Debt
national debt minus all govt inter-agency borrowing(owes to itself)
External National Debt
portion of the national owe to foreigners (31%)
Can Uncle Sam go bankrupt?
the U.S. govt will not go bankrupt b/c it never has to pay off its debt. When the Treausury mature, they can be refinanced or rolled over issuing new securirties
Does govt spending burrowing crow out private sector spending?
the crowding out effect is a burden to our national debt since govt borrows to finance deficit causing interest rates to rise
National Debt
the dollar amount that the federal government owes holders of government securities.it is the cumulative sum of past deficits
Are we passing the debt to burden to our children?
their is a counterargument that national debt is transferring purchasing power to foreigners,