Ch 13
As a percentage of GDP, the total US public debt is the highest such debt among the world's advanced nations
False
The Federal Reserve and federal government agencies hold more than 3/4 of the public debt
False
As a percentage of GDP, the total US public debt help by the public was larger in 2010 than it was in 1990
True
Deficits increased substantially in 2008 because of
fiscal stimulus after the financial collapse
The cyclically adjusted budget measures what the federal deficit or surplus would be if the economy reached the ____ level of GDP
full- employment
Refinancing of the public debt might drive up real interest rates because
government borrowing to finance the debt increases demand for funds and competes with private borrowing
Social Security is a 'pay as you go' plan. This means that
most of the current revenues from the SS tax are paid to current SS retirees
What type of tax system would have the most built in security?
A progressive tax system because it increases at an increasing rate as incomes rise, thus having more of a dampening effect on rising (or falling) incomes
An internally help public debt is like a debt of the left hand owed to the right hand
True
For a person who thinks the public sector is too large, the fiscal options for ending recession would include
a cut in taxes
The long-run fiscal imbalance in the SS retirement system is the result of
an aging population and declining worker-beneficiary ratio
For a person who wants to preserve the size of government, the fiscal options for ending a recession include
an increase in government spending
Expectations of a near-term policy reversal weaken fiscal policy because
consumers may hesitate their spending because they believe that tax rates will rise again.
If the cyclically adjusted budget is balanced, the
government is not engaging in either expansionary or contractionary policy
Refinancing of the public debt might cause
higher interest rates that can lower investment and economic growth
The problem of time lags in enacting and applying fiscal policy is that
in the time it takes to identify the situation, enact a policy, and allow it to work, economic circumstances may have changed
The SS trust fund
includes assets held by these programs to help pay for future projected tax revenue shortfalls
The government's fiscal policy options for moving the economy out of a recession include
increasing government spending, decreasing taxes, or both
Fiscal policy is a tool that alters _____ to achieve specific macroeconomic objectives, and fiscal activity addresses _____
macroeconomic activity; economic and non- economic priorities
The ratchet effect makes anti-inflationary policy
more difficult
A political business cycle happens because
politicians are more interested in reelection than in stabilizing the economy
If the public investment financed through borrowing complements private investment
private borrowers may be willing to pay higher interest rates associated with financing the public debt
The crowding-out effect is the
reduction in investment spending caused by the increase in interest rates, arising from an increase in government spending
Built-in, or automatic, stabilizers work by changing _____ so that GDP changes are reduced
tax revenue and government payouts
If the annual interest payments on the debt sharply increased as a percentage of the GDP
the government would have to use more tax revenues for interest or go deeper into debt
Budget deficits in 2002 were due to
the recession and tax cuts