Macroeconomics Homework Chapter 13

In 2015, interest payments on the public debt, as a percentage of GDP, were about

2.2 percent

The accompanying table gives budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. The public debt declined in year

6

Refer to the diagram, in which Qf is the full-employment output. An expansionary fiscal policy would be most appropriate if the economy's present aggregate demand curve were at

AD0

A Federal budget deficit exists when

Federal government spending exceeds tax revenues in a given year

The crowding-out effect arises when

Government borrows in the money market, thus causing an increase in interest rates

The public debt is held as

Treasury bills, Treasury notes, Treasury bonds, and U.S. savings bonds.

Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt

does not impose a large burden on future generations.

A given reduction in government spending will dampen demand-pull inflation by a greater amount when the

economy's aggregate supply curve is steep

The American Recovery and Reinvestment Act of 2009 included mostly

increases in government spending and decreases in taxes.

Contractionary fiscal policy is so named because it

is aimed at reducing aggregate demand and thus achieving price stability

A contractionary fiscal policy is shown as a

leftward shift in the economy's aggregate demand curve.

The time that elapses between the beginning of a recession or an inflationary episode and the identification of the macroeconomic problem is referred to as a(n)

recognition lag

(Last Word) Which of the following would not help to relieve the Social Security and Medicare shortfalls?

restricting immigration of skilled working-age adults

As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system

serves as an automatic stabilizer for the economy

To say that "the U.S. public debt is mostly held internally" is to say that

the bulk of the public debt is owned by U.S. citizens and institutions.

Since actual budget deficits surpassed 10 percent of GDP in 2009,

the deficits as a percentage of GDP have fallen, but fiscal policy has remained expansionary.

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because

the opportunity cost of wartime expenditures was borne by the generation that lived during the war.

When government spending is increased, the amount of the increase in aggregate demand primarily depends on

the size of the multipler

The U.S. public debt

consists of the historical accumulation of all past federal deficits and surpluses.

Refer to the accompanying graph. What combination would most likely cause a shift from AD1 to AD3?

an increase in taxes and a decrease in government spending

In the diagram, it is assumed that investment, net exports, and government purchases

are independent of the level of GDP

The actual budget deficit of the federal government in 2009 was about $1.4 trillion. On the basis of this information, it

cannot be determined whether the government engaged in expansionary or contractionary fiscal policy in 2009.

The built-in stabilizers in the economy tend to

Dampen the irregular swings in real GDP

Discretionary fiscal policy will stabilize the economy most when

deficits are incurred during recessions and surpluses during inflations.

Refer to the diagram, in which Qf is the full-employment output. If the economy's present aggregate demand curve is AD2,

government should undertake neither an expansionary nor a contractionary fiscal policy.