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