Macro Chapter 14

Government budget​ deficit: An excess of government spending over government revenues during a given period of time.
It may be argued that the effects of a higher public debt are the same as the effects of a higher deficit because a higher deficit creates a higher public debt.
Public​ debt: The total value of all outstanding federal government securities.
Which of the following statements is true when considering budget deficits and the national​ debt? The national debt is a stock variable and a federal budget deficit is a flow variable.
The federal government has its best opportunity to lower its national debt when it has a budget surplus.
If the federal government has a budget deficit it can finance its spending by selling Treasury bonds.
Which of the following statements is true regarding the national debt and federal government​ deficits? There is a positive relationship between the national debt and a federal government budget deficit.
Since the​ 1940s, more often than​ not, the U.S. federal government has run a budget deficit.
Since​ 2001, more often than​ not, the U.S. federal government has run a budget deficit.
Which of the following is a reason for this resurgence in federal government budget​ deficits? Tax revenue not keeping pace with growth in spending
Since 1970 the U.S.​ government’s budget deficit as a percentage of real GDP has averaged approximately​ 3%.[On average the deficit has been approximately​ 3%. Remember that is the annual budget deficit NOT the national debt]
If a government spends more than it receives during a​ year, then during this year it experiences a​ ________, and if it spends less than it​ receives, it experiences a​ ________. budget​ deficit; budget surplus
The total value of all outstanding federal government securities is the public debt.
Since​ 2001, the average annual government budget deficit has exceeded 10 percent of GDP. False
The federal budget deficit is a​ flow, whereas accumulated budget deficits represent a stock, called the public debt.
If federal budget deficits ​increase, then a part of that deficit will be financed by foreign dollar​ holders, who will buy fewer U.S.​ exports, thus increasing the U.S. trade deficit.
A trade deficit implies that the dollar value of imports exceeds the dollar value of exports.
Generally a larger US trade deficit is accompanied by a a larger US federal government budget deficit
Suppose the dollar value of imports to the U.S. exceed the dollar value of exports from the US. This implies that foreigners are holding an excess supply of dollars.
If foreigners have an excess supply of dollars after trading goods and services they will likely buy more U.S. Treasury bonds.
If the U.S. federal government operates with a budget deficit it must borrow. In order to entice people to lend money to finance this​ deficit, the U.S. government must pay a higher rate of interest on the bonds it sells.
A natural consequence of the government continually spending more than what it takes in through tax​ receipts, ceteris​ paribus, is that the government takes up a larger percentage of the economic activity.
There is an ______ relationship between the interest rate and the price of a bond. inverse
As the interest rate or yield on U.S. bonds​ increases, foreigners buy more U.S. bonds and fewer U.S. goods and services.
From the end of WWII through 1983 the U.S. government had consistently experienced a trade surplus
Smaller trade deficits tend to accompany larger government budget deficits. false
Other things​ equal, interest rates will​ ________ whenever there is​ ________ in deficits financed by an increase in borrowing. rise; an increase
In the presence of a​ short-run recessionary​ gap, government deficit spending can influence both real GDP and employment. true
In the long​ run, higher government budget deficits resulting from increased government spending​ and/or tax cuts will do all of the following except increase equilibrium real GDP.
Higher government deficits arise from increased government spending or tax​ cuts, which raise aggregate demand
Entitlements in the U.S. are non-discretionary expenditures that have been legislated by Congress.
The U.S. federal government has contemplated ways to reduce its national debt. Which of the following suggestions would best enable the government to achieve this​ goal? Reduce government​ spending, raise​ taxes, or both.
From an arithmetic point of​ view, a federal budget deficit can be wiped out by simply increasing the amount of taxes collected. true
Data supports the idea that tax increases can completely eliminate actual deficits. false
Entitlements are the most important component of the federal budget. true
Entitlements are growing faster than any other part of the federal government budget. true
The United States is not the only country that has experienced a significant increase in its public debt in recent years.
To assess the changes in a​ nation’s degree of public​ indebtedness, most economists examine ratios of net public debt to GDP
Between the late 1990s and early years of this​ century, most nations observed declines in the ratio of the net public debt to GDP.

Leave a Reply

Your email address will not be published. Required fields are marked *