Exam 17: Macroeconomic Policy Debates

Arguments for the balanced budget amendment include all of the following EXCEPT

The government debt is the difference between the current level of total expenditures and revenues.

In what ways is the government debt a burden on future generations?

Explain what is meant by the term "monetizing the deficit."

By the first years of the 21st century, the rate of inflation in the United States had fallen to between ________ percent.

In the United States, the Federal Reserve pursues an inflation targeting policy of keeping inflation below 2 percent.

Recall the Application that questions if the United States can or should adopt a value-added tax (VAT) to answer the following question(s). The value-added tax is essentially a sales tax that is levied on each stage of production. Firms pay the value added tax on their sales and then receive a credit for value-added taxes paid by their suppliers. Unlike a sales tax, the value-added tax is embedded in the price of goods. -According to this Application, ________ developed countries and ________ developing countries have a value-added tax.

The United States is a country with a high saving rate.

A policy where the Federal Reserve focuses only on inflation is called monetarizing inflation.

During recessions, unemployment ________ while the budget deficit as a percentage of GDP ________.

Ricardian equivalence is the proposition that

Suppose the federal government implemented a flat tax to replace the income tax, and the flat tax saved taxpayers a total of $5 billion. A tax change such as this could be viewed as an example of the federal government implementing

Prior to the recession which began in late 2007, the Federal Reserve purchased ________ of the government budget deficit.

Among the factors that have a negative impact on savings in the United States is the

Active fiscal policy is the main tool used by the Fed for economic stabilization.

The government borrows money to cover budget deficits by

Suppose the government has a $1.2 trillion budget deficit. If the government borrows $1.2 trillion to finance this deficit and finances the rest by printing money, the amount of new money created will be

Suppose the government's initial debt is $350 billion and that during the next two years the government runs deficits of $90 and $40 billion. If during the third year the government has a $70 billion surplus, the government's total debt at the end of the three years will be

Suppose the government's initial debt is $425 billion. If for the next three years the government runs deficits of $150, $125, and $200 billion, the government's total debt at the end of the three years will be

The purchase by the central bank of newly created government debt is called "monetizing the deficit."