Exam 17: Macroeconomic Policy Debates

Critically evaluate the statement, "Budget deficits can only be bad for a country."

What would happen to a government's total debt if it ran a budget deficit?

Typical consumption taxes create an incentive to save.

Financing government expenditure through deficits rather than through taxes will lead to higher spending if

A surplus is defined as

Do deficits lead to inflation?

If the private sector is not willing to purchase government bonds being issued to finance a deficit, and the government's only option is to print more money, then this will likely cause

What method is used as the standard way to measure the effect of debt in an economy?

The federal government ran a budget deficit of approximately ________ in fiscal year 2010.

When a government chooses to have a zero deficit with regards to revenues and spending, it is operating with what kind of budget?

Since 1998, the U.S. federal government has continuously run a budget surplus.

The only way governments can finance a deficit is by printing new money.

Arguments against the balanced budget amendment include which of the following?

Purchases of goods and services are included in GDP, but transfer payments are not included.

The debt burden in the United States was highest during

Ricardian equivalence requires that saving by the private sector decreases when the deficit increases.

Capital gains are the profit earned from the sale of

"Ricardian equivalence" is the proposition that it does not matter whether government expenditure is financed by taxes or by issuing debt.

Suppose that a person in the United States earns $5,000 and faces an income tax rate of 25 percent. If that person saves $2,000 and invests it at 12 percent then he or she will pay

Recall the Application about the possibility that the Federal Reserve's loose monetary policy was responsible for the housing boom during the 2000s to answer the following question(s). -Recall the Application. When applying the Taylor Rule to the decade of 2000, economist John Taylor found that past experience showed that from 2001 to 2004, the Fed should have ________ interest rates instead of ________ interest rates.