Exam 32: Budget Deficits in the Short and Long Run

Figure 32-3 ​ -If budget deficits shift the money demand curve as is illustrated in Figure 32-3, which component of total expenditures will be affected the most?

Figure 32-1 ​ -In Figure 32-1, there are four levels of income.G is government expenditures and TT is taxes less transfers.At which level of income does the official budget produce a surplus?

Increases in government spending or tax cuts normally push interest rates up.

The structural deficit can be used to estimate the thrust of current fiscal policy.

If the level of government spending increases at the same time the Fed is pursuing contractionary monetary policy, we know that

Until about 1983, almost all of U.S.national debt stemmed from financing wars or from the loss of tax revenues that accompany recessions.

Suppose that the economy is currently at full employment.All other things being equal, if the government implements expansionary fiscal policy, then the appropriate monetary policy is

National debt is also known as

Figure 32-2 ​ -Assume that a contractionary monetary policy has shifted the aggregate demand curve in Figure 32-2 from D₀D₀ to D₁D₁.Fiscal authorities who wish to restore real GDP to the full-employment level will

Crowding out can best be defined as

Which of the following is not true with regard to the burden of the U.S.national debt?

If you wanted to measure changes in fiscal policy intentions, you should use the

Under a balanced budget policy, a sharp rise in GDP will cause

Figure 32-3 ​ -Figure 32-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money.If the Federal Reserve does not want interest rates to rise, it will

Debt is to deficit as

If the U.S.government decides to eliminate a budget surplus by reducing taxes, the most likely effect would be

The central bank is said to monetize the deficit when it

Structural budget surplus is the hypothetical surplus we would have under current fiscal policies if the economy were operating near full employment.

Figure 32-2 ​ -Suppose that Figure 32-2 shows the effects of reducing the budget deficit by raising taxes.If authorities do not want real GDP to fall, monetary policy must

Which of the following statements is incorrect?