Exam 13: Fiscal Policy, Deficits, and Debt

Year Actual Budget Deficit (-) or Surplus (+) Cyclically Adjusted Deficit (-) or Surplus (+) 1 +1.4\% +0.1\% 2 +2.5 +1.1 3 +1.3 +1.1 4 -1.5 -1.1 5 -3.4 -2.7 6 -3.5 -2.4 7 -2.6 -1.8 8 -1.9 -1.8 9 -1.3 -1.4 Refer to the data in the table. In which year was the cyclical de?cit the largest?

Built-in stability means that

The impact of an expansionary fiscal policy may be strengthened if it crowds out some private investment spending.

Payment of interest on the U.S. public debt

In the graph, tax revenues vary

The goal of expansionary fiscal policy is to rein in inflation.

Which of the following is an example of built-in stability? As real GDP decreases, income tax revenues

Increased government spending for investments such as highways or harbors financed by increasing the public debt would most likely

The key to assessing whether fiscal policy is expansionary or not is to observe the change in the cyclically adjusted budget balance.

The crowding-out effect suggests that

Which would tend to reduce the crowding-out effect that occurs when the federal government increases its borrowing to finance a deficit?

A decrease in government spending and a cut in taxes would be a pair of fiscal policies that reinforce each other.

A budget deficit causes the government to issue or sell Treasury bonds.

The portion of the public debt held outside federal agencies and the Federal Reserve is

Gross Domestic Product (GDP) Consumption (C) \ 0 \ 40 100 120 200 200 300 280 400 360 The accompanying table is the before-tax consumption schedule for a closed economy. If a lump-sum tax (the same tax amount at each level of GDP) of $40 is now imposed in this economy, the consumption Schedule will be

Fiscal policy is mainly undertaken by the Federal Reserve.

A given reduction in government spending will dampen demand-pull inflation by a greater amount when the

From 2010 to 2015, the actual as well as the cyclically adjusted federal budget deficits as percentages of GDP in the U.S.

The financing of a government deficit increases interest rates and, as a result, reduces investment spending. This statement describes

As of 2018, more than half of the total debt of the U.S. government was owed to foreigners.