Exam 3: The Government, the Economy, and Economic Development

So-called Modern Monetary Theory gained visibility among some economists and elected politicians leading up to the 2020 presidential election as an explanation for why the U.S. government could increase borrowing to finance infrastructure and other investments without threatening to push the inflation rate up.

What is meant by the term "net debtor nation"?

U.S. economic well-being is heavily influenced by the economic behavior of billions of individuals around the world and on the economic policy decisions of dozens of foreign governments in both underdeveloped and developing nations.

Historically, the three assets that combine to produce goods and services were land, labor, and capital. What is the main factor that still enables the United States to have the highest GDP and one of the highest levels of GDP per capita in the world today?

What is the primary cause of the U.S. trade imbalance?

GDP and GNP have been only 1% to 2% different from each other over the last 20 years.

What is the difference between total federal debt and federal debt held by the public?

The U.S. savings rate is too low to finance all of the demand for investments; this means the economy is increasingly dependent on foreign investment.

The inflow of foreign capital has helped keep U.S. interest rates low because it finances high levels of consumption, including imported products, by U.S. households.

According to CBO projections, what is the most likely negative consequence from the expansion in federal debt?

Describe the impact of the federal government's budgets and policies on inequality in distribution of income across the population. Include discussion of personal income and corporate tax policies, and income transfer and other assistance programs. Also include factors that are less susceptible to government actions.

What is the term for the value of goods and services and the value of investment flows between the United States and other countries?

Economic events in other industrial nations or groups of developing nations rarely have significant repercussions in the United States.

What are the two most basic measures that economists use to estimate the size of the economy?

In recent years, what percentage of the total U.S. economy is total government expenditures?

Briefly describe "structural unemployment."

The inflow of investments from abroad is the more important explanation for the current account deficit than is the import-export imbalance.

What were the most significant indicators signaling the start of the recession in 2007?

The significant increase in the degree of inequality in income distribution in the United States can be attributed to the significant cuts in federal corporate and personal income taxes and cuts in transfer programs.

What unemployment rate is considered full employment in the United States?