Exam 15: Government Spending and Its Financing

Assume that in an all-currency economy the real interest rate is 4%,the expected rate of inflation is 8%,and the nominal interest rate is 12%.The monetary base equals $50 billion.The real seignorage revenue collected by the government would equal

From the 1950s to the 2010s,transfer payments' share of GDP

Suppose that real GDP is 10,000 and remains constant,nominal GDP is initially 30,000,inflation is 3%,and the debt-GDP ratio is 0.7.Find the largest nominal deficit that the government can run without raising the debt-GDP ratio.

Compared with other countries in the OECD,U.S.government spending relative to GDP is

The amount the government budget deficit would be if the economy were at full employment is known as the

Which of the following policies would not prevent the Social Security trust fund from running out of assets?

A Social Security system in which payroll taxes that workers and their employers pay in go directly to retirees and other beneficiaries is known as

When the United States engaged in quantitative easing from 2008 to 2014,why didn't the money supply rise sharply?

Recent proposals to allow the Social Security trust fund to invest in the stock market (instead of buying government bonds)are based on the premise that

From 2001 to 2015,the debt-GDP ratio in the United States

Consider an economy that has the following monetary data. The monetary base and the money supply are expected to grow at a constant rate of 20% per year.Inflation and expected inflation are 20% per year.Suppose that bank reserves and currency pay no interest,all currency is held by the public,and bank deposits pay no interest.What is the cost to the public of the inflation tax?

The graph plotting the tax rate on the horizontal axis and tax revenues on the vertical axis,which was used by supply-side economists to suggest that tax rates were too high,in known as the

At the beginning of year one,there is no government debt outstanding.The government runs a $100 billion deficit in year one.Interest at a nominal rate of 10% must be paid starting in year two.Assume nominal GDP in year one is $2000 billion and the nominal growth rate of GDP is 4%.Assume the government balances its primary budget in the future and the interest rate and growth rate do not change. (a)What will be the government deficit in years two,three,four,and five? (b)What will be the value of government bonds outstanding at the end of the fifth year? (c)What will be the debt-GDP ratio at the end of year five?

From the late 1960s to the late 1990s,the share of GDP devoted to government purchases

Government capital consists of

When did the United States suffer hyperinflation?

Who bears the burden of the government debt? Explain why.Under what circumstances is there no burden to be borne?

An example of tax smoothing is provided by evidence of

The current deficit is

The political process by which fiscal policy is made