Exam 18: Treasury Auctions, Public Debt, and Government Borrowing: Exploring the Us Treasury System

Lengthening the average maturity of the public debt tends to increase long-term interest rates relative to short-term interest rates.

The marketable public debt in the United States is issued today in book entry form, which means investors do not receive an engraved certificate but instead receive a statement of account:

Please describe the impact of government borrowing upon the financial system and the economy. If the federal government wished to increase total spending in the economy the most, from who should it most likely borrow funds?

The ratio of the Federal budget deficit to U.S. GDP has actually fallen in the most recent years.

The U.S. public debt is the largest single collection of securities available in the financial system today.

The net effect of government retirement of debt held by the nonbank public is:

Inflation tends to increase the size of government budget deficits and the size of the public debt.

A policy sometimes followed by the Federal Reserve in which the Fed tries to extend a steadying influence on the financial markets when the Treasury is offering new securities or conducting refundings is known as:

Most authorities on economic policy are convinced, according to the textbook, that the debt management activities of the Treasury:

The U.S. Treasury today uses a system where all successful bidder does wind up paying the same price and is called a uniform or single price auction.

Using the the description or the definition below, identify each of the key terms and concepts presented in this chapter. a. The taxing and spending activities carried out by the government in order to achieve the nation's economic goals. b. Activities of the government's Treasury department that consist of refunding and refinancing the government's debt. c. Volume of debt obligations that are the responsibility of the government and, therefore, its taxpayers.

Lengthening the maturity of the public debt generally reduces the public's demand for money.

The options available to the Treasury to finance a federal deficit are: drawing on accumulated cash balances, issuing new debt securities or printing money.

The ultimate purpose of the Economic Recovery Tax Act of 1981 was to stimulate added savings by individuals and families providing additional funds for basic investment.

In a "reverse auction", the Treasury will solicit redemption prices from securities holders.

Under the ____ auction, bidders have an incentive to obtain as great a proportion of the issue as possible.

The Economic Growth and Tax Relief Reconciliation Act of 2001 lowered personal tax brackets and gradually phased out social insurance taxes.

Securities issued by the U.S. Treasury today are:

The net effect on the nation's money supply and legal reserves held of Treasury borrowings from the nonbank public is an increase in the money supply and a decrease in legal reserves.

Suppose the U.S. Treasury is confronted with a budget surplus and chooses to retire debt previously issued. According to your text, several effects are likely to occur if the retired debt was held by the Federal Reserve banks. Which effect below is not likely to happen in this case?