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

Please describe the effects of retiring government securities on the financial system and the economy. Whose securities should be paid off if the federal government wants to have the maximum negative (contractionary) impact on the economy?

The bulk of U.S. Treasury revenues are from:

Foreign contingent investors held about ___________ in U.S. Treasuries in 2009.

The trend toward shorter maturities of marketable public debt is a matter of concern because:

Foreign holdings of U.S. Treasury securities have fallen in recent years as foreign stocks and bonds have become more popular.

Treasury IOUs issued in the most recent auction are referred to as "on the run," while those issued in earlier auctions are labeled "off the run".

According to your text, the principal source of federal government revenues is income taxes levied against corporations.

Due to unexpected decline in federal income tax collections the Treasury will be compelled to borrow an extra $40 billion to cover planned expenditures in the current government budget. Using T accounts, trace through the likely effects of this additional borrowing on the financial markets and on the economy. Assume that 50 percent of the securities to be issued will be absorbed by nonbank institutions. How would your analysis change if the economy were at full employment?

The Tax Reform Act of 1986 was designed to be neutral in its effect on financial conditions.

The non-interest-bearing public debt of the U.S. represents about 10 percent of the nation's gross public debt.

The U.S. Treasury today uses a system where all successful bidders wind up paying the same price, which is called a:

Under the yield auction method, dealers bidding the highest prices receive bills until all available bills are allocated.

A method of selling U.S. Government Securities in which government securities dealers submit sealed bids stated in percentage terms is known as a/an:

During the first year of the Obama administration, the deficit reached:

In the 21st century, the federal government was passing a bigger share of welfare and social programs back to the States:

Retirement of government debt held by the Federal Reserve tends to have an anti-inflationary effect because:

Which of the following effects occur when the Treasury borrows from depository institutions?

The U.S. Treasury exercises the greatest measure of control over the nonmarketable public debt, yet it is the marketable public debt which has the greatest impact on the cost and availability of credit in the nation's financial markets.

The key to understanding the effects of government borrowing is to consider how the government plans to spend the borrowed funds.

While more state and local government funds are needed as the population continues to grow, it is not clear those needed funds can be raised at reasonable cost, given the current structure and rules surrounding the market for municipals.