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

The Treasury most frequently uses the Dutch auction when it issues new securities.

In a uniform price auction, all successful bidders for federal government securities pay the stop-out price.

Suppose the Treasury is faced 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 nonbank public. Which effect listed below is not likely to happen in this case?

U.S. Treasury borrowing directly from the Federal Reserve is equivalent to printing money and is highly inflationary.

Suppose the Treasury is faced 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 depository institutions. Which effect listed below is not likely to happen in this case?

Suppose the U.S. federal government's revenues and expenditure accounts displayed the amounts shown in this fiscal year (each item in billions of U.S. dollars): What were the government's total revenues and expenditures in the most recent fiscal year? Was the budget in surplus or deficit? All other factors held constant, what is likely to happen to the economy's level of income and interest rates as a result of this year's government budget position? Please explain the reasoning behind your answer to this last question.

If the economy is at full employment and the federal deficit is funded by borrowing from the nonbank public, a likely effect will be increased prices.

Significant cuts in individual income tax rates as well accelerated depreciation allowances, inflation-adjusted tax rates and income tax deductions were accomplished for the first time in several years with the passage of the:

Fiscal policy is known to have short a predictable lags.

The approximate size of the gross public debt of the United States in 2009 was, according to your text, approximately:

Using the the description or the definition below, identify each of the key terms and concepts presented in this chapter. a. Method by which marketable U.S. Treasury securities are issued and sold. b. Portion of the government debt that is actively traded each day. c. A government budget position that tends to expand economic activity and may necessitate the borrowing of money to sustain that position.

Retiring government debt held by depositories causes:

Treasury borrowings from the Federal Reserve are equivalent to printing money because there is no offsetting withdrawal of reserves from depositories or from the public's deposit accounts.

Treasury reverse auctions are likely in a period of economic recession.

The net effect of retiring government securities held by the nonbank public is a reduction in total spending. This occurs because money is transferred from the general public to investors.

The taxing and spending programs of the federal government designed to promote national economic goals are known as fiscal policy.

A U.S. federal budget surplus means that the Treasury will no longer have to borrow.

Treasury borrowing from the nonbank public has which of the following effects?

What are reverse auctions? Why are they relatively rare?

The marketable public debt in the United States is issued today in book entry form, which means investors receive an engraved certificate and receive a statement of account.