Exam 18: Fiscal Policy

Article Summary In a letter to Congress, Treasury Secretary Jacob Lew stated that the United States will run out of borrowed money by Thursday, October 17 unless the $16.7 trillion debt ceiling was raised. Every Thursday, the Treasury typically rolls over $100 billion in debt as bonds mature and investors use the proceeds to buy new bonds, and Lew was concerned that without an increase in the debt ceiling, a crisis could emerge from a massive bond sell-off. Since the government had reached its current debt limit, it would only be able to use daily on-hand revenue to pay its bills without the increase in the ceiling. The Treasury expected the government to have only $30 billion per day in cash on hand by October 17, while its typical daily expenses were $60 billion. "If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history," Lew said. -Refer to the Article Summary.When does the Treasury Department borrow? Why would the Treasury have to borrow more than it estimated,as was indicated by its letter to Congress to raise the debt ceiling? When would the Treasury repay what it borrowed,and who is it repaying?

The government purchases multiplier is defined as

A one-time tax rebate,which is not expected to be extended in future years,will

Suppose real GDP is $13 trillion,potential real GDP is $13.5 trillion,and Congress and the president plan to use fiscal policy to restore the economy to potential real GDP.Assuming a constant price level,Congress and the president would need to decrease taxes by

What economic impact would the closing of a nearby military base have on a town? Would people and businesses that did not directly deal with the military personnel be affected?

The increase in the amount that the government collects in taxes when the economy expands and the decrease in the amount that the government collects in taxes when the economy goes into a recession is an example of

The aggregate demand curve will shift to the right ________ the initial decrease in taxes.

To combat inflation,Congress and the president should

Government deficits tend to increase during

The aggregate demand curve will shift to the right ________ the initial increase in government purchases.

If the federal budget goes from a budget deficit in Year 1 to a budget surplus in Year 2,does it follow that the federal government acted to raise taxes or cut government spending in Year 2?

Figure 18-7 -Refer to Figure 18-7.Given that the economy has moved from A to B in the graph above,which of the following would be the appropriate fiscal policy to achieve potential GDP?

Government transfer payments include which of the following?

The federal government debt as a percentage of GDP did not rise

Which of the following is considered expansionary fiscal policy?

A(n)________ in private expenditures as a result of a(n)________ in government purchases is called crowding out.

The problem causing most recessions is too little

An equal increase in government purchases and taxes will cause

Decreasing government spending ________ the price level and ________ equilibrium real GDP.

Expansionary fiscal policy ________ the price level and ________ equilibrium real GDP.