Exam 20: Deficit Finance

If we assume that government borrowing crowds out private investment,then future generations will have a smaller capital stock.Ricardo's view is that this will not be the case,because people are forward looking.Do you agree?

High interest rates contribute to a lower federal budget deficit.

The burden of the debt does not depend on whether debt finance crowds out private investment.

Suppose,in 2008,the federal debt was $5 trillion.That year,the United States ran a deficit of $455 billion.During the course of the year,the inflation rate was 3.8%.How much is the "inflation tax"?

When government borrowing decreases private investment by raising the market interest rate,this is known as

The United States has not had a surplus in the last 30 years.

From an efficiency standpoint,one must compare the excess burdens of tax and debt finance.

We have learned from this chapter that the real value of the debt is eroded by inflation and may be overestimated because of it and other factors.Do you feel that the debt will be a major concern during your working lifetime and retirement?

In 2008,the amount of the debt held by the public as a percent of GDP was

You make a loan to the government of $100.The government promises to pay you back some sum of money in two years.The interest rate will be 4 percent over that period,but inflation will be 4 percent.How much will you require that the government pay you in two years in the absence of any inflation? With inflation?

Which one of the following statements is true?

Total Government Debt is the sum of previous surplus and deficits.