Exam 20: Deficit Finance

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 purpose of functional finance is to

Which one of the following statements is true?

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?

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

At a given point in time,if all past deficits and surpluses were added,we would get the

The level of economic activity in a given year will cause the budget deficit to vary.

The burden of debt is borne by future generations.

According to a model of intergenerational equity,if future generations are expected to be better off than the current generation,transfers should

High interest rates contribute to a lower federal budget deficit.