Exam 13: Fiscal Policy, Deficits, and Debt

In an economy, the government wants to increase aggregate demand by $50 billion at each price level to increase real GDP and reduce unemployment. If the MPS is 0.4, then it could increase government spending by:

Refer to the graph above. Assume that the economy is in a recession with a price level of P₁ and output level Q₁. The government then adopts an appropriate discretionary fiscal policy. What will be the most likely new equilibrium price level and output?

A major reason that the public debt cannot bankrupt the Federal government is because:

The following are important problems associated with the public debt, except:

In 2012, the general public (excluding Federal agencies) held about what percentage of U.S. Federal debt?

The cyclically-adjusted surplus in the U.S. went from +1.2% of GDP in 2000 to +0.6% of GDP in 2002. This suggests that the government during that period:

The effect of an increase in the government budget deficit on the equilibrium level of GDP is essentially the same as a(n):

Refer to the data in the table above. The direction of fiscal policy became more contractionary from:

When Social Security contributions have exceeded payouts in the past, the excess amounts were used to help finance the Federal government's budget deficits.

Due to automatic stabilizers, when the nation's total income rises, government transfer spending:

To track the public debt over time and understand its significance to the economy, it is best:

The economy is in a recession. The government enacts a policy to increase spending by $2 billion. The MPS is 0.2. What would be the full increase in real GDP from the change in government spending assuming that the aggregate supply curve is horizontal across the range of GDP being considered?

The public debt is the:

Refer to the graph above. Assume that the economy initially has a price level of P₁ and output level Q₁. If the government implements expansionary fiscal policy, and the full multiplier effect was felt, it would bring the economy to:

The Medicare trust fund is expected, if current flows continue, to be depleted within a couple of decades.

If the U.S. Congress passes legislation to raise taxes to control demand-pull inflation, then this would be an example of a(n):

When the Federal government cuts taxes and increases spending to stimulate the economy during a period of recession, such actions are design to be:

In the later part of 2009, something historic happened relative to Social Security, in that for the first time:

Which of the following expansionary fiscal policy changes would be most favored by those economists who think that the government is too large and inefficient?

As the economy declines into recession, the collection of personal income tax revenues automatically falls. This phenomenon best illustrates how a progressive income-tax system: