Exam 13: Fiscal Policy, Deficits, and Debt

As of 2012, more than half of the total debt of the U.S. government was owed to foreigners.

A decrease in government spending and a cut in taxes would be a pair of fiscal policies that reinforce each other.

One timing problem in using fiscal policy to counter a recession is the "administrative lag" that occurs between the:

The cyclically-adjusted budget deficit in an economy is zero. If this economy goes into recession, then the actual government budget will be:

Refer to the graph above. A budget surplus would be associated with GDP level:

Assume that the economy is in a recession and there is a budget deficit. A strict balanced-budget rule that would require the Federal government to balance its budget during a recession would be:

The goal of expansionary fiscal policy is to rein in inflation.

From 1995 to 2001, the U.S. public debt relative to GDP:

When changes in taxes and government spending occur in the economy without explicit action by Congress, such policy is called ______ fiscal policy:

Incurring an internal debt to finance a war like World War II does not pass the true cost of the war on to future generations because:

One advantage of automatic fiscal policy over discretionary fiscal policy is that automatic fiscal policy:

Transfer payments that increase as GDP falls are a type of automatic stabilizer in the economy.

One of the potential consequences of the public debt is that it may:

Refer to the above graph. If the economy was initially in equilibrium at point 3 and a government deficit makes interest rates increase by 4 percentage points, then the crowding-out effect would be a reduction of:

You are given the following information about aggregate demand at the existing price level for an economy: (1) consumption = $500 billion; (2) investment = $50 billion; (3) government purchases = $100 billion; and (4) net export = $20 billion. If the full-employment level of GDP for this economy is $620 billion, then what combination of actions would be most consistent with closing the GDP-gap here?

The following is budget information for a hypothetical economy. All data are in billions of dollars. Refer to the above table. Assume that Year 1 is the first year for this economy and Year 5 is the current year. What is the public debt in this economy at Year 5?

If the crowding-out effect is at its maximum strength, it follows that an increase in government spending would:

In Year 1, the actual budget deficit was $150 billion and the cyclically-adjusted deficit was $125 billion. In Year 2, the actual budget deficit was $130 billion and the cyclically-adjusted deficit was $125 billion. It can be concluded that from Year 1 to Year 2:

If the government wants to reduce unemployment using fiscal policy, it may do so by increasing government spending.

In 2012, the public debt in the U.S. on a per capita basis was about: