Chapter 12 - Macroeconomics - Assignment Essays

question

Fiscal Policy

answer

Use of government taxes and spending to alter macroeconomic outcomes

question

Deficit Spending

answer

Use of borrowed funds to finance government expenditures that exceed tax revenues

question

Budget Deficit

answer

Amount by which government spending exceeds government revenue in a given time period

question

Budget Surplus

answer

Excess of government revenues over government expenditures in a given time period

question

Fiscal Year (FY)

answer

12-month period used for accounting purposes; begins October 1st for the federal government

question

Discretionary Fiscal Spending

answer

Those elements of the federal budget not determined by past legislative or executive commitments

question

Fiscal Restraint

answer

Tax hikes or spending cuts intended t reduce (shift) aggregate demand

question

Fiscal Stimulus

answer

Tax cuts or spending hikes intended to increase (shift) aggregate demand

question

Income Transfers

answer

Payments to individuals for which no current goods or services are exchanged, such as Social Security, welfare, unemployment benefits

question

Automatic Stabilizer

answer

Federal expenditure or revenue item that automatically responds counter cyclically to changes in national income, like unemployment benefits and income taxes

question

Cyclical Deficit

answer

That portion of the budget balance attributable to short-run changes in economic conditions

question

Structural Deficit

answer

Federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy

question

Crowding Out

answer

Reduction in private sector borrowing (and spending) caused by increased government borrowing

question

Opportunity Cost

answer

Most desired goods or services that are forgone in order to obtain something else

question

Crowding In

answer

Increase in private sector borrowing (and spending) caused by decreased government borrowing

question

National Debt

answer

Accumulated debt of the federal government

question

Treasury Bonds

answer

Promissory notes (IOU's) issued by the U.S. Treasury

question

Liability

answer

Obligation to make future payment; debt

question

Asset

answer

Anything having exchange value in the marketplace; wealth

question

Internal Debt

answer

U.S. government debt (Treasury bonds) held by U.S. households and institutions

question

External Debt

answer

U.S. government debt (Treasury bonds) held by foreign households and institutions

question

Refinancing

answer

Issuance of new debt in payment of debt issued earlier

question

Debt Service

answer

Interest required to be paid each year on outstanding debt

question

Optimal Mix of Output

answer

Most desirable combination of output attainable with existing resources, technology, and social values

question

Deficit Ceiling

answer

Explicit, legislated limitation on the size of the budget deficit

question

Deficit spending results whenever the government

answer

Finances current expenditures that exceed current tax revenues

question

With greater deficit spending, ceteris paribus

answer

Any inflationary gap will become larger

question

Budget surplus is

answer

Excess of government revenues over government expenditures in a given time period

question

In order to reduce the U.S. debt

answer

Government should spend less than it collects in tax revenues

question

Which of the following is an argument against balancing the federal budget?

answer

Doing so may prevent the government from pulling the economy out of recession

question

Elements of the federal budget not determined by past legislative or executive commitments are

answer

Discretionary fiscal spending

question

Much of each year's federal budget is considered "uncontrollable" because

answer

Most of the current revenues and expenditures are the result of decisions made in prior years

question

Which of the following is not an automatic stabilizers?

answer

A. Progressive Income Taxes
B. Unemployment Benefits
C. Welfare Payments
D. Defense Spending
D.

question

Automatic stabilizers tend to stabilize the level of economic activity because they

answer

Increase spending during recessions and reduce spending during inflationary periods

question

Progressive income tax system is particularly effective as an automatic stabilizer because

answer

In a booming economy, taxpayers move into higher tax brackets, which restrains their spending

question

Which of the following is most likely to reduce a federal budget surplus?

answer

Recession

question

For the convenience of analyzing the part of the deficit that is sensitive to fiscal policy, the actual deficit is divided into which of the following components?

answer

Structural and cyclical deficits

question

Structural deficit represents

answer

Federal reserves minus federal expenditures at full employment under current fiscal policy

question

If the total budget deficit is $200 billion and the deficit at full employment is $120 billion, then the

answer

Cyclical deficit is $80 billion

question

Opportunity cost of the debt is

answer

Less of an issue if the economy is below full employment since crowding out is less likely to occur

question

Crowding in is the result of

answer

Falling interest rates

question

National Debt is

answer

Accumulation of all annual deficit and surplus flow

question

Fiscal agent of the U.S. government is the

answer

U.S. Treasury

question

Policies designed to pay off the national debt will result in

answer

Smaller level of aggregate demand

question

Interest payments on the national debt

answer

Are a redistribution of income from taxpayers to bondholders

question

The "real burden" of the debt is directly related to

answer

Idea of opportunity cost

question

Debt service

answer

Refers to the annual interest payments on the debt

question

At the time it occurs, external financing of the debt allows the economy to

answer

Consume beyond the production possibilities curve

1 of 48

question

Fiscal Policy

answer

Use of government taxes and spending to alter macroeconomic outcomes

question

Deficit Spending

answer

Use of borrowed funds to finance government expenditures that exceed tax revenues

question

Budget Deficit

answer

Amount by which government spending exceeds government revenue in a given time period

question

Budget Surplus

answer

Excess of government revenues over government expenditures in a given time period

question

Fiscal Year (FY)

answer

12-month period used for accounting purposes; begins October 1st for the federal government

question

Discretionary Fiscal Spending

answer

Those elements of the federal budget not determined by past legislative or executive commitments

question

Fiscal Restraint

answer

Tax hikes or spending cuts intended t reduce (shift) aggregate demand

question

Fiscal Stimulus

answer

Tax cuts or spending hikes intended to increase (shift) aggregate demand

question

Income Transfers

answer

Payments to individuals for which no current goods or services are exchanged, such as Social Security, welfare, unemployment benefits

question

Automatic Stabilizer

answer

Federal expenditure or revenue item that automatically responds counter cyclically to changes in national income, like unemployment benefits and income taxes

question

Cyclical Deficit

answer

That portion of the budget balance attributable to short-run changes in economic conditions

question

Structural Deficit

answer

Federal revenues at full employment minus expenditures at full employment under prevailing fiscal policy

question

Crowding Out

answer

Reduction in private sector borrowing (and spending) caused by increased government borrowing

question

Opportunity Cost

answer

Most desired goods or services that are forgone in order to obtain something else

question

Crowding In

answer

Increase in private sector borrowing (and spending) caused by decreased government borrowing

question

National Debt

answer

Accumulated debt of the federal government

question

Treasury Bonds

answer

Promissory notes (IOU's) issued by the U.S. Treasury

question

Liability

answer

Obligation to make future payment; debt

question

Asset

answer

Anything having exchange value in the marketplace; wealth

question

Internal Debt

answer

U.S. government debt (Treasury bonds) held by U.S. households and institutions

question

External Debt

answer

U.S. government debt (Treasury bonds) held by foreign households and institutions

question

Refinancing

answer

Issuance of new debt in payment of debt issued earlier

question

Debt Service

answer

Interest required to be paid each year on outstanding debt

question

Optimal Mix of Output

answer

Most desirable combination of output attainable with existing resources, technology, and social values

question

Deficit Ceiling

answer

Explicit, legislated limitation on the size of the budget deficit

question

Deficit spending results whenever the government

answer

Finances current expenditures that exceed current tax revenues

question

With greater deficit spending, ceteris paribus

answer

Any inflationary gap will become larger

question

Budget surplus is

answer

Excess of government revenues over government expenditures in a given time period

question

In order to reduce the U.S. debt

answer

Government should spend less than it collects in tax revenues

question

Which of the following is an argument against balancing the federal budget?

answer

Doing so may prevent the government from pulling the economy out of recession

question

Elements of the federal budget not determined by past legislative or executive commitments are

answer

Discretionary fiscal spending

question

Much of each year's federal budget is considered "uncontrollable" because

answer

Most of the current revenues and expenditures are the result of decisions made in prior years

question

Which of the following is not an automatic stabilizers?

answer

A. Progressive Income Taxes
B. Unemployment Benefits
C. Welfare Payments
D. Defense Spending
D.

question

Automatic stabilizers tend to stabilize the level of economic activity because they

answer

Increase spending during recessions and reduce spending during inflationary periods

question

Progressive income tax system is particularly effective as an automatic stabilizer because

answer

In a booming economy, taxpayers move into higher tax brackets, which restrains their spending

question

Which of the following is most likely to reduce a federal budget surplus?

answer

Recession

question

For the convenience of analyzing the part of the deficit that is sensitive to fiscal policy, the actual deficit is divided into which of the following components?

answer

Structural and cyclical deficits

question

Structural deficit represents

answer

Federal reserves minus federal expenditures at full employment under current fiscal policy

question

If the total budget deficit is $200 billion and the deficit at full employment is $120 billion, then the

answer

Cyclical deficit is $80 billion

question

Opportunity cost of the debt is

answer

Less of an issue if the economy is below full employment since crowding out is less likely to occur

question

Crowding in is the result of

answer

Falling interest rates

question

National Debt is

answer

Accumulation of all annual deficit and surplus flow

question

Fiscal agent of the U.S. government is the

answer

U.S. Treasury

question

Policies designed to pay off the national debt will result in

answer

Smaller level of aggregate demand

question

Interest payments on the national debt

answer

Are a redistribution of income from taxpayers to bondholders

question

The "real burden" of the debt is directly related to

answer

Idea of opportunity cost

question

Debt service

answer

Refers to the annual interest payments on the debt

question

At the time it occurs, external financing of the debt allows the economy to

answer

Consume beyond the production possibilities curve

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Chapter 12 – Macroeconomics

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