logo image

ch 13, Econ Ch 13

The government’s fiscal policy options for moving the economy out of a recession include
increasing government spending, decreasing taxes, or both.
For a person who wants to preserve the size of government, the fiscal options for ending a recession include
an increase in government spending.
For a person who thinks the public sector is too large, the fiscal options for ending recession would include
a cut in taxes.
Built-in, or automatic, stabilizers work by changing
tax revenue and government payouts correct so that GDP changes are reduced.
The problem of time lags in enacting and applying fiscal policy is that
in the time it takes to identify the situation, enact a policy, and allow it to work, economic circumstances may have changed.
A political business cycle happens because
politicians are more interested in reelection than in stabilizing the economy.
Expectations of a near-term policy reversal weaken fiscal policy because
consumers may hesitate to increase their spending because they believe that tax rates will rise again.
The crowding-out effect is the
reduction in investment spending caused by the increase in interest rates, arising from an increase in government spending.
In requesting a tax cut in the early 1960s, President Kennedy said, “It is a paradoxical truth that tax rates are too high today and tax revenues are too low and the soundest way to raise tax revenues in the long run is to cut tax rates now.”

This statement recognizes that

tax cuts increase production, GDP, and tax revenues.
Budget deficits in 2002 were due to
the recession and tax cuts
Deficits increased substantially in 2008 because of
fiscal stimulus after the financial collapse
Total U.S. debt is the total amount of money
debt held by the public is
owed by the federal government to all security holders
a portion of U.S. debt.
Why is the debt as a percentage of GDP more relevant than the total debt?
Debt as a percentage of GDP measures the economy’s ability to manage debt correct.
An internally held public debt is like a debt of the left hand owed to the right hand.
True
The Federal Reserve and federal government agencies hold more than three-fourths of the public debt
False
As a percentage of GDP, the total U.S. public debt held by the public was larger in 2010 than it was in 1990.
True
As a percentage of GDP, the total U.S. public debt is the highest such debt among the world’s advanced nations
False
If the annual interest payments on the debt sharply increased as a percentage of the GDP,
the government would have to use more tax revenues for interest or go deeper into debt.
Refinancing of the public debt might drive up real interest rates because
government borrowing to finance the debt increases demand for funds and competes with private borrowing.
Social Security is a “pay-as-you-go” plans. This means that
most of the current revenues from the Social Security tax are paid to current Social Security retirees.
The Social Security trust fund
includes assets held by these programs to help pay for future projected tax revenue shortfalls.
The long-run fiscal imbalance in the Social Security retirement system is the result of
an aging population and declining worker-beneficiary ratio.
The government’s fiscal policy options for ending severe demand-pull inflation include
reducing government spending, increasing taxes, or both.
For a person who wants to preserve the size of government, the fiscal options for ending severe demand-pull inflation would include
an increase in taxes.
For a person who thinks the public sector is too large, the fiscal options for ending severe demand-pull inflation would include
a cut in government spending.
The ratchet effect makes anti-inflationary policy
more difficult
Some politicians have suggested that the United States enact a constitutional amendment requiring that the Federal government balance its budget annually. Such an amendment, if strictly enforced, would force the government to enact a contractionary fiscal policy whenever the economy experienced a severe recession.
Net tax revenue falls and transfer payments rise. Balancing the budget would require lowering transfer payments and raising taxes
Built-in, or automatic, stabilizers work by changing ______ so that GDP changes are reduced.
taxes and government payouts
What type of tax system would have the most built-in stability?
A progressive tax because it increases at an increasing rate as incomes rise, thus having more of a dampening effect on rising (or falling) incomes.
The standardized budget measures what the Federal deficit or surplus would be if the economy reached the _______ level of GDP.
full-employment
If the standardized budget is balanced, the
government is not engaging in either expansionary or contractionary policy
A political business cycle is the concept that
politicians are more interested in reelection than in stabilizing the economy
Expectations of a near-term policy reversal weaken fiscal policy because
consumers may hesitate to increase their spending because they believe that tax rates will rise again.
The crowding-out effect is the
reduction in investment spending caused by the increase in interest rates, arising from an increase in government spending.
Consider the following statement: “Although fiscal policy clearly is useful in combating the extremes of severe recession and demand-pull inflation, it is impossible to use fiscal policy to fine-tune the economy to the full-employment, noninflationary level of real GDP and keep the economy there indefinitely.”

This statement recognizes that

the impact of fiscal policy will affect the economy differently depending on the timing of the policy and the severity of the situation
What are the two ways to measure the public debt?
Its absolute dollar size and as a percentage of GDP
The distinction between the absolute and relative sizes of the public debt is important because
the absolute size doesn’t tell you about an economy’s capacity to repay the debt
Refinancing the public debt means
selling new bonds to retire maturing bonds.
An internally held debt is one in which the
bondholders live in the nation having the debt
Paying off an internally held debt would
not burden the economy as a whole
Paying off an externally held debt
may lower the dollar exchange rate.
The total public debt is more relevant to an economy than the public debt as a percentage of GDP
F
An internally held public debt is like a debt of the left hand owed to the right hand
T
The Federal Reserve and Federal government agencies hold more than three-fourths of the public debt
F
The portion of the U.S. debt held by the public (and not by government entities) was larger as a percentage of GDP in 2009 than it was in 2000
T
As a percentage of GDP, the total U.S. public debt is the highest such debt among the world’s advanced industrial nations
F
Refinancing of the public debt might drive up real interest rates because
government borrowing to finance the debt increases demand for funds and competes with private borrowing
Refinancing of the public debt might cause
higher interest rates that can lower investment and economic growth.
Social Security and Medicare are “pay-as-you-go” plans. This means that
most of the current revenues from the Social Security tax are paid to current Social Security retirees
Social Security and Medicare trust funds are
assets held by these programs to help pay for future projected tax revenue shortfalls

Need essay sample on "ch 13, Econ Ch 13"? We will write a custom essay sample specifically for you for only .90/page

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
×
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register
Signup & Access Essays

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
|
Complete Buyer Protection
|
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy