Exam 31: Government Debt and Deficits

Consider a closed-economy AD/AS macro model.An expansionary fiscal policy will generally increase the governmentʹs budget and also tends to and thus private investment.

Decreasing government expenditures in order to reduce the governmentʹs budget deficit can involve certain costs.An example of such a cost could be

Suppose the stock of government debt in Canada at the end of one fiscal year (Year 1)is $475 billion.During the following year (Year 2),government purchases were $180 billion,debt -service payments were $25 billion,and net tax revenues were $208 billion.What is the stock of debt at the end of Year 2?

When a government changes its fiscal policy,it is

The extent to which tax revenues are able to finance the discretionary part of total government expenditure is best measured by the

The diagram below shows two budget deficit functions for a hypothetical economy. FIGURE 31-2 -Refer to Figure 31-2.Initially,suppose the economy is at point A on budget deficit function B0.Real GDP (Y)is $100 million.If the level of potential output (Y*)were $300 million,the cyclical component of the actual budget deficit would be

Consider the following variables: G = government purchases I = interest rate on government debt D = stock of government debt T = net tax revenue The governmentʹs budget constraint can be expressed as

Suppose during one fiscal year,government purchases are $195 billion,debt-service payments are $22 billion and net tax revenues are $208 billion.What is the governmentʹs primary budget deficit/surplus?

The Canadian tax and transfer system acts as an automatic stabilizer because

The diagram below shows two budget deficit functions for a hypothetical economy. FIGURE 31-2 -Refer to Figure 31-2.Initially,suppose the economy is at point A on budget deficit function B0.Real GDP (Y)is $100 million.If the level of potential output (Y*)were $300 million,the structural budget deficit would be

Suppose the governmentʹs budget deficit falls from one year to the next,but there has been no change in the governmentʹs fiscal policy.The change in the budget deficit can be explained by

The governmentʹs primary budget deficit (or surplus)is the

Consider a closed-economy AD/AS model.If an increase in the governmentʹs budget deficit drives up market interest rates,

Annually balanced government budgets

If we want to know whether tax revenues are sufficient to finance the discretionary part of government expenditure,which of the following measures should we analyze?

Do we get a useful and meaningful statistic by dividing the national debt by the GDP?

Suppose the government decided to ensure that its structural budget deficit was always zero.This policy would be problematic because

In an open economy like Canadaʹs,a policy -induced increase in the governmentʹs budget deficit tends to

An annually balanced government budget is a difficult policy goal to achieve because

The best measure of the change in the stance of a governmentʹs fiscal policy is