Exam 33: Budget Deficits in the Short and Long Run

In 2010, many politicians argued that the deficit should be reduced at all costs but many economists countered that deficit reduction would be problematic given the state of the economy.

The U.S.government need never default on its debt because

Economic principles suggest that we should focus on balancing the budget rather than balancing aggregate supply and aggregate demand.

A budget deficit is best defined as the

With no change in fiscal policy, the budget

Crowding out can best be defined as

When the economy has substantial additional saving, deficit spending will have a large "crowding out" effect.

The U.S.national debt at the end of fiscal year 2010 was almost

Figure 16-3 -If budget deficits shift the money demand curve as is illustrated in Figure 16-3, which component of total expenditures will be affected the most?

Expansionary fiscal policy normally lowers interest rates.

The primary conclusion of using inflation accounting is that inflation

The American national debt, like the Greek debt in 2010, is an obligation to pay primarily in foreign currencies.

What is "crowding-in" effect? Explain the factors which determine the strength of the crowding in effect.

If crowding out occurs, the Main Burden of the debt is

The Fed and the government are working against each other if, as the government cuts taxes to promote economic growth, the Fed

It is most likely that the federal government will never actually pay off the national debt.

A budget deficit will be least inflationary if the aggregate

Describe the particular policy mix that accounts for the favorable economic conditions of the late 1990s.Be sure to specify the fiscal and monetary policies pursued during this period.

The statement that "repaying our enormous national debt will ruin the nation" is

Which of the following is expected to increase aggregate demand in the short run?