Exam 32: Budget Deficits in the Short and Long Run

Give some arguments for and against a balanced budget requirement.

What is "crowding out"? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer.

Which of the following statements about the national debt has the most validity?

Falling GDP leads to higher transfer payments and lower tax receipts.

A budget deficit will be most inflationary if the aggregate

In contrast to Argentina in 2001, the United States debt is less of a burden because the U.S. debt is

In 2010 and 2011, many observers were worried that the

In actual practice, does the Fed monetize the debt?

The United States need never pay off the national debt; it can simply refinance the debt when it comes due. The flaw in thinking that the government must pay it off is based on the fallacy of

When will the difference between the actual deficit and the structural deficit be the largest?

Expansionary fiscal policy normally raises interest rates.

In the short run, the dominant effect of deficit reduction causes an

The central bank is said to monetize the deficit when it purchases bonds issued by the government.

Figure 32-3 If budget deficits shift the money demand curve as is illustrated in Figure 32-3, which component of total expenditures will be affected the most?

The fallacy in the strict crowding-out argument comes from supposing that

If the economy is in a recessionary gap and the government attempts to balance the budget, the effect will be to

Monetizing the debt has what effect on the economy?

If the government ran a major deficit, and there was no noticeable effect on the level of GDP, this could be taken as evidence of

Which of the following is true regarding the effect of deficits from 1980 to 2005 in the United States?

The strict crowding-out argument relies on the assumption that