Exam 16: Budget Deficits in the Short and Long Run

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 crowding-out effect is likely to be the strongest during periods of

Whether or not deficits create a burden depends on how and why the government incurred the deficits in the first place.Explain.

Why might the Fed decide to monetize the deficit?

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

Explain why the portion of the national debt owed to foreigners is a serious matter,whereas the portion owed to U.S.citizens is of less concern.Why does the U.S.national debt pose less of a problem than the debts of Greece in 2010?

Economists who argue in favor of rapid deficit reduction claim that deficit reduction will

With no change in fiscal policy,the budget

Most economists agree that the focus of fiscal policy is to

When budget deficits take place in a high-employment economy,the effect is an increase in capital stock.

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

The official fiscal year budget deficits disappeared from 1998 to 2001.

The structural deficit/surplus budget

Deficit spending will not cause much inflation if the economy is operating near full employment.

If the Fed decides to keep interest rates low when there is a large budget deficit,economists conclude that the Fed is

Why does the government not have to repay debt,as do private individuals?

The strict crowding-out argument relies on the assumption that

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

Give some arguments for and against a balanced budget requirement.

The structural deficit is defined as