Exam 18: The Government and the Macroeconomy

Argentina, Mexico, and Brazil have all defaulted on their debts at one time or another.

The largest debt-to-GDP ratio is in the United States.

Which of the following should economic policymakers consider to be associated with large deficits and a large debt-to-GDP ratio?

In 1956, the Federal-Aid Highway Act of 1956 created the interstate highway system, at a cost of about $27 billion: $25 billion from the federal government and the remaining $2 billion from states. The full federal share was to be financed by issuing 30-year bonds. But this type of financing was not without its detractors, in particular Senator Harry Flood Byrd of Virginia, who biographer Alden Hatch described as having "an almost pathological abhorrence for borrowing that went beyond reason to the realm of deep emotion. You've been given the unenviable task of convincing Senator Byrd that borrowing to build freeways is good and fair. Use the language of generational accounting to make your argument.

The federal government usually finances its budget deficit by:

The national income identity can be rearranged to show that ________ equals ________.

In the post-World War II U.S. economy, the rapid expansion of federal government debt began during the:

According to the Congressional Budget Office report "A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," the share of federal government spending in GDP will climb to 40 percent by 2075, assuming:

U.S. government debt that is not held by the public often is not counted in economic analyses because it is:

If domestic saving is less than domestic investment, then investment can be financed by:

Income minus taxes is often called:

If investors begin to doubt the ability to finance spending with ________, markets will demand ________.

Which of the following is/are possible cause(s) of rising health care expenditures?

Assume the government does not "print money." Can the government run persistent budget deficits?

Refer to the following figure when answering Figure 18.2: Government Outlays and Receipts as a Percentage of GDP, 1947-2012 -Consider Figure 18.2. Which of the following were periods when the federal government ran a budget surplus?

If current generations are depleting nonrenewable resources, they must compensate future generations by:

Refer to the following figure when answering Figure 18.1: Federal Government Receipts and Outlays, 1990-2012 (Source: Federal Reserve Economic Data, St. Louis Federal Reserve) -Consider Figure 18.1. The federal government ran a surplus during the period:

________ is/are what may happen when the central government needs to borrow to finance its deficit to the detriment of private firms.

The government's intertemporal budget constraint assumes that the budget is:

Which of the following is an indicator of whether a country can borrow?