2. When the government runs a fiscal deficit, it finances it by: a. issuing stocks b. decreasing taxes c. borrowing money from a commercial bank d. issuing bonds
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2. When the government runs a fiscal deficit, it finances it by:
a. issuing stocks
b. decreasing taxes
c. borrowing money from a commercial bank
d. issuing bonds
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- 11. Study Questions and Problems #11 Suppose you are the economic policy adviser to the president and are asked what should be done to eliminate a federal deficit. You would recommend to government spending and taxes.1. The public choice perspective on deficit spending suggests that deficit spending - is the result of politicians' concern for the economy's long‑term sucess. - shifts the costs of programs primarily onto present‑day taxpayers. - shifts the costs of programs away from current taxpayers and onto future generations. - is primarily funded by printing money to induce inflation. 2. If the government is required to balance the budget and the economy falls into a recession, which of the actions is a feasible policy response? - invest in infrastructure - cut spending equal to the reduction in tax revenue - cut taxes to encourage consumer spending - increase government spending to stimulate the economy 3. What is a likely consequence of this policy? - The negative consequences of the recession are magnified. - Consumer spending increases due to their ability to keep more of their after-tax income. - Unemployment falls due to the economic…14. What are the three tools of fiscal policy? Tixes a. b. c.
- 4. Which of the following statements are FALSE? (a) When the government prints money to buy goods and services the resulting inflation is a form of tax, since people will not have to pay more for their goods and services than before. (b) An effective fiscal policy macroeconomic stimulus should aim to replace private spending with public (government) spending. (c) To be effective a fiscal policy macroeconomic stimulus should have temporary increases in spending and permanent tax cuts. (d) The paradox of thrift is that the increase in saving during a recession because people postpone major purposes prolongs the recession and thus is not good for the economy, while normally saving grows the economy.14. . The federal government runs a budget deficit when: it buys back more bonds than it issues. it spends less than it receives in tax revenues. it spends more than it receives in tax revenues. the economy is growing rapidly.Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4 trillion worth of taxes. Instructions: Enter your responses rounded to one decimal place. a. What will be the government's deficit? 24 1000 billion b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue? $4 1000 billion C. At a 3 percent rate of interest, how much interest will the government pay each year? $4 30 billion d. Add the interest payment to the government's $5 trillion expenditures for the next year, and assume that tax revenues remain at $4 trillion. In the second year, compute the () Deficit: $ billion (ii) Amount of new debt (bonds) issued to finance the deficit in the second year: $ billion (iii) Total debt at the end of the second year: $ billion (iv) Debt service requirement: $ billion < Prev 5 of 5 Next W tv N FEB 877 9.
- When the total revenues in the federal government are greater than the total expenses in a given year, the budget: A. is balanced. B. has a profit. C. has a deficit. D. has a surplus.Many communities today are concerned with their local government's ability to appropriately manage the taxes it collects. If a government spends more money on expenditures than it collects in taxes, it may end up with not enough money, called deficit. Which of the following could result in a county government having a deficit budget? a The country closes a clinic reducing expenditures, without adjusting taxes. b. The goverment raises sales and property taxes Without adjusting expenditures. C. The county gives all sheriff deputies a raise without adjusting taxes d. The county collects donations to build a WWII veteran memorial2. Which of the following would not reduce the budget deficit or would notincrease the budget surplus?a. Raising income taxesb. Switching from direct expenditures to tax expendituresc. Selling the Parliamentary buildingsd. Cutting social security payments
- Part A Decide whether each of the following fiscal policies of the federal government is expansionary or contractionary. Write expansionary or contractionary, and explain the reasons for your choice. 1. The government cuts business and personal income taxes and increases its own spending. Expansionary. The decrease in personal income taxes increases disposable income and thus increases consumption spending. The business tax cut increases investment spending, and the increase in government spending increases government demand. 2. The government increases the personal income tax , Social Security tax and corporate income tax Government spending stays the same 3. Government spending goes up while taxes remain the same. 4. The government reduces the wages of its employees while raising taxes on consumers and businesses Other government spending remains the sameQuestion Please select the correct term for each statement below. National savings, budget deficit, capital, inflow, budget, surplus, and budget balance a. the difference between the amount the government collects and how much it spend. b. when government savigns are combined with all of the privately-held savings from across the country. c. the result when the government spends more money than it takes in through taxes. d. the net amount of funds coming into a country. e. when the government spends less money than it takes in through taxes.Saved The size of the national debt increases when the federal government runs a deficit. True or False True False