Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 6CQQ
To determine
The relation of Government debt to
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Students have asked these similar questions
Suppose that in 2018 the federal government spent $3.4 trillion and collected $2.8 trillion in taxes. In 2019, government spending rose to $3.8 trillion and government revenue rose to $3.0 trillion. If the government debt was $20.0 trillion at the beginning of 2018, what will it be at the end of 2019?
Select one:
a. $21.4 trillion
b. $20.8 trillion
c. $20.6 trillion
d. $19.8 trillion
e. $18.6 trillion
According to the traditional view on government debt, a tax cut without a cut in government spending:a. stimulates consumer spending and reduces national saving in the short run.b. stimulates consumer spending and reduces private saving in the short run.c. raises consumption in both the short run and the long run.d. has no effect on consumer spending but reduces national saving in the short run.e. has no effect on consumer spending but reduces private saving in the short run.
Which of the following is NOT a discretionary fiscal policy
A.
Making automatic stabilizers more effective
B.
Public works
C.
Changes in tax rates
D.
Changes in government spending
E.
Changes in Full Employment GDP
Chapter 18 Solutions
Essentials of Economics (MindTap Course List)
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- A government starts off with a total debt of $3.5 billion. In year one, the government runs a deficit of 400 million. In year two, the government runs a deficit of 1 billion. In year three, the government runs a surplus of 200 million. What is the total debt of the government at the end of year three?arrow_forwardIf a government is using fiscal policy, this means that it is using. economy. spending; interbank loans interest rates; tax policies bonds; stock markets spending; tax policies and to attempt to stabilize thearrow_forwardFiscal stance refers to: Select one: A. A government that takes a tough stance when it comes to running the country’s finances B. A government that is running a budget deficit C. A government that is running a budget surplus D. Whether a government is pursuing an expansionary or contractionary fiscal policyarrow_forward
- When the government spends more than it takes in taxes it must borrow money to finance its expenditure. How does expansionary fiscal policy affect government's debt?arrow_forwardOne problem with fiscal policy is that it can lead to crowding out. Crowding out is defined as: Select one: A. That part of public expenditure financed from borrowing B. Increased taxes pushing up interest rates C. Increased demand for money pushing up interest rates resulting in lower C and I D. Increased public spending feeding through to adverse exchange rate movementsarrow_forwardAlert dont submit AI generated answer.arrow_forward
- 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.arrow_forwardWhat is a default on the national debt? A. The Federal Reserve purchases Treasurys issued by the federal government. B. The federal government buys back its own debt from the holders of United States Treasuries by having the Treasury print money. C. The holders of United States Treasurys forgive the debt and provide the government with cash. D. The federal government declares bankruptcy or restructures the payments on its debts with the lenders.arrow_forwardExplain the term federal deficits.arrow_forward
- What does a declining national debt indicate? Group of answer choices The government is receiving more money in taxes than it spends in a year. The government is spending more money than it receives in taxes for a given year. The unemployment rate is declining. The rate of inflation is declining.arrow_forwardWhich of the following owns the largest proportion of the national debt? a. foreigners b. federal, state, and local governments and the Federal Reserve c. private individuals, banks, and corporations d. foreign governmentsarrow_forwardOne criticism of the fiscal policy ineffectiveness is because: A.the velocity of money is predictable. B.it is dependent on Congress' approval. C.the crowding-out effect increases investment. D.prices and wages are sticky in the short run.arrow_forward
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