Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 27, Problem 27.6.11PA
To determine
The financing of government spending.
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Which of the following sentences correctly describes the budget of the Federal Government of the Unites States during the past six decades?
A. Since 1961, the Government always runs in budget deficits, meaning it spends more money than it receives every year – except for the brief period of 1998 to 2001.
B. Since 1961, the U.S. Government has been an example of how to run a country on a balanced budget, meaning it balances the level of spending with the level of tax revenue.
C. Since 1961, the Government always runs in budget surpluses, meaning it receives more money than it spends every year – except for the brief period of 1998 to 2001.
D. Since 1961, the Government budget doesn’t show a clear trend. About half of the time, the U.S. incurs budget deficits; to compensate for that, the Government runs budget surpluses half of the time too.
The Swedish Fiscal Policy Council discusses public debt policy in a low interest environment in their latest report. The argue that “there are strong arguments in favour of low public debt despite low interest rates. For private operators, it may be rational to increase debt in a low interest rate climate, but this is not necessarily the case for the state”. Why is that so?
Give two examples each of revenue
receipts and capital receipts in a financial
budget.
Chapter 27 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 27.A - Prob. 1PACh. 27.A - Prob. 3PACh. 27.A - Prob. 4PACh. 27.A - Prob. 5PACh. 27 - Prob. 27.1.1RQCh. 27 - Prob. 27.1.2RQCh. 27 - Prob. 27.1.3RQCh. 27 - Prob. 27.1.4PACh. 27 - Prob. 27.1.5PACh. 27 - Prob. 27.1.6PA
Ch. 27 - Prob. 27.1.7PACh. 27 - Prob. 27.2.1RQCh. 27 - Prob. 27.2.2RQCh. 27 - Prob. 27.2.3PACh. 27 - Prob. 27.2.4PACh. 27 - Prob. 27.2.5PACh. 27 - Prob. 27.2.6PACh. 27 - Prob. 27.2.7PACh. 27 - Prob. 27.2.8PACh. 27 - Prob. 27.3.1RQCh. 27 - Prob. 27.3.2RQCh. 27 - Prob. 27.3.3PACh. 27 - Prob. 27.3.4PACh. 27 - Prob. 27.3.5PACh. 27 - Prob. 27.3.6PACh. 27 - Prob. 27.4.1RQCh. 27 - Prob. 27.4.3RQCh. 27 - Prob. 27.4.4PACh. 27 - Prob. 27.4.5PACh. 27 - Prob. 27.4.6PACh. 27 - Prob. 27.4.7PACh. 27 - Prob. 27.4.8PACh. 27 - Prob. 27.4.9PACh. 27 - Prob. 27.5.1RQCh. 27 - Prob. 27.5.2RQCh. 27 - Prob. 27.5.3PACh. 27 - Prob. 27.5.4PACh. 27 - Prob. 27.5.5PACh. 27 - Prob. 27.5.6PACh. 27 - Prob. 27.5.7PACh. 27 - Prob. 27.6.1RQCh. 27 - Prob. 27.6.2RQCh. 27 - Prob. 27.6.3RQCh. 27 - Prob. 27.6.4RQCh. 27 - Prob. 27.6.5PACh. 27 - Prob. 27.6.6PACh. 27 - Prob. 27.6.7PACh. 27 - Prob. 27.6.9PACh. 27 - Prob. 27.6.10PACh. 27 - Prob. 27.6.11PACh. 27 - Prob. 27.7.1RQCh. 27 - Prob. 27.7.2RQCh. 27 - Prob. 27.7.3RQCh. 27 - Prob. 27.7.4PACh. 27 - Prob. 27.7.5PACh. 27 - Prob. 27.7.7PACh. 27 - Prob. 27.7.8PACh. 27 - Prob. 27.1CTE
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Similar questions
- Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing? fiscal policies monetary policies economic policies financial policiesarrow_forwardA friend of yours argues that federal government spending is out of control and significant cuts in spending are needed to reduce the size of the government. She tells you that if we cut federal government spending on research and foreign aid, it will really reduce the size of the government. Refer to Figure 2 in the text for information on the budget. a. What percentage of federal government spending comes from research and foreign aid? b. How much will the federal government spend on research and foreign aid if the federal government's total spending is $1.2 trillion.arrow_forwardBriefly explain how a budget deficit arises and what corresponding action is typically by taken by a government in this type of circumstance.arrow_forward
- What would it take to convert a sales tax into a true consumption tax? Senator Smith has suggested that the U.S. federal income tax is a more efficient form of tax than the Texas sales tax. What are the arguments for and against this position?arrow_forwardplease answer the following questions: numbers 2-5: 2. What is the largest component of the federal budget?A) EntitlementsC) DefenseB) Net interest 3. Which of the following sources of revenue is used to fund government spending?A) corporate contributionsB) political party contributionsC) taxationD) aggregate supply 4. Suppose an economy is slowing and more and more people are losing their jobs and, therefore, paying less income taxes. If policy makers try to avoid a budget deficit by raising taxe rates, this would probably A) help pull the economy out of a depression.B) make the economic slowdown worse.C) increase inflation. 5. Automatic stabilizers:A) work without the need for decisions from Congress or the White House.B) require explicit actions each year by policy makers to become active.C) increase elections during recessions.D) increase aggregate demand during an economic boom.arrow_forwardExplain how an increase in government spending may decrease private investment (crowding-out effect). Use relevant graphs to support your answer.arrow_forward
- Why do critics charge that fiscal policy has a “big-government bias”?arrow_forwardWhich of the following accurately describes the phenomenon of crowding out? government borrowing pushes up interest rates, driving out private investment and consumption government spending drive up the budget deficit government spending causes more goods to be allocated to the public sector and fewer are available for the private sector Increasing the proportion of public sector spending in the composition of GDP renders production less competitive and therefore less efficient.arrow_forwardComplete the following sentence. As it relates to fiscal policy, a budget deficit exists when:Choose one answer.a. the government receipts are greater than its expenditures. b. the government expenditures are greater than its receipts. c. the government expenditures are equal to its receipts. d. the national debt is less than the yearly revenue.arrow_forward
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