Chapter 13

Question 1

what is national debt

Answer 1

the total amount owed by the federal government to owners of government securities (savings bond)

Question 2

what is the net public debt

Answer 2

nation debt minus all government interagency borrowing

Question 3

T or F the national debt includes the Social Security trust fund and, as a result, federal budget deficits are reduced or budget surpluses are raised

Answer 3

True

Question 4

what is a debt ceiling?

Answer 4

a legislated legal limit on the national debt

Question 5

what is internal national debt?

Answer 5

the portion of the national debt owed to a nation’s own citizens

Question 6

what is external national debt?

Answer 6

the portion of the nation debt owed to foreign citizens

Question 7

what is the crowding-out effect?

Answer 7

a reduction in private-sector spending as a result of federal budget deficits financed by U.S. Treasury borrowing, when federal government borrowing increases interest rates the result is lower consumption by households and lower investment spending by businesses

Question 8

what is the causation chain for government spends and borrows?

Answer 8

> government competes with private borrowers > interest rates raise > consumer and business spending decrease > AD and real GDP increase dampened

Question 9

what is the crowding-in effect?

Answer 9

an increase in private-sector spending as a result of federal budget deficits financed by U.S. treasury borrowing at less than full employment consumers hold more treasury securities and this additional wealth causes them to spend more. business investment s spending increases because of optimistic profit expectations

Question 10

when is crowding out complete?

Answer 10

crowding out is complete if the economy is at full employment but debatable at less than full employment