Chapter 17 Flashcards
Government expenditures are defined as:
government spending on goods and services plus transfer payments.
A deficit is defined as
the excess of total expenditures over total revenues.
If there was a federal budget surplus it would make it possible to:
A) reduce the national debt.
B) increase spending on priorities.
C) ecrease taxes in order to improve the equity and efficiency of the tax
system.
The government finances budget deficits by:
A) borrowing from the public.
B) creating new money.
If the Federal Reserve purchases newly issued government debt
new money is created.This is called Monetizing the Deficit
Which of the following is a burden of the national debt?
Future generations will have to pay higher taxes to finance the national
debt.
Which of the following illustrates a burden of the national debt?
A large debt decreases the amount of capital, thereby decreasing future
incomes.
Government debt lowers the amount of capital in the economy because the
debt:
“crowds out” private investment.
“Servicing the debt” refers to:
paying interest on the existing debt
Social Security and Medicare represent promises made to:
the current generation but paid for by future generations
Changes in taxes and transfer payments that dampen economic fluctuations
are known as:
automatic stabilizers.
During recessions, unemployment __________ while the budget deficit as a
percentage of GDP __________
increases; increases
A constitutional balanced budget amendment would
require that federal expenditures equal revenues (excluding borrowing).
Arguments for the balanced budget amendment include which of the
following?
A balanced budget amendment would reduce the taxation burden on future
generations.
Which of the following is an argument for the balanced budget amendment
A balanced budget amendment would increase capital formation
