Macro Economics Chapter 13 Power Point Flashcards
What are the four stages of the budget process?
•Agency budget proposals•President submits budget•Budget resolution•Budget passed
What is the federal fiscal year?
October 1 through September 30
What is the federal deficit?
How much money the government borrows in any given fiscal year.
What is the national debt?
Amount owed by the federal government to owners of government securities.
How does the U.S. Treasury borrow money?
By selling securities promising to make interest payments and to repay on a given date.
What is the net public debt?
National debt minus all government interagency borrowing.
What has been done to curb the national debt?
•Tax increase•Spending caps•Debt ceiling
What happened to taxes in 1993?
Raised the highest marginal tax rate from 31% to 36%•Increased tax on gasoline by 4.3 cents per gallon.
What happened to spending in 1993?
Reduced military spending and cut some entitlements, including Medicare, Medicaid, and food stamps.
What was the result through the late 1990s?
Four years of federal surpluses from 1998 to 2001
What happened in 2001?
Recession, tax cuts, and increased spending on the war on terrorism meant a return to deficits.
What is a debt ceiling?
The legislated legal limit on the national debt.
What usually happens when the debt pushes against the ceiling?
Congress raises the ceiling to accommodate the budget deficit.
Can the government go bankrupt? Does the national debt need to be paid off?
•Yes, it’s possible•No, the debt need never be paid off
Are we passing the debt burden to our children?
•Yes, especially if it continues to increase•No, not as long as the debt is internally owned
What is the internal national debt?
The portion of the national debt owed to a nation’s own citizens.
What is the external national debt?
The portion of the national debt owed to foreign citizens.
What is the crowding-out effect?
When federal government borrowing increases interest rates, the result is lower consumption and investments.
Does government borrowing crowd out private-sector spending?
• Yes, the more the government borrows the less loanable funds for everyone else• No, especially if it occurs during economic downturns
When Govt. spends and borrows:Govt. competes with _________ __________, Interest rates _____, Consumers and business spending _________, AD and real GDP _______ _________.
- private borrowers- rise- decrease- increase dampened
