Module 8

Question 1

is the debt accumulated
by individuals or private businesses. can take numerous forms; a personal loan, credit card, corporate bond or business loan for instance.

Answer 1

Private Debt

Question 2

or national debt, is the sum
of the financial obligations incurred by all government bodies of a county. This debt
can be accumulated by the government directly or a government agency at any
level.

Answer 2

Public Debt

Question 3

create a debt owed
by the government to a member of the
public.

Answer 3

government bonds

Question 4

is accumulated when the government of a county borrows money from the
government of another.

Answer 4

sovereign debt

Question 5

is the cost of servicing
debt. For consumers, it is the cost of interest payments on debt. The debt burden will be higher for credit cards and
loans with high interest. The debt burden on mortgages will be relatively lower
compared to the value of the loan.q

Answer 5

Debt Burden

Question 6

The legal limit set by
Congress on the total amount that the department of treasury can borrow. If the level of federal debt hits the debt ceiling, the government cannot legally borrow additional funds until Congress raises the
debt ceiling.

Answer 6

Debt Ceiling

Question 7

The nation’s debt limit is
similar to the limit your credit card company places on your spending. But there’s one significant difference. Congress is in charge of both its spending and the debt limit. It already
knows how much it will add to the debt when it approves each year’s budget deficit. When it refuses to increase the
debt limit, it’s saying it wants to spend but not pay its bills. That’s like your credit card company allowing you to spend
above its limit and then refusing to pay the stores for your purchases.

Answer 7

Federal Debt

Question 8

is a term used to
describe the act of repaying a debt. This will be achieved by retrieving recently issued notes and bonds and restoring the
principal to those who bought the debt. When debt is released, it is frequently
retired by setting up a sunk fund. The issuer contributes a portion of the proceeds from the debt offering to the
sinking fund. The assets are available until the loan must be repaid.

Answer 8

Debt retirement

Question 9

is a macroeconomic economic theory of total spending in the economy and its effects
on output, employment, and inflation.

Answer 9

Keynesian economics

Question 10

Developed Keynesian economics

Answer 10

John Maynard Keynes

Question 11

He developed the multiplier effect

Answer 11

Richar Khann

Question 12

an injection of government spending eventually leads to added business activity and even more spending. This
theory proposes that spending boosts aggregate output and generates more income. If workers are willing to spend
their extra income, the resulting growth in the gross domestic product (GDP) could
be even greater than the initial stimulus amount.

Answer 12

Keynes theory of fiscal stimulus

Question 13

is one of the chief components of Keynesian countercyclical fiscal policy.

Answer 13

multiplier effect

Question 14

The Keynesian Tools and
Underdeveloped Countries:

Answer 14

-effective demand
-propensity to consume
-saving
-marginal efficiency of capital
-rate of interest
-the multiplier
-policy measures

Question 15

Unemployment is caused by the deficiency of effective demand, and to get over it, Keynes suggested the stepping up of consumption and non-
consumption expenditures.

Answer 15

effective demand

Question 16

highlights the relationship between consumption
and income. When income
increases, consumption also
increases but by less than the
increment in income.

Answer 16

propensity to consume

Question 17

Keynes regarded this as a social vice for it is excess of
saving that leads to a decline in
aggregate demand. Again, this
idea is not applicable to
underdeveloped countries
because saving is the panacea for their economic backwardness.

Answer 17

Saving

Question 18

There is an
inverse relationship between
investment and MEC. When
investment increases, the MEC
falls, and when investment
declines, the MEC rises.

Answer 18

marginal efficiency of capital

Question 19

is the second determinant
of investment in the Keynesian
system. It is, in turn, determined by liquidity preference and the
supply of money.

Answer 19

rate of interest

Question 20

Not only this, even the Keynesian policy prescriptions are hardly tenable under the conditions prevailing in
underdeveloped countries.

Answer 20

policy measures

Question 21

Dr. V. K. R.V. Rao
has analyzed the feasibility of
applying the Keynesian multiplier theory and policy implications to an underdeveloped country like
India. According to Dr. Rao,
Keynes never formulated the
economic problems of
underdeveloped countries nor did he discuss the relevance to these countries for either the objective or the policy that he proposed for the more developed countries.

Answer 21

The multiplier