Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 18, Problem 6CQQ
To determine
The relation of Government debt to
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Suppose that in 2018 the federal government spent $3.4 trillion and collected $2.8 trillion in taxes. In 2019, government spending rose to $3.8 trillion and government revenue rose to $3.0 trillion. If the government debt was $20.0 trillion at the beginning of 2018, what will it be at the end of 2019?
Select one:
a. $21.4 trillion
b. $20.8 trillion
c. $20.6 trillion
d. $19.8 trillion
e. $18.6 trillion
According to the traditional view on government debt, a tax cut without a cut in government spending:a. stimulates consumer spending and reduces national saving in the short run.b. stimulates consumer spending and reduces private saving in the short run.c. raises consumption in both the short run and the long run.d. has no effect on consumer spending but reduces national saving in the short run.e. has no effect on consumer spending but reduces private saving in the short run.
If a government is using fiscal policy, this means that it is using.
economy.
spending; interbank loans
interest rates; tax policies
bonds; stock markets
spending; tax policies
and
to attempt to stabilize the
Chapter 18 Solutions
Essentials of Economics (MindTap Course List)
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Similar questions
- A government starts off with a total debt of $3.5 billion. In year one, the government runs a deficit of 400 million. In year two, the government runs a deficit of 1 billion. In year three, the government runs a surplus of 200 million. What is the total debt of the government at the end of year three?arrow_forwardWhich of the following is NOT a discretionary fiscal policy A. Making automatic stabilizers more effective B. Public works C. Changes in tax rates D. Changes in government spending E. Changes in Full Employment GDParrow_forwardFiscal stance refers to: Select one: A. A government that takes a tough stance when it comes to running the country’s finances B. A government that is running a budget deficit C. A government that is running a budget surplus D. Whether a government is pursuing an expansionary or contractionary fiscal policyarrow_forward
- What are the consequences of a high Debt to GDP ratio for the economy?arrow_forwardWhen the government spends more than it takes in taxes it must borrow money to finance its expenditure. How does expansionary fiscal policy affect government's debt?arrow_forwardOne problem with fiscal policy is that it can lead to crowding out. Crowding out is defined as: Select one: A. That part of public expenditure financed from borrowing B. Increased taxes pushing up interest rates C. Increased demand for money pushing up interest rates resulting in lower C and I D. Increased public spending feeding through to adverse exchange rate movementsarrow_forward
- Suppose a government has no debt and a balanced budget. Suddenly it decides to spend $5 trillion while raising only $4 trillion worth of taxes. Instructions: Enter your responses rounded to one decimal place. a. What will be the government's deficit? 24 1000 billion b. If the government finances the deficit by issuing bonds, what amount of bonds will it issue? $4 1000 billion C. At a 3 percent rate of interest, how much interest will the government pay each year? $4 30 billion d. Add the interest payment to the government's $5 trillion expenditures for the next year, and assume that tax revenues remain at $4 trillion. In the second year, compute the () Deficit: $ billion (ii) Amount of new debt (bonds) issued to finance the deficit in the second year: $ billion (iii) Total debt at the end of the second year: $ billion (iv) Debt service requirement: $ billion < Prev 5 of 5 Next W tv N FEB 877 9.arrow_forwardWhat is a default on the national debt? A. The Federal Reserve purchases Treasurys issued by the federal government. B. The federal government buys back its own debt from the holders of United States Treasuries by having the Treasury print money. C. The holders of United States Treasurys forgive the debt and provide the government with cash. D. The federal government declares bankruptcy or restructures the payments on its debts with the lenders.arrow_forward
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