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Debt needs to be judged relative to assets because
assets can increase the ability to repay a debt
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Which of the following does not hold some of the U.S. gov debt
domestic banks, chinese gov., and the fed reserve
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Retirement of the baby boomers
threatens the ss system because the number of retirees will be relatively large compared to the number of workers remaining by 2020
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Budget deficits
increase the national debt in terms of dollars and as a percentage of GDP
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In the late 1990s actual output grew so fast that by the end of the period it significantly exceeded potential output. Base on this info, the budget moved into
surplus during this period as the passive deficit moved into surplus
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in the long run deficits reduce
investment
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Suppose that the economy has a structural deficit of 200 bil and is also running a budget deficit. It follows that
the passve deficit or surplus cannot be determined without more info
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Which of the following most likely decreases the deficit as a percentage of GDP
a higher GDP growth rate
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Which of the following is true regarding the U.S. gov. debt
some of the U.S. gov debt is owed to foreigners
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When the baby boomers begin to retire in very large numbers, if woker productivity does not change, aggregate supply will
likely fall because the number of reitrees will be greater than the number of new labor force entrants
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Because the baby boom generation threatened the solvency of the U.S. ss system in 1983 the gov passed an amendment to the ss act. this act
raised ss taxes
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If an economy operates below potential income, the actual deficit is
larger that the structural deficit
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when the U.S. dect to GDP ratio has fallen, it has generally been because
income rose
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Politicians who support a "lockbox" for SS argue that
the SS surplus should be used to urchase gov bonds and reduce gov debt
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The U.S. gov currently is running
very large budget deficits
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Deficits and debt are often measured relative to GDP because
the gov's ability to repay the debt depends on GDP
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One of the reasons gov. devt is different from individual debt is
gov never really needs to pay back its debt
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What would make the impending SS prob worse
an increase in the average age at which people die
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If the national devt increases in any given year, it follows that the gov
sold bonds in that year to finance a budget deficit
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Which of the followin holds the most U.S. gov debt
U.S. gov agencies
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deficit
shortfall of revenues under payments
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surplus
an excess of revenues over payments
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gov finances deficits
by selling bonds to private individuals and to the central bank
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structural deficit
part of budget deficit that would exist even if the economy were at its potential levle of income
actual deficit - passive deficit
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passive deficit
- part of the deficit that exists because the economy is operating below its potential level of output
- passive deficit = tax rate x (potential output - actual output)
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nominal deficit
the deficit determined by looking at the difference between expenditures and receipts
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real deficit
nominal deficit adjusted for inflation
real deficit = nominal deficit (inflation x total debt)
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debt
accumulated deficits minus accumulated surpluses
debt is accumulated deficits minus accumulated surpluses. wereas deficit is a flow concept, debt is a stock concept
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reasons gov debt is different from individual debt are
- gov lives forever
- gov can print money to pay debt
- gov owes much of debt to itself
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cash flow accounting system
accounting system entering expenses and revenues only when cash is received or paid out
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policies that would help match real production to real expenditures in 2020 are
- 1. increase taxes on workers to reduce their consumption
- 2. reduce ss payments to reduce consumption by retirees
- 3. increase the retirement age to 72 to increase real production
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