ECON 0110 Lecture Notes - Lecture 18: United States Treasury Security, Money Supply, European Cooperation In Science And Technology

17 views3 pages

brownduck476

13 Feb 2015

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

When bonds mature, the government must pay the principal that is due to the lenders (the bondholders). When the treasury has a surplus, which occurs very rarely, the treasury can use the excess tax revenue to pay off the principal to some of the bondholders. The bond would now be cancelled and the national debt would decrease. When the treasury has a deficit, the treasury must find some new way to obtain money so it can pay the principal to the bondholders whose bonds have matured. The treasury obtains the new money by refinancing the debt . Refinancing the debt , or rolling over the debt , occurs when treasury issues new bonds to generate enough revenue to pay off maturing bonds. Less tax revenue is needed in the future. Also, as treasury pays off debt, more funds become available for other borrowers. This could stimulate consumer and business borrowing and spending.

Related Questions

27.Individuals with low incomes probably

a. pay no Social Security tax

b. pay more Social Security tax than income tax

c. pay less Social Security tax than personal income tax

d. pay no taxes at all

e. are avoiding most of their tax payments

28. Which of the following is true?

a. The federal budget deficit is a flow and so is the national debt.

b. The national debt is both a stock and a flow.

c. The federal budget deficit is a stock and the national debt is a flow.

d. The federal budget deficit is a flow and the national debt is a stock.

e. The federal budget deficit is stock and so is the national debt.

30. When the U.S. government runs a deficit, it usually does the following:

a. it buys government bonds from the public

b. it asks the Treasury Department to print money to pay for the deficit

c. it sells new government bonds to the public

d. it borrows money directly from the Federal Reserve

e. it asks the Federal Reserve to print money to pay for the deficit

32. Under what condition can the U.S. government continue to pay interest on a rising debt without eventually needing to increase the average tax rate?

a. if the national debt grows at the same rate as nominal GDP

b. if the nominal interest on the national debt grows faster than nominal GDP

c. if the total interest payments on the national debt grow faster than nominal GDP

d. if the national debt grows faster than nominal GDP

e. if the real interest on the national debt grows faster than real GDP

34.The national debt

a. will be zero when the federal budget is balanced.

b. has been shrinking in the last 30 years.

c. is equal to the governmentâs budget deficit.

d. can grow without negative economic effects.

36.In the long run,

a. an increase in the federal budget deficit can lower the interest rate and investment spending.

b. an increase in the federal budget deficit can raise the interest rate and investment spending.

c. a decrease in the federal budget deficit can lower the interest rate and raise investment spending.

d. a decrease in the federal budget deficit can raise the interest rate and lower investment spending.

44. If the Fed conducts open market purchases (of bonds), we should expect to see the money supply

a. decrease, the interest rate increase, autonomous consumption decrease, business investment decrease, and real GDP decrease

b. increase, the interest rate decrease, autonomous consumption decrease, business investment decrease, and real GDP decrease

c. increase, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP increase

d. decrease, the interest rate decrease, autonomous consumption increase, business investment increase, and real GDP decrease

e. decrease, the interest rate increase, autonomous consumption increase, business investment increase, and real GDP increase

48. In the classical model the interest rate is determined in the money market; in the short-run macro model, the interest rate is determined in the market for loanable funds.

a. true

b. false

yellowreindeer970

Q44. Paying off the national debt would redistribute income from the
a. debt holders to the taxpayers
b. taxpayers to the major recipients of transfer payments
c. banks to the taxpayers
d. taxpayers to the debt holders

Q45. When the government uses tax revenue to pay off portions of the national debt, total purchasing power in the economy
a. increases
b. decreases
c. is not affected at any level
d. remains the same but changes individually

Q46. Which of the following would cause a credit to the U. S. balance of payments?
a. a group of U. S. citizens goes to New Zealand for a vacation
b. General Motors pays a dividend to a citizen of Brazil
c. Lloyd's of London makes an insurance payment to a U. S. resident
d. Russia cancels its purchases of U. S. wheat and buys wheat from Argentina

Q47. Under the gold standard, a country experiencing a gold outflow
a. has a balance of payments surplus
b. had an increasing money supply
c. experienced a decline in output
d. experienced an increase in output

Q48. Under the gold standard, a country with a trade deficit should expect
a. gold to flow out of the country to other countries
b. gold to flow into the country from other countries
c. the value of its currency to appreciate
d. the value of its currency to depreciate

Q49. The course of international monetary policy is directed primarily by the
a. Federal Reserve
b. World Bank
c. International Monetary Fund
d. leaders of the Group of Seven nations

tealgoat796

You hear on the nightly news that the president has vowed to decrease the nation's debt. Both the government and private citizens will have to buckle down and learn to do without, he says.

In order to reduce its debt, a nation must:

A.	run lower deficits.
B.	decrease tax rates.
C.	run lower surpluses.
D.	increase in government spending.

Debt reduction will result in:

A.	more public works projects, higher transfer payments, and more money available for households to spend.
B.	fewer public works projects, higher transfer payments, and more money available for households to spend.
C.	more public works projects, lower transfer payments, and less money available for households to spend.
D.	fewer public works projects, lower transfer payments, and less money available for households to spend.

A friend of yours looks at the state of the U.S. debt in 2011 and tells you, Since the debt is so high, we must be running an incredibly large deficit every year. Your friend's analysis is:

A.	not valid, because the debt is always changing even when deficits are the same.
B.	not valid, because the debt can be high even when the deficit for an individual year is small.
C.	valid, because the debt is always changing even when deficits are the same.
D.	valid, because the public debt is the sum of all deficits and surpluses run by the government over time and can be high even when the deficit for an individual year is small.

Assume that the government in some nations intended to respond to low employment via fiscal policy.

a. What type of policy would this require?

A.	A contractionary fiscal policy designed to decrease the aggregate demand curve.
B.	An expansionary fiscal policy designed to decrease the aggregate demand curve.
C.	An expansionary fiscal policy designed to increase the aggregate demand curve.
D.	A contractionary fiscal policy designed to increase the aggregate demand curve.

b. Assume that this policy ended up having an undesirable outcome. How could this happen in terms of formulation and implementation lags?

A.	This could happen if the implementation lag exceeded the formulation lag.
B.	This could happen if the formulation lag exceeded the implementation lag.
C.	This could happen if the formulation lag and the implementation lag exceeded the expansion.
D.	This could happen if the formulation lag and the implementation lag exceeded the recession.

Econo Nation started 2008 with no national budget debt or surplus. By the end of 2008, it had a budget surplus of $286 million; in 2009, it had a budget deficit of $-425 million; in 2010, it had a budget surplus of $100 million, and the amount of its budget deficit or surplus in 2011 is unknown. If at the end of 2011 Econo Nation's national debt totalled $52 million, determine the deficit or surplus in 2011.

Instructions: Enter your answer as a whole number and include a negative sign if there is a deficit.

Period	Deficit (-) or surplus (+)
Beginning of 2008	$0
End of 2008	$286 million
2009	$-425 million
2010	$100 million
End of 2011	_______ million

sapphiresalmon584

ECON 0110 Lecture Notes - Lecture 18: United States Treasury Security, Money Supply, European Cooperation In Science And Technology

Document Summary

Get access

Related Documents

ECON 0110 Lecture Notes - Lecture 16: Unemployment Benefits, Federal Reserve System

ECON 0110 Lecture Notes - Federal Reserve System, Unemployment Benefits

ECON 0110 Lecture Notes - Lecture 5: United States Treasury Security, Federal Reserve System, Nominal Interest Rate

Related Questions