Question 1

In 2011, the public debt was $617 billion.Put this number in perspective by relating the debt to GDP, to other countries' debt, to the amount of interest payments on the debt, and to ownership of the debt.

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Question 2

Comment on the statement: "Discretionary fiscal policy offers an ideal approach to dealing with the nation's economic problems."

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Question 3

What fiscal policy is most likely to be invoked during a period of rapid inflation? A period of severe unemployment? What political, investment, and international problems might the government encounter in enacting these policies and putting them into effect?

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Question 4

Describe the European Sovereign Debt Crisis.

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Question 5

Why do some economists, who favour government intervention to address high unemployment or demand-pull inflation, nonetheless reject the use of fiscal policy?

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Question 6

Explain the crowding-out effect.

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Question 7

In Year 1, the full-employment budget showed a deficit of $100 billion and the actual budget showed a deficit of $125 billion.In Year 2, the full employment budget showed a deficit of $100 billion and the actual budget showed a deficit of $150 billion.Based on the data, what can be concluded about the direction of fiscal policy and the performance of the economy between Years 1 and 2?

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Question 8

Identify and explain the three lags associated with the implementation of fiscal policy.

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Question 9

Complete the table below by stating whether the direction of discretionary fiscal policy was contractionary (C), expansionary (E), or neither (N), given the hypothetical budget data for an economy.

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Question 10

What information would be important for assessing the size of the public debt beside the absolute amount of the public debt?

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Question 11

What is the difference between the actual deficit, the full-employment deficit, and the cyclical deficit?

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Question 12

Identify five problems or complications that arise in the implementation of fiscal policy.

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Question 13

"If economic forecasting was a more exact science, the business cycle could be entirely corrected by fiscal measures." Do you agree?

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Question 14

Using the below graph, illustrate the possible impact of a crowding-out effect of a fiscal policy by drawing in the relevant aggregate demand shifts.Label and explain any shifts in the demand curve shown.

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Question 15

Explain how the net-export effect would reduce the effectiveness of fiscal policy.

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Question 16

Differentiate between the federal deficit and the federal debt.

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Question 17

Given the problems with fiscal policy, why might some economists support its use?

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Question 18

State three causes of the public debt.

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Question 19

The following table shows government spending and tax revenue for a hypothetical economy over a five-year period.All figures are in billions.  (a) In what years were there budget deficits and what were the amounts?
(b) In what year was there a budget surplus and what was the amount?
(c) What is the public debt in this economy over the five years?

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Question 20

How can the government finance its expenditures?

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Quiz 13: Part A: Fiscal Policy, Deficits, Surpluses, and Debt