chapter 13

Question 1

Two types of government spending:

Answer 1

purchases of goods and services

government transfers

Question 2

Big items in government purchases

Answer 2

National defense

Education

Question 3

Big items in government transfers

Answer 3

Social Security

Medicaid

Medicare

Question 4

Social Security

Answer 4

Provides guaranteed income to older Americans, disabled Americans, and the surviving spouses and dependent children of decreased or retired beneficiaries

Question 5

Medicare

Answer 5

Covers much of the cost of health care of Americans over age 65

Question 6

Medicaid

Answer 6

Covers much of the cost of health care for Americans with low incomes

Question 7

Social insurance

Answer 7

government programs designed to protect families against economic hardship

Question 8

Social insurance programs

Answer 8

Social Security

Medicare

Medicaid

Unemployment insurance

food stamps

Question 9

Expansionary fiscal policy

Answer 9

Fiscal policy that increases aggregate demand:

1. An increase in government purchases of goods and services
2. A cut in taxes
3. An increase in government transfers

Question 10

Contractionary fiscal policy

Answer 10

The fiscal policy that reduces aggregate demand:

1. Reduction in government purchases of goods and services
2. An increase in taxes
3. Reduction in government transfers

Question 11

Ricardian equivalence

Answer 11

expansionary fiscal policy will have no effect on the economy because far-sighted consumers will undo any attempts by the government to expand

Question 12

federal disaster relief

Answer 12

Quickly disburses funds to victims of natural disaster

Question 13

lump-sum taxes

Answer 13

taxes that dont depend on the taxpayer’s income

Question 14

Automatic stabilizers

Answer 14

Government spending and taxation rules that cause fiscal policy to be automatically expansionary when the economy contracts and contractionary when the economy expands

Question 15

Discretionary fiscal policy

Answer 15

Fiscal policy that is the result of deliberate actions by policy makers rather than rules

Question 16

Savings government

Answer 16

Tax Revenues - Government Purchases - Transfers

T - G - TR

Question 17

Budget deficit rises with

Answer 17

Recessions

High Unemployment

Question 18

Budget deficit falls with

Answer 18

expansions

low unemployment

Question 19

Cyclically adjusted budget balance

Answer 19

An estimate of what the budget balance would be if real GDP were exactly equal to potential output

Question 20

Fiscal year

Answer 20

U.S. fiscal year runs from October 1 to September 30 and is labeled according to the calender year in which it ends

Question 21

Public debt

Answer 21

Government debt held by individuals and institutions outside the government

Question 22

Difference between deficit an debt

Answer 22

Deficit - difference between the amount of money a government spends and the amount it receives in taxes over a given period

Debt - the sum of monye a government owes at a particular point in time

Question 23

Net public debt

Answer 23

Government debt minus any government assets

Question 24

Implicit liabilities

Answer 24

Spending promises made by governments that are effectively a debt despite the fact that they are not included in the usual debt statistics

Question 25

Dedciated taxes

Answer 25

Their expenses are paid out of special taxes on wages

Social Security and Part of Medicare are supported by these

Question 26

Fiscal austerity

Answer 26

Cut government spending and raise taxes, to both reduce the need to borrow more funds and to demonstrate to lenders the ability and determination to do what’s necessary to honor its debts