Question : 21) If the federal budget has an actual budget deficit : 1244889

21) If the federal budget has an actual budget deficit of $100 billion and a cyclically adjusted budget deficit of $75 billion, then the economy

A) must be at potential real GDP.

B) must be below potential real GDP.

C) must be above potential real GDP.

D) could be below or above potential real GDP.

22) Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential

A) this will result in a current budget deficit.

B) the cyclically adjusted budget will be balanced.

C) government transfer payments will be rising and tax receipts will be falling.

D) All of the above are correct.

23) During most of the years of the Great Depression, the actual federal budget was in ________, and the cyclically adjusted budget was in ________.

A) deficit; surplus

B) surplus; surplus

C) deficit; deficit

D) surplus; deficit

24) Suppose the government wants to maintain a balanced budget. To achieve this goal, when the economy falls into recession government would need to ________ taxes, which would cause aggregate demand to ________.

A) decrease; decrease

B) decrease; increase

C) increase; decrease

D) increase; increase

25) The government budget for the country of Economia is in surplus in 2011, and in deficit in the following year, 2012. We can conclude the

A) government must have raised tax rates or cut spending.

B) government must have cut tax rates or increased spending.

C) government fiscal policy did not change between 2011 and 2012.

D) none of the above

26) Some economists argue that the federal government should normally run a deficit at potential GDP, with the borrowed funds applied to

A) consumption goods.

B) investment goods.

C) social security benefits.

D) health care costs.

27) Borrowing to pay for long-lived capital expenditures makes sense as

A) the benefits are received in the current year so the burden of paying for them should be spread over many years.

B) the benefits are received over many years so the burden of paying for them should be spread over many years.

C) the benefits are received in the current year so the burden of paying for them should be paid in the current year.

D) the benefits are received over many years so the burden of paying for them should be paid in the current year.

28) The total value of U.S. Treasury bonds outstanding equals

A) the federal government deficit.

B) the federal government surplus.

C) the federal government debt.

D) the cyclically adjusted budget deficit.

29) The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus.

A) increases; increases

B) decreases; increases

C) increases; decreases

D) decreases; decreases

30) The federal government debt as a percentage of GDP did not rise

A) during the Great Depression.

B) during World War II.

C) during the 1960s.

D) during the 1980s.