money neurtality quiz

Question 1

deficit

Answer 1

revenue<expenditures

Question 2

surplus

Answer 2

revenue>expenditures
last one in 2000

Question 3

examples of revenue (receipts)

Answer 3

income tax = 47%
payroll tax = 33%
corporate income tax = 11%
others = 9%

Question 4

where does federal spending go

Answer 4

major entitlements (more than 50%)
medicare, medicaid, healthcare, social security

Question 5

public debt/national debt

Answer 5

total accumulation of all past yearly deficits and surpluses

Question 6

who holds the national debt

Answer 6

agencies of government, foreigners, and individuals

Question 7

most debt is held by

Answer 7

the public (foreigners)

Question 8

budget balance

Answer 8

two different changes in fiscal policy (equal effects on budget balance but unequal on economy)

Question 9

what impacts budget balance

Answer 9

deliberate changes in fiscal policy
current state of the business cycle

Question 10

cyclically adjusted budget balance

Answer 10

an estimate of what the budget balance if there was neither a recession or inflation gap

Question 11

servicing the debt

Answer 11

requires taxing the general public to pay interest to bondholders

Question 12

long run implications of fiscal policy

Answer 12

deficits, surpluses, and debt

Question 13

two reasons to be concerned when a government runs a deficit

Answer 13

crowding out
place financial pressure on future budgets

Question 14

addition problems of fiscal policy

Answer 14

problems of timing
political motivated policies
crowding out effect
net exports effect

Question 15

problems of timing

Answer 15

recognition lag
administrative lag
operational lag

Question 16

political motivated policies

Answer 16

politicians may use economically inappropriate policies to get reelected

Question 17

crowding out effect

Answer 17

government spending might cause unintended effects that weaken the impact of the policy

Question 18

net exports effect

Answer 18

international trade reduces the effectiveness of fiscal policies

Question 19

the money market

Answer 19

determines interest rates on the short run

Question 20

the loanable funds

Answer 20

determines interest rates on long run

Question 21

expansionary monetary policy on long run

Answer 21

won’t increase real GDP
causes more inflation

Question 22

monetary neutrality

Answer 22

changes in the money supply have no real effects on the economy
(an increase in money supply wont change in long run)

Question 23

three graphs needed

Answer 23

money market
investment demand
AD/AS

Question 24

in short run

Answer 24

nominal interest rate falls = real interest rate falls

Question 25

inflation

Answer 25

price level is the absolute level of a price index

Question 26

price level measures

Answer 26

consumer Price index producer price index GDP deflator

Question 27

rate of inflation

Answer 27

the annual rate of increase in the price level

Question 28

disinflation

Answer 28

a reduction in the rate of inflation

Question 29

deflation

Answer 29

a decline in overall prices throughout the economy opposite of inflation

Question 30

who is harmed in unanticipated inflation

Answer 30

creditors because both the principal on loans and interest payments are usually fixed

Question 31

who benefits from unanticipated inflation

Answer 31

debtors the real value of their payments decline as their wages rise with inflation

Question 32

inflation tax

Answer 32

independent central banks issue fiat money monetizing the debt seignorage central banks print money to pay government debts, cause prices to rise and decrease purchasing power

Question 33

seignorage

Answer 33

economics refer to the revenue generated by the government's right to print money

Question 34

demand pull inflation

Answer 34

increases prices demand increases but supply stays the same shortage overheated economy with excessive spending but same amount of goods

Question 35

cost push inflation

Answer 35

higher production costs increase prices negative supply shock

Question 36

output gap in inflationary gap

Answer 36

positive

Question 37

output gap in recessionary gap

Answer 37

negative