Macro Economics 18Th Edition Chptr 13

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1.What is the role of the Council of Economic Advisers?

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a group of three economist appointed by the president to provide expertise and assistance on economic matters.

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2.What economic activities are involved with an expansionary fiscal policy? A contractionary fiscal policy?

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Increased government spending
Tax reductions

Decreased government spending
Increased taxes

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3.What is a budget deficit? A budget surplus?

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-the amount by which the expendituresof the federal government exceeds it's expenditures in any year

-the amount by which the revenues of the federal governement exceeds its expenditure in any year.

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4.What do economists mean when they talk about a “standardized budget”?

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a comparision of the governement expenditures and tax colllections that would occur if the economy operated at full employment throught out the year; the full employment budget

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5.What are the projections for the Federal budget over the next decade? Do you believe these forecasts?

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Front 6

6.What is a political business cycle?

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The alleged tendency of congress to destabilize the economy by reducing taxes and increasing government expenditures before elections and to raise taxes and lower expenditures after elections.

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7.Identify the factors associated with the recognition lag, administrative lag, and operational lag.

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-looking at the indicators to see what is happening
-how do you go about proposing new legislation for spending
-how long does it take to happen in the economy

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8.What does the term “procyclical” refer to? Countercyclical?

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-meaning that they worsen rather than correct recession and inflation

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9.What is the crowding-out effect?

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a rise in interest rates and a resulting decrease in planned investment caused by the federal governements increased borrowing to finance budget deficit and refinance debt.

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10.What does the term “public debt” refer to?

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The total amount owed by the federal government to the owners of government securities; equal to the sum of past government budget deficits less governement budget surpluses.

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11.Who owns the public debt?

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Front 12

12.What is the relationship between national debt and GDP?

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Front 13

13.How does the U.S. budget deficits or surpluses compare to those of other industrialized nations?

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Front 14

14.How much interest does the U.S. government pay on the national debt?

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1.7 percent

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15.What are public investments?

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Government expenditures on public capital (such as roads, highways, bridges, mass-transit systems, and electric power facilities) and on human capital(such as education,training, and health)

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16.THE LAST WORD: Review and identify the LEI (leading economic indictors) included in this article. What type of economic activity is each one concerned with? What type of conclusions can be drawn if the indicator goes up or down? When are they good for the economy or when are they bad?

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