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23 Cards in this Set

  • Front
  • Back
Government budget deficit
An excess of government spending over government revenues during a given period.
Balanced budget
A situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given period of time.
Government Budget Surplus
An excess of government revenues
Public Debt
The total value of all outstanding federal government securities; a stock measured at a given point in time.
4 Years of Government Budget Surplus
1998 - 2001
The real annual budget deficit
The real annual budget deficit is the difference between the real expenditures and real revenues during the years in which the government's spending has exceeded its revenues.
Long-run aggregate supply is
the sum of planned production for the entire economy at full employment.
According to the text, the net public debt to Gross Domestic Product (GDP) ratio is currently about
Net public debt is equal to
the gross public debt minus all governmental interagency borrowing. Essentially, removes what the federal government owes itself (overlap of debt).
Government Budget Deficit stats - All Net debt %?
Aggregate net debt of all US government entities would rise to 80% of GDP.
Gross Public Debt
All federal government debt irrespective of who owns it.
Per Capita Net Public Debt
Per Capita Net Public Debt is obtained by dividing the net public debt by the population.
Annual Interest Payments on Public Debt
This is the interest that the government must pay to those who hold the bonds it has issued to finance past budget deficits.

Today, foreign residents, businesses, and governments hold more than 50% of the net public debt.
Which of the following statements is true about the public debt and future generations?
Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents.
When foreign residents buy U.S. Treasury securities to finance the budget deficit, we can also anticipate an __ in the trade deficit.
In the long run, a higher government deficit does not affect equilibrium real Gross Domestic Product (GDP), so that continuous increases in the government deficit will
reduce spending on privately provided goods and services.
The fastest growing component of the annual federal budgets since 2000 is
entitlement payments.
The Crowding Out Effect
Deficit spending increases the total demand for credit but leaves the total supply of credit unaltered. The rise in interest rates causes a reduction in the growth of investment and capital formation, which in turn slows the growth of productivity and improvement in society's living standard.
Has the federal budget deficit created the trade deficit?
It appears that larger trade deficits tend to accompany larger government budget deficits.
When evaluating additional macroeconomic effects of government deficits, two important points must be kept in mind:
1. Given the level of government expenditures, the main alternative to the deficit is higher taxes.
2. Is is important to distinguish between the effects of deficits when full employment exists and the effects when substantial unemployment exists.
In the long run, higher government budget deficits have __ effect on equilibrium real GDP per year. Ultimately, therefore, government spending in excess of government receipts simply redistributes a larger share of real GDP per year to government-provided goods and services.
No effect on long run real GDP
Guaranteed benefits under a government program such as Social Security, Medicare, or Medicaid. Legislated federal government payments that anyone who qualifies is entitled to receive, are now the most important component of the federal budget.
Noncontrollable Expenditures
(aka nondiscretionary expenditures) - Government spending that changes automatically without action by Congress.