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Worksheet for Fiscal Policy and Budget FY2011
#1. Fiscal policy refers to _______________ spending and ________________.
#2. Fiscal policy in the US is determined by _____
______________ and Congress.
#3. An increase in the fiscal deficit will normally be expected to __________ real GDP and
_______________ interest rates.
#4. An increase in the US fiscal deficit will normally lead to an ________________ in the
value of the US dollar.
#5. Crowding out refers to a fiscal deficit _______________ interest rates and choking off
___________ expenditure.
#6. When crowding out occurs, there can be domestic crowding out and ______________
crowding out.
#7. International crowding out occurs when the fiscal deficit raises interest rates and this
leads to a ___________ foreign exchange rate and less US exports.
#8. US farmers are particularly worried about US fiscal deficits because they can reduce
farm ________________ due to a higher US dollar.
#9. Domestic crowding out, unlike international crowding out, is defined as a reduction in
investment and consumption due to higher interest rates stemming from higher
____________ _____________.
#10.
Fiscal deficits are _____________, while the national debt is a stock.
#11. The most recent year that the US had a fiscal surplus was _______. See
http://en.wikipedia.org/wiki/Fiscal_policy_of_the_United_States
#12. The US had a fiscal surplus during three consecutive years _______, ________, and
_______. The President at that time was _______ ______________.
#13. The fiscal deficit is defined as (government expenditures – government revenues),
where government expenditures includes _____________ on the debt.
#14. The fiscal deficit is endogenous because it depends on the level of __________.
#15,
The three means of financing government are taxes, ___________, and _________.
#16. Many people confuse the terms deficit and debt. However, the two are related. The
change is the _____________ is equal to the ____________.
#17. When the government borrows it issues _________________.
#18. The total amount of bonds outstanding is called the national ___________.
#19. If we increase government spending by $1000 and raise taxes by $1000 at the same
time, the IS curve will not shift to the right. True or False? Why?
#20. Higher deficits and government debt affect the economy by increasing aggregate
demand, by raising ____________ ___________ and by affecting business confidence.
#21. The nominal GDP of the US in 2009 was about 14 ____________ dollars.
#22. The US Federal government fiscal deficit in 2009 was about 1.4 ___________ dollars.
#23. The US deficit to GDP ratio in 2009 was about ____________ %.
#24. Debt in the hands of the public includes debt held by the Social Security trust funds,
True or False.
#25. China’s holdings of US federal government debt is NOT part of the debt held by the
public? True or False?
#26. About ______ % of recent US federal debt held by the public is held by foreigners.
#27. About ______% of recent total outstanding US federal debt is held by foreigners.
#28. According to OMB and CBO in 2009, debt held by the public was
__________________ while total outstanding debt was _____________________________
#29. In our reading we found that the Federal Reserve in 2009 owned about
____________ % of the debt held by the public.
#30. The Federal Reserve holding of Treasury bonds is included in the debt held by the
public. True or False.
Consider the following chart
#31. The majority of debt instruments that have been issued by the federal government
are bonds, bills, and _________.
#32. Generally speaking, the maturity of a bill is shorter than a note, and the maturity of a
note is shorter than a _____________.
#33. Most of the debt issued by the federal government and held in government accounts
is in federal trust ________, such as the federal employees ____________ funds.
#34. In 2008, roughly ______% of the debt held by the public was inflation protected...i.e.,
indexed to inflation.
#35.
The US federal fiscal year FY2011 begins _______, 20___ and ends _____, 20___.
#36. Fiscal years have become popular with governments, instead of calendar years,
because of what reasons?
#37. What are the four major revenue sources to the federal government?
#38. In 2009, individual income taxes and social security payroll taxes constituted
______ % of total federal receipts.
#39. What % of federal revenues are due to tariffs on imports?
#40. What % of federal revenues are due to excise taxes (i.e., cigarette, gasoline and
tobacco taxes) taken together?
#41. Government spending can be divided into two large categories – non-mandatory or
______________ spending and non-discretionary or _______________ spending.
#42. Defense spending is considered to be mandatory spending. True or False?
#43.
Interest on the debt is considered to be mandatory spending. True or False?
#44. There are _____ appropriation subcommittees under the Budget Committees in the
House and the Senate.
#45. The President’s point man on the budget is the Director of the Office of
_____________ and ______________.
#46. The appropriations subcommittee dealing major funding for the fight against
terrorism is the one on ____________________ Security.
#47. Many people living in farm states are concerned with the leadership of the in the
House and Senate appropriation subcommittees on ____________________.
#48. The defense budget 2009 outlays as a percentage of total federal government
expenditures is almost exactly equal to _______%.
#49. Non-discretionary spending in the US federal budget as a percentage of total
expenditures is about _________%.
-----------------------Use “outlay”, ”authorization”, or “appropriation” correctly in the following three short
answers.
#50. An ___________ is an act of congress establishing, changing, or continuing a federal
agency or program and delimiting its powers and structure.
#51.
An __________ is an act of congress providing an agency or program with a specified
amount of budget authority.
#52. An ________ is a payment (usually a check drawn on the Treasury, or in cash) by the
government in fulfillment of an obligation.
-------------------------#53. Discretionary federal spending includes spending on Social Security and Medicare.
True or False?
#54. According to OMB interest on the national debt is expected in 2015 to be equal to
$ _______________ which will be _________% of projected total government expenditures.
#55.
Interest on the debt in 2009 was _________% of total federal expenditures.
#56. If the Federal Reserve Bank of New York enters the open market and purchases a
large amount of Treasury debt, then we would expect the money supply would increase.
True or False?
#57. It is a good thing that the Social Security Trust Funds buy Treasury bonds, This is
because Treasury bonds are high risk and long maturity. True or False?
Correct the following
#58. Treasury Bills (long maturity) Treasury Bonds (medium maturity) Treasury Notes
(short maturity).
#59. In the Federal budget process, OMB and the President initiate the action of making a
budget for the US government. True or False?
#60. A ___________ _____________ is used to hammer out the differences between the
two budgets of the House and the Senate.
#61. Since the government's budget is a formal legal object, the President must sign it in
order for it to become law. True or False?
#62.
Budget reconciliation is a process used to make sure that newly budgeted amounts
agree with existing law. True or False?
#63. 90% of the federal income tax law is fixed. Therefore, it takes an act of _________
to change the federal tax law.
#64.
The term CBO stands for ________________ _________________ _______________.
#65. The OMB budget summary shows that the Obama administration is now concerned
with job _________ and economic growth.
Fill in the blanks based on OMB summary of the budget -#66. Investing in Job Creation -- $17.5 billion in _________ guarantees from the Small
Business Administration to small businesses to help them operate and expand.
#67. Investing in Job Creation – a redirection of Troubled Asset ______ _______ funds
that are being repaid so as to help small businesses create jobs.
#68.
Building Infrastructure -- $_______ billion in funds for increased broadband access.
#69. Building Infrastructure -- $1.14 billion to modernize the _____ Traffic ________
System.
#70.
Educating a Workforce – an historic $_______ billion increase in child care funding.
#71. Educating a Workforce – new legislation to provide _________ student loans to
students from the federal government thus eliminating waste.
#72. Clean Energy Economy – new market based policies that aim to reduce GHG
emissions by more than _______ % by 2050.
#73. Clean Energy Economy -- $545 million to develop carbon ________ and storage
technology.
#74. Lowering the Cost of and Providing More Health Care -- $______ million to increase
and strengthen health related IT policy, coordination, and research activities.
#75. Lowering the Cost of and Providing More Health Care -- $286 million for research
that compares the __________ of different medical options.
#76. Keeping America Safe – the Administration requests an increase of _____ % in the
defense budget; an amount equal to $18.2 billion.
#77. Keeping America Safe – an increase of $______billion for the Department of Energy's
Defense Nuclear Nonproliferation program, representing an increase of 26% from the 2010
budget.
#78. Look at the chart above. Four large mandatory spending items are ______?
#79. Look at the chart above. The dark black part of outlays refers to discretionary
security spending. What is that?
#80. Look at the chart above. By 2015 individual income taxes are expected to be a
much larger % of total revenue to the federal government. Why?
Here are some fiscal questions that require you to use your IS-LM AS-AD analysis to
answer. Assume the typical IS-LM AS-AD curves.
#81. Suppose that government spending increases without an increase in taxes or money.
Will this put pressure on prices to rise?
#82. Suppose that government spending increases without an increase in taxes or money.
Will this put pressure on interest rates to fall?
#83. Suppose that government spending increases without an increase in taxes or money.
Will there be any crowding out effects? If so, explain them.
#84. Suppose that government spending increases without an increase in taxes or money.
If the government spends more will this increase the amount of money in the economy?
#85. Suppose that tax rates are raised. Will this raise of lower the multiplier?
#86. Suppose that tax rates are raised. Will this increase the amount of money in the
economy?
#87. Raising income taxes will definitely cause a rise in prices. True or False?
#88. Cutting taxes will definitely raise interest rates. True or False?
#89. Cutting taxes will cause a rise in the fiscal deficit. True or False?
#90. In the short run, printing money to finance increased government spending will lower
the real wage in the economy. True or False?
#91. Raising taxes will increase or lower real wages in the economy?
#92. Increasing government spending will increase or lower real wages in the economy.
#93. If workers demand a higher money wage, the effect will be the same as a lowering of
taxes. True or False.
#94. The effect of an increase in government spending can be offset by a rise in the
nominal wage rate. True or False?
#95. If government spending increases, but planned investment decreases at the same
time, the economy may not be affected at all. True or False.
#96. Lower nominal wages can lead to greater private investment. True or False?
#97. When government spending increases, private consumption will increase also. True
or False?
#98. Fiscal policy is a very rational process.
#99. Fiscal policy can help us evaluate fiscal alternatives.
#100.
Taxes = Money = Income
No. No. No. Why?