Figure 10.4 Federal Surplus or Deficit as a Percent of GDP
What will be an ideal response?
The federal deficit—as measured by government borrowing—reached 6 percent of GDP in 1983, a year of deep recession. The deficit was reduced as a percent of GDP from the early 1990s until 1998, when the budget went into surplus. From 1998 to 2001, the government had a net surplus, meaning that some debt was being retired. After 2000, a recession combined with the Bush administration tax cuts put the budget back into deficit. The recession of 2007-9 led to even larger deficits, reaching 10% of GDP before starting to decline as the economy started a slow recovery
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If interest rates and output rises, then
a. government spending may have fallen. b. the money supply may have risen. c. taxes may have risen. d. expectations may have risen. e. none of the above.
Under rent control, bribery is a mechanism to
a. bring the total price of an apartment (including the bribe) closer to the equilibrium price. b. allocate housing to the poorest individuals in the market. c. force the total price of an apartment (including the bribe) to be less than the market price. d. allocate housing to the most deserving tenants.
The conventional policy tools available to the Fed include each of the following, except the:
A. currency-to-deposit ratio. B. reserve requirement. C. target federal funds rate range. D. discount rate.
Suppose that monetary neutrality and the Fisher effect both hold. An increase in the money supply growth rate increases
a. the inflation rate and growth of real GDP. b. the inflation rate but not the growth rate of real GDP. c. the growth rate of real GDP, but not the inflation rate. d. neither the inflation rate nor the growth rate of real GDP.