Question

Shrinking area of lawmaker discretion means...

a.)the US Federal government is trying to become smaller

b.) The US Federal government cannot decrease government spending by a huge amount because most of what the government spends money on is interest on debt, social security and medicare

c.) There is a time lag between when fiscal policy is changed and when we see the economic results

How are debt and deficit different

a.) debt can never be paid back but deficits can

b.) Debt is how you fund a deficit. Debts can accrue over period of time but deficits are an accounting measure that is looked at for a specific point in time.

c.) Debt is fluid but deficits are static

d.) Both B and C are correct. (1st option = A. Second option = B. Third option = C.

Which of the below options explains the process we defined as "Crowding Out"?

a.) The government runs a surplus. They buy bonds. This leads to less business investment.

b.) The government runs a deficit. They borrow money in the open markets. This causes consumers and businesses to spend more money. Real GDP growth occurs.

c.) The government runs a deficit. They fund the deficit by selling bonds. Interest rates go up. It becomes more expensive for consumers and businesses to borrow money. C and I components of GDP fall.

d.) None of the above

Answer 1

Q1. Shrinking area of lawmaker discretion means

Answer- (C) There is a time lag between when fiscal policy is changed and when we see the economic results.

Q2. How are debt and deficit different

Answer- (D) Both B and C are correct.

Q3. Which of the below options explains the process we defined as "Crowding Out"?

Answer- (C) The government runs a deficit. They fund the deficit by selling bonds. Interest rates go up. It becomes more expensive for consumers and businesses to borrow money. C and I components of GDP fall.