What is the economic consequence of a government budget deficit created by expansionary fiscal policy?
Explanation
Expansionary fiscal policy, which involves either increasing government spending or decreasing taxes to stimulate the economy, by its nature leads to a budget deficit where government outlays exceed its revenues.
Other questions
What are the three main options for an expansionary fiscal policy when a recession occurs?
If the economy's MPC is .75, and the government initiates $5 billion of new spending, what will be the total rightward shift of the aggregate demand curve?
Why must a tax cut be somewhat larger than a government spending increase to achieve the same amount of rightward shift in the aggregate demand curve?
In the context of fiscal policy, what is the 'ratchet effect'?
What is a 'built-in stabilizer' in the context of fiscal policy?
What is the purpose of using the 'standardized budget' to evaluate fiscal policy?
What is the 'recognition lag' in the context of fiscal policy timing problems?
What is the 'crowding-out effect' as it relates to fiscal policy?
How is the U.S. public debt primarily defined?
According to the data for 2007, what percentage of the total U.S. public debt was held by foreigners?
What are the two main reasons that a large public debt does not threaten to bankrupt the U.S. Federal government?
How can the payment of interest on the public debt contribute to income inequality?
To eliminate a $12 billion inflationary GDP gap in an economy with an MPC of .75, by how much should the government decrease its spending?
Why are the fiscal policies of state and local governments often described as pro-cyclical?
What are public-private complementarities, and how can they affect the crowding-out effect?
What is discretionary fiscal policy?
If the government wants to increase initial consumption spending by $5 billion and the MPC is .75, by how much should it cut personal income taxes?
Which type of fiscal policy would a government use to combat demand-pull inflation?
What is meant by a 'cyclical deficit'?
According to the text, what happened to the standardized budget in the U.S. between 1993 and 1999?
Which timing lag for fiscal policy is associated with the time it takes to pass legislation?
What is meant by the term 'political business cycle'?
According to the text, why might households not increase their spending much in response to a tax cut they believe is temporary?
Which U.S. securities are described as long-term, nonmarketable bonds?
What was the total U.S. public debt in 2007?
What is the primary burden of the public debt, according to many economists?
How does an externally held public debt create an economic burden for Americans?
To close a $12 billion inflationary GDP gap in an economy with an MPC of .75, by how much should the government increase taxes?
Which of the following best describes the Council of Economic Advisers (CEA)?
The operational lag of fiscal policy refers to the time:
What type of tax system provides the most built-in stability for an economy?
In the Economic Stimulus Act of 2008, what form did most of the $152 billion stimulus take?
In 2007, what was the value of interest payments on the total U.S. public debt?
Which of the following is an example of 'public investment' that could be enabled by public debt?
What is the current thinking of most economists regarding the roles of fiscal and monetary policy in stabilization?
Which of the following is NOT a reason for the downward inflexibility of prices and wages, according to the text?
What is the main reason that expansionary fiscal policy might not be fully effective in stimulating the economy?
In 2007, interest payments on the public debt were what percentage of U.S. GDP?
How do economists generally view the argument that the public debt is burdening future generations?
If the government increases spending by $1.25 billion and reduces taxes by $5 billion, and the MPC is .75, what is the initial increase in new spending?
According to the standardized budget data in Table 30.1, what was the status of U.S. fiscal policy in 2003?
What are efficiency wages and how do they contribute to downward wage inflexibility?
What is the primary difference between how the government refinances the public debt and how it would retire the debt?
In the context of the crowding-out effect shown in Figure 30.8, what happens if government borrowing raises the real interest rate from 6 percent to 10 percent along investment demand curve ID1?
In the view of economists who think the public sector is too large, what fiscal policy should be used during a recession?
Which of the following is a key reason why Social Security surpluses are currently generated in the U.S.?
What does a government budget surplus represent?
In Figure 30.4b, what does the downward shift of the tax line from T1 to T2 represent?
How did the Federal government use fiscal policy in response to the 2001 recession and the September 11 terrorist attacks?