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An accurate statement about achieving a balanced budget would be that
An accurate statement about achieving a balanced budget would be that
- most states allow a budget deficit
- balanced budgets are not necessary
- only federal government must balance the budget
- most states require a balanced budget for state spending (correct)
What is one important distinction between classical economics and Keynesian economics?
What is one important distinction between classical economics and Keynesian economics?
Classical economics teaches that free markets regulate themselves, and Keynesian economics teaches that government action affects the economy.
All of the following are characteristics of classical economics EXCEPT
All of the following are characteristics of classical economics EXCEPT
- a significant role for government in the running of the economy (correct)
- focus on long-term equilibrium
- emphasis on free markets
- the belief in self-regulating markets
The author of The General Theory of Employment, Interest, and Money was
The author of The General Theory of Employment, Interest, and Money was
The purpose of expansionary fiscal policy is to
The purpose of expansionary fiscal policy is to
Fiscal policy is carried out primarily by
Fiscal policy is carried out primarily by
The crowding-out effect of expansionary fiscal policy suggests that
The crowding-out effect of expansionary fiscal policy suggests that
All of the following are reasons why it is difficult to implement balanced fiscal policy EXCEPT
All of the following are reasons why it is difficult to implement balanced fiscal policy EXCEPT
Keynesian economics failed to deal successfully with
Keynesian economics failed to deal successfully with
In contrast with classical economics, Keynesian economics,
In contrast with classical economics, Keynesian economics,
The federal budget is put together
The federal budget is put together
How does the 'crowding-out effect' influence businesses?
How does the 'crowding-out effect' influence businesses?
An example of expansionary fiscal policy would be
An example of expansionary fiscal policy would be
How did economic events during WWII demonstrate the principles of Keynesian economics?
How did economic events during WWII demonstrate the principles of Keynesian economics?
A major advantage of the built-in or automatic stabilizers is that they
A major advantage of the built-in or automatic stabilizers is that they
All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT
All of the following are reasons why it is difficult to put balanced fiscal policy into practice EXCEPT
Supporters of supply-side economics believe that
Supporters of supply-side economics believe that
When revenues exceed expenditures
When revenues exceed expenditures
Every hour, the federal government spends about
Every hour, the federal government spends about
All of the following people are well-known classical economists EXCEPT
All of the following people are well-known classical economists EXCEPT
The political business cycle refers to the possibility that
The political business cycle refers to the possibility that
The national debt rose during Ronald Reagan's term as President for all of the following reasons EXCEPT
The national debt rose during Ronald Reagan's term as President for all of the following reasons EXCEPT
When you buy a US Savings Bond, you
When you buy a US Savings Bond, you
An example of contractionary fiscal policy would be
An example of contractionary fiscal policy would be
An example of an automatic stabilizer is
An example of an automatic stabilizer is
All of the following are problems associated with high national debt EXCEPT that it
All of the following are problems associated with high national debt EXCEPT that it
The national debt of the US is in excess of
The national debt of the US is in excess of
The Office of Management and Budget
The Office of Management and Budget
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Study Notes
Balanced Budget
- Most states require a balanced budget for their spending.
Economic Theories
- Classical economics believes that free markets self-regulate.
- Keynesian economics emphasizes the impact of government action on the economy.
- Classical economics features minimal government involvement in the economy, while Keynesian economics promotes government intervention.
Key Figures
- John Keynes authored "The General Theory of Employment, Interest, and Money," foundational to Keynesian economics.
Fiscal Policy
- Expansionary fiscal policy aims to increase economic output.
- Fiscal policy is primarily carried out by the Federal government.
- The federal budget is compiled by Congress and the White House.
- Expansionary fiscal policy examples include cutting taxes and increasing government spending.
Economic Effects
- The crowding-out effect occurs when government spending limits private investment opportunities.
- High inflation during the 1970s challenged Keynesian economics.
- The "crowding-out effect" makes borrowing harder for businesses due to increased government expenditures.
Stabilizers and Surplus
- Automatic stabilizers function without needing Congressional approval.
- A budget surplus exists when revenues exceed expenditures.
- Each hour, the federal government spends approximately $200 million.
National Debt
- The national debt exceeds 18.1 trillion dollars.
- Problems associated with high national debt do not include the risk of investing in treasury bonds.
- Notable classical economists do not include Arthur Laffer.
Political Influences
- The political business cycle suggests politicians may manipulate the economy for re-election advantages.
- The national debt rose during Ronald Reagan's presidency due to factors excluding war expenses.
Bonds and Contractionary Policy
- Purchasing a US Savings Bond equates to loaning money to the government.
- Contractionary fiscal policy includes decreasing government spending.
Automatic Stabilizers
- Automatic stabilizers include taxes, which adjust without legislative action in response to economic conditions.
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