Economics Chapter: Fiscal Policy & Trade Deficits

Which of the following is a correct representation of the relationship between saving, investment, and government spending?

If a country experiences a trade deficit and a budget deficit, what is the likely impact on its foreign debt?

How can a government finance a budget deficit?

What is a key takeaway from the relationship between fiscal policy and the balance of payments?

What are the potential consequences of a government consistently running budget deficits?

Which of the following is NOT a major consequence of unsustainable fiscal policy?

Which of the following equations represents the relationship between national income, consumption, investment, government spending, exports, and imports?

What is the main implication of the equation X - M = (S - I) + (T - G)?

Which of the following describes the 'Action Time Lag' in fiscal policy?

Which of these examples best illustrates the concept of an 'Effect Time Lag' in fiscal policy?

Why is monetary policy often considered faster than fiscal policy in addressing economic problems?

Which of the following is NOT a characteristic of Discretionary Fiscal Policy?

Identify the potential problem associated with implementing a fiscal stimulus package during an economic recovery.

What is the main purpose of automatic stabilizers in fiscal policy?

How do progressive taxes act as an automatic stabilizer?

What is the primary balance?

Which of the following statements accurately describes the relationship between discretionary fiscal policy and automatic stabilizers?

What is the operational deficit?

What is the most important factor influencing the cyclically adjusted balance?

Why is the cyclically adjusted balance more useful in analyzing fiscal policy than the standard budget balance?

What does the augmented balance include that the standard budget balance does not?

Which of the following is NOT a factor considered in assessing a country's market access for borrowing?

Why is the gross financing needs and sources important for understanding government finances?

What is the primary concern about using the cyclically adjusted balance for fiscal policy design?

What is the main objective of 'reprioritizing expenditure' as a strategy to increase fiscal space?

Which of the following is NOT a key aspect of assessing fiscal sustainability?

How does high inflation affect the real value of debt?

What is the role of institutions like the IMF, World Bank, and OECD in fiscal space assessment?

Which of the following is a risk associated with monetary expansion as a way to increase fiscal space?

What is the relationship between 'fiscal space' and 'long-term economic stability'?

Which of the following is a potential drawback of 'rational borrowing' as a strategy to increase fiscal space?

Which of these actions is NOT considered a way to boost fiscal space?

Which of the following is NOT a crucial part of assessing fiscal space?

What is the primary goal of simulating fiscal policy decisions?

How do standardized assumptions contribute to fiscal policy evaluation?

What is a defining characteristic of a vicious cycle of debt accumulation?

What factor is NOT considered when determining the degree of fiscal space?

Which aspect of fiscal policy evaluation analyzes how fiscal sustainability holds up under stress tests and expansionary fiscal policies?

Which aspect of fiscal policy evaluation focuses on assessing the availability of financing, debt burdens, and necessary fiscal adjustments over time?

What is the primary factor that drives debt accumulation in a vicious cycle?

What is the relationship between the nominal interest rate (r) and GDP growth rate (g) that leads to a stable debt-to-GDP ratio?

How can a country reduce its debt-to-GDP ratio?

What happens to debt sustainability when the GDP growth rate (g) is less than the nominal interest rate (r)?

What is the key concept that explains how people anticipate future taxes and adjust their behavior accordingly?

What can happen when a country has high deficits and rising public debt?

Why might fiscal stimulus fail or even backfire in a country with high deficits and rising public debt?

Which of the following is a consequence of a country having a high debt-to-GDP ratio?

Which of the following is a potential solution to manage debt sustainability when the nominal interest rate (r) is greater than the GDP growth rate (g)?