Question Details

The Federal government is piling up larger deficits than estimated in February 



1. "A significant difference exists between the consequences of federal as opposed to state borrowing if the federal government borrows by selling bonds to the Federal Reserve. It alone can do so - the central bank buys only federal bonds." This significant difference is that state borrowing 
a) reduces taxes b) reduces unemployment 
c) doesn't have to be repaid d) cannot increase the money supply 
"Economists call the process debt monetization. Without it, rising federal deficits tend merely to shuffle spending to the government sector from the private sector." 
2. Debt monetization is financing deficits by 
a) raising taxes b) raising the interest rate 
c) selling bonds to the public d) selling bonds to the central bank 
3. The fact that spending is merely shuffled to the government sector from the private sector means that 
a) the multiplier is large b) there is complete crowding out 
c) we must be at less than full employment 
d) the deficits must cause a fall in the interest rate 
4. "The Treasury plans to pay down $1.85 billion on the public debt with the sale Monday of about $13 billion in short-term bills." Maturing bills outstanding total 
a) $1.85b b) $11.15b c) $14.85b d) insufficient information to tell 
5. “The Federal government is piling up larger deficits than estimated in February as the recession…..” This clipping is best completed with 
a)	lowers tax receipts 
b)	is fought with higher government spending 

c)	eases 
d)	prompts the Fed to buy more Treasury bills 




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