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Write the formula for a budget deficit.
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What is the difference between government debt and a budget deficit or surplus?
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Why do economists like to compare the debt to the size of the nations’ gross domestic product or GOP?
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What is the difference between the real and nominal budget deficit?
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Suppose the nominal deficit is $100 billion, inflation is 10 percent, and total debt is $5 trillion. What is the real deficit?
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What is the difference between the structural and the cyclical or passive deficit?
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Define automatic stabilizers and provide three examples.
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Suppose the gross domestic product is $10 trillion, the budget deficit is $100 billion, and the unemployment rate is seven percent, or one percent above the assumed full employment rate. Suppose further that the marginal tax rate is 30%. Which portion of the $100 billion deficit is structural and which portion is cyclical?
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What is the central idea behind rational expectations theory?
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What is the central policy implication of rational expectations theory?
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Why is it important to estimating correctly the natural rate of unemployment important?
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What are the three main ways of financing a budget deficit?
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Why does the balanced budget multiplier have a value of one?
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Use the Keynesian model to illustrate crowding out.
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What is the primary problem with the “print money” option of financing the deficit?
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Summarize the major arguments, pro and con in the budget deficit debate.
