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1. A cyclical deficit is the portion of the deficit that exists only when: the economy...

1. A cyclical deficit is the portion of the deficit that exists only when:

the economy is at potential output/income

the economy is in an inflationary gap

the economy is in a recessionary gap

The Treasury is buying back bonds

2.

When the U.S. Government runs a deficit, the

Fed has to buy bonds to finance the deficit

Treasury has to sell bonds to finance the deficit

Federal government tax revenues must be less than Federal government spending

Both B and C are correct

3.

The Special Interest Effect:

Provides a restraint on deficit spending.

Makes rasing taxes politically popular.

Is a likely cause of the large U.S. public debt.

All of the above

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