Chapter13Summary

Chapter13Summary - Chapter 13 Summary Tucker,...

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Chapter 13 Summary Tucker , Macroeconomics for Today , 5th Edn. 1. Federal government budget deficits or surpluses are measured as the difference between government expenditures and tax collections. Each is measured on an annual basis. When G > taxes, then a deficit occurs, and the government has to pay for the expenditures that are not tax financed by borrowing money. This borrowing takes the form of sales of bonds by the U.S. Treasury to households, businesses, units of government or whoever is willing to purchase these bonds. Annual budget surpluses may be used to repurchase bonds already issued by the government, but also could be used to finance additional expenditures or tax reductions in a subsequent year. 2. The national debt is the total value of all government bonds that have been issued and not yet repurchased by the U.S. Treasury. The national debt, therefore, is not measured on an annual basis, but rather is calculated as a given total value at a certain moment in time. Annual budget deficits increase the size of the "outstanding" or total national debt. 3. The national debt totaled about one trillion dollars in 1980. By 1990 this value had grown to four trillion dollars, and by 1995 it had grown to almost 6 trillion dollars. Hence, most of the U.S. national debt has been acquired in the last 25 years. This came about primarily because of tax rate reductions supported by
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Chapter13Summary - Chapter 13 Summary Tucker,...

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