Figure 10.4 Federal Surplus or Deficit as a Percent of GDP
What will be an ideal response?
The federal deficit—as measured by
government borrowing—reached 6
percent of GDP in 1983, a year of deep
recession. The deficit was reduced
as a percent of GDP from the early
1990s until 1998, when the budget went
into surplus. From 1998 to 2001, the
government had a net surplus, meaning that some debt was being retired. After 2000, a recession combined with the Bush administration tax cuts put the budget back into deficit. The recession of 2007-9 led to even larger deficits, reaching 10% of GDP before starting to decline as the economy started a slow recovery.
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Refer to the graph below. If the output level increases from Q2 to Q3, then the:
A. Marginal cost of the product becomes closer to its marginal benefit
B. Marginal cost of the product increases while its marginal benefit decreases
C. Marginal cost of the product decreases while its marginal benefit increases
D. Marginal cost of the product stays constant while its marginal benefit increases
In 2008, several banks had a:
A. solvency problem, and the Fed kept them all from going bankrupt. B. confidence problem, and would not lend enough to keep from going bankrupt. C. solvency problem, and eventually went bankrupt as a result. D. reserve problem, and did not have enough funds on hand to lend to keep from going bankrupt.