1. A cyclical deficit is the portion of the deficit that existsonly 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 Federalgovernment 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