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The following table contains approximate gures for gross domestic product (GDP) and the national debt in the United States for June 2001 and June 2010. The national debt represents the total amount of money owed by the federal government to holders of U.S. securities. All numbers are in trillions of dollars. Total National GDP Debt Debt Held by Debt Held Outside Fed. Govt. and Fed. Reserve (Trillions of (Trillions of Federal Foreign Ownership U.S. Ownership Dollars) Dollars) Government (External National Debt) (External National Debt) and Federal (Trillions of Dollars) (Trillions of Dollars) Reserve ( Trillions of Dollars) June 2001 10.1 5.7 3.0 1.0 1.? June 2010 14.5 13.2 4.6 4.0 4.6 Source: \"U.S. Treasury, Bureau of Economic Analysis." Net public debt is the portion of the national debt that is held outside the federal government and the Federal Reserve System. In June 2001, the net public debt as a percentage of total national debt was V . In June 2001, the percentage of the U.S. national debt held by foreigners (external national debt) was V . The fraction of the national debt held by foreigners will eventually need to be repaid to foreigners, thereby reducing the collective purchasing power of Americans. Between 2001 and 2010, the fraction of the national debt held by foreigners V . The absolute level of the debt does not necessarily provide a clear indication of a nation's debt burden. Thus, economists often look at relative measures of the national debt. One possible relative measure of the national debt is the federal debt held by the public {outside the federal government and the Federal Reserve) as a percentage of GDP. In 2001, publicly held debt was 7 of GDP. Between 2001 and 2010, publicly held debt as a percentage of GDP V . 1which of the following concerns about the national debt are substantive? Check all that apply. [3 As government securities mature, portions of the national debt come due. When this occurs, the only wailr for the government to obtain the necessary funds is to raise taxes or cut expenditures. [3 The large U.S. national debt is in danger of bankrupting the federal government. D Paying off the U.S. national debt will require future generations of Americans to decrease their purchases of goods and services by an amount equal to the existing debt. D Government's borrowing to renance the debt may lead to higher interest rates. Higher interest rates reduce investment spending, leaving future generations with a smaller stock of capital goods. On the following graph, ADI represents the initial aggregate demand curve in a hypothetical economy, and Ad represents the initial aggregate supply curve. The economy's fullemployment output is $12 billion. 106 105 101 PRICE LEVEL (CPI) 8 8 [a 60 9? Full Employment 6 TI' 8 9 1|] 11 12 13 14 15 16 REAL GDP (Billions Of dollars) The initial shortrun equilibrium level of real GDP is billion, and the initial shortrun equilibrium price level is E. Suppose the government, seeking full employment, borrows money and increases its expenditures by the amount it believes necessary to close the output gap. According to critics of Keynesian fiscal policy, which curve in the previous graph will most likely be the new aggregate demand curve? OAD2 CAD; OAD4 As a result, the equilibrium level of real GDP will be billion, and the equilibrium price level will be S . According to critics of Keynesian fiscal policy, which of the following is true in this case? 0 The increase in decitnanced government spending has no impact on real GDP and the price level. 0 The increase in decitnanced government spending causes real GDP to increase to fullemployment output. 0 Real GDP does not increase; only the price level increases. 0 The increase in decitnanced government spending causes real GDP to increase, but not to fullemployment output. This is an examnle of V