Question 1

Crowding in can be defined as

Accepted Answer

A)  an increase in the budget deficit increases demand so that investment increases. 
B)  tax incentives on investment encourage capital formation,an increase in aggregate supply. 
C)  consumption rises in a recovery,which increases demand for investment. 
D)  the budget deficit falls enough to lower interest rates to stimulate investment. 
A)  an increase in the budget deficit increases demand so that investment increases. 
B)  tax incentives on investment encourage capital formation,an increase in aggregate supply. 
C)  consumption rises in a recovery,which increases demand for investment. 
D)  the budget deficit falls enough to lower interest rates to stimulate investment. A

Question 2

Like the debt of many families,the national debt in 2014 was many times larger than the national income.

Accepted Answer

A) True 
 B)False  False

Question 3

For which of the following time periods did the U.S.have a budget surplus?

Accepted Answer

A)  1990-1993 
B)  1998-2001 
C)  2003-2006 
D)  The U.S.did not have a surplus in any of these time periods. 
A)  1990-1993 
B)  1998-2001 
C)  2003-2006 
D)  The U.S.did not have a surplus in any of these time periods. B

Question 4

Future generations will be hurt by a high national debt if incurring the debt

Accepted Answer

A)  was done to pay Social Security recipients. 
B)  resulted in heavy commitments to bail out business firms. 
C)  increased formation of capital. 
D)  slowed the formation of capital. 
A)  was done to pay Social Security recipients. 
B)  resulted in heavy commitments to bail out business firms. 
C)  increased formation of capital. 
D)  slowed the formation of capital.

Question 5

If deficit spending causes an increase in economic activity,it may "crowd in" some potential investment spending.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the economy is currently at full employment.All other things being equal,if the government implements restrictive policies then the appropriate monetary policy is

Accepted Answer

A)  no change from the current policy. 
B)  reduce the growth of the money supply. 
C)  constant growth of the money supply. 
D)  increase the growth of the money supply. 
A)  no change from the current policy. 
B)  reduce the growth of the money supply. 
C)  constant growth of the money supply. 
D)  increase the growth of the money supply.

Question 7

Why might the Fed decide to monetize the deficit?

Accepted Answer

A)  to keep inflation low 
B)  to reduce the structural deficit 
C)  to reduce the budget deficit 
D)  to keep interest rates low 
A)  to keep inflation low 
B)  to reduce the structural deficit 
C)  to reduce the budget deficit 
D)  to keep interest rates low

Question 8

Until the 1980s,most of the national debt was

Accepted Answer

A)  owned by foreigners. 
B)  acquired either during wars,especially World War II,or during recessions. 
C)  owned by banks. 
D)  financed by printing money. 
A)  owned by foreigners. 
B)  acquired either during wars,especially World War II,or during recessions. 
C)  owned by banks. 
D)  financed by printing money.

Question 9

The structural deficit is extremely sensitive to the performance of the economy.

Accepted Answer

A) True 
 B)False

Question 10

The structural deficit is defined as

Accepted Answer

A)  that part of the deficit that is so hard to remove that it is never reduced. 
B)  the portion of the budget deficit that occurs because the economy is not at full employment. 
C)  the hypothetical deficit the economy would have under current fiscal policies if the economy were operating near full employment. 
D)  the actual budget deficit that exists in the economy. 
A)  that part of the deficit that is so hard to remove that it is never reduced. 
B)  the portion of the budget deficit that occurs because the economy is not at full employment. 
C)  the hypothetical deficit the economy would have under current fiscal policies if the economy were operating near full employment. 
D)  the actual budget deficit that exists in the economy.

Question 11

The structural deficit or surplus

Accepted Answer

A)  shows the government where to make cuts in expenditures to follow the balanced budget requirement. 
B)  reveals the complicated structure underlying government spending and tax policy. 
C)  is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. 
D)  includes all government budgets-federal,state,and local. 
A)  shows the government where to make cuts in expenditures to follow the balanced budget requirement. 
B)  reveals the complicated structure underlying government spending and tax policy. 
C)  is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. 
D)  includes all government budgets-federal,state,and local.

Question 12

What is the difference between the deficit and the debt?

Accepted Answer

The budget deficit is the difference ove

Question 13

Give some arguments for and against a balanced budget requirement.

Accepted Answer

A balanced budget requirement would elim

Question 14

The United States need never pay off the national debt; it can simply refinance the debt when it comes due.The flaw in thinking that the government must pay it off is based on the fallacy of

Accepted Answer

A)  benefit-cost ratio. 
B)  post hoc,ergo propter hoc. 
C)  composition. 
D)  a priori expectations. 
A)  benefit-cost ratio. 
B)  post hoc,ergo propter hoc. 
C)  composition. 
D)  a priori expectations.

Question 15

Figure 16-1  
-In Figure 16-1,there are four levels of income.G is government expenditures and TT is taxes less transfers.At which level of income is the actual deficit the greatest?

Accepted Answer

A)  Y4 
B)  Y3 
C)  Y2 
D)  Y1 
A)  Y4 
B)  Y3 
C)  Y2 
D)  Y1

Question 16

Although a balanced budget may be appropriate under one monetary policy,a deficit or surplus may be appropriate under a different monetary policy.

Accepted Answer

A) True 
 B)False

Question 17

The statement that "repaying our enormous national debt will ruin the nation" is

Accepted Answer

A)  true,because taxes will have to go up by such large amounts that American citizens will have very little income to live on. 
B)  true,because most of our national debt is owed to foreigners. 
C)  false,because the government will take emergency measures to prevent national bankruptcy. 
D)  false,because each time the principal on the debt comes due,the U.S.Treasury rolls it over by issuing more debt. 
A)  true,because taxes will have to go up by such large amounts that American citizens will have very little income to live on. 
B)  true,because most of our national debt is owed to foreigners. 
C)  false,because the government will take emergency measures to prevent national bankruptcy. 
D)  false,because each time the principal on the debt comes due,the U.S.Treasury rolls it over by issuing more debt.

Question 18

Expansionary fiscal policy normally lowers interest rates.

Accepted Answer

A) True 
 B)False

Question 19

Very recently,the debt-to-GDP ratio has been:​

Accepted Answer

A)  ​higher than usual. 
B)  ​lower than usual. 
C)  ​stabilized. 
D)  ​volatile. 
A)  ​higher than usual. 
B)  ​lower than usual. 
C)  ​stabilized. 
D)  ​volatile.

Question 20

The main reason that the deficit grows in a recession is that

Accepted Answer

A)  the government reacts quickly and adjusts taxes to compensate. 
B)  monetary policy that targets interest rates causes the costs of borrowing to fall. 
C)  the deficit causes the recession,and reducing the deficit cures the recession. 
D)  many forms of taxes act as automatic stabilizers. 
A)  the government reacts quickly and adjusts taxes to compensate. 
B)  monetary policy that targets interest rates causes the costs of borrowing to fall. 
C)  the deficit causes the recession,and reducing the deficit cures the recession. 
D)  many forms of taxes act as automatic stabilizers.

Crowding in can be defined as

Like the debt of many families,the national debt in 2014 was many times larger than the national income.

For which of the following time periods did the U.S.have a budget surplus?

Future generations will be hurt by a high national debt if incurring the debt

If deficit spending causes an increase in economic activity,it may "crowd in" some potential investment spending.

Suppose that the economy is currently at full employment.All other things being equal,if the government implements restrictive policies then the appropriate monetary policy is

Why might the Fed decide to monetize the deficit?

Until the 1980s,most of the national debt was

The structural deficit is extremely sensitive to the performance of the economy.

The structural deficit is defined as

The structural deficit or surplus

What is the difference between the deficit and the debt?

Give some arguments for and against a balanced budget requirement.

The United States need never pay off the national debt; it can simply refinance the debt when it comes due.The flaw in thinking that the government must pay it off is based on the fallacy of

Figure 16-1 -In Figure 16-1,there are four levels of income.G is government expenditures and TT is taxes less transfers.At which level of income is the actual deficit the greatest?

Although a balanced budget may be appropriate under one monetary policy,a deficit or surplus may be appropriate under a different monetary policy.

The statement that "repaying our enormous national debt will ruin the nation" is

Expansionary fiscal policy normally lowers interest rates.

Very recently,the debt-to-GDP ratio has been:

The main reason that the deficit grows in a recession is that

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Exam 16: Budget Deficits In The Short and Long Run

Crowding in can be defined as

Like the debt of many families,the national debt in 2014 was many times larger than the national income.

For which of the following time periods did the U.S.have a budget surplus?

Future generations will be hurt by a high national debt if incurring the debt

If deficit spending causes an increase in economic activity,it may "crowd in" some potential investment spending.

Suppose that the economy is currently at full employment.All other things being equal,if the government implements restrictive policies then the appropriate monetary policy is

Why might the Fed decide to monetize the deficit?

Until the 1980s,most of the national debt was

The structural deficit is extremely sensitive to the performance of the economy.

The structural deficit is defined as

The structural deficit or surplus

What is the difference between the deficit and the debt?

Give some arguments for and against a balanced budget requirement.

The United States need never pay off the national debt; it can simply refinance the debt when it comes due.The flaw in thinking that the government must pay it off is based on the fallacy of

Figure 16-1 -In Figure 16-1,there are four levels of income.G is government expenditures and TT is taxes less transfers.At which level of income is the actual deficit the greatest?

Although a balanced budget may be appropriate under one monetary policy,a deficit or surplus may be appropriate under a different monetary policy.

The statement that "repaying our enormous national debt will ruin the nation" is

Expansionary fiscal policy normally lowers interest rates.

Very recently,the debt-to-GDP ratio has been:​

The main reason that the deficit grows in a recession is that

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

Monetary Policy Conventional and Unconventional

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters

Very recently,the debt-to-GDP ratio has been: