Question 1

If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security,the burden on future generations is slight.

Accepted Answer

A) True 
 B)False  False

Question 2

According to Keynes' philosophy of government budgets,_____.

Accepted Answer

A) chronic deficits accumulate into a national debt 
B) permanent surpluses are desirable 
C) fiscal policy focuses on maintaining an annually balanced budget 
D) deficits dampen aggregate demand in the short run and reduce the federal debt 
E) deficits are appropriate during recessions 
A) chronic deficits accumulate into a national debt 
B) permanent surpluses are desirable 
C) fiscal policy focuses on maintaining an annually balanced budget 
D) deficits dampen aggregate demand in the short run and reduce the federal debt 
E) deficits are appropriate during recessions E

Question 3

The functional finance philosophy is based on the idea that balancing the federal budget is less important than using it to promote an economy operating at its potential.

Accepted Answer

A) True 
 B)False  True

Question 4

If a government runs a cyclically balanced budget,its revenue will equal its expenditure:

Accepted Answer

A) each year. 
B) at each phase of the business cycle. 
C) over the course of the business cycle. 
D) only during expansions. 
E) only during recessions. 
A) each year. 
B) at each phase of the business cycle. 
C) over the course of the business cycle. 
D) only during expansions. 
E) only during recessions.

Question 5

Interest payments in the United States increased during the 1980s because of:

Accepted Answer

A) growing federal deficits. 
B) a low tax rate. 
C) growing budget surpluses. 
D) a fall in government expenditure. 
E) an increase in national savings. 
A) growing federal deficits. 
B) a low tax rate. 
C) growing budget surpluses. 
D) a fall in government expenditure. 
E) an increase in national savings.

Question 6

If the functional finance approach to federal budgeting is followed,the federal government's budget deficit should be zero.

Accepted Answer

A) True 
 B)False

Question 7

Some economists argue that federal government capital projects,which offer benefits over a number of years,should be financed through deficit financing.

Accepted Answer

A) True 
 B)False

Question 8

When there are large federal budget deficits,the trade deficit tends to shrink.

Accepted Answer

A) True 
 B)False

Question 9

In 1981,U.S.policy makers predicted a balanced budget as:

Accepted Answer

A) the budget included a decrease in defense expenditures. 
B) the budget included an increase in the tax rate. 
C) the budget included an increase in unspecified government spending. 
D) the growth in GDP was expected to be large enough to lead to an increase in tax revenues despite the tax cut. 
E) the growth in GDP was expected to be small enough to require less government spending. 
A) the budget included a decrease in defense expenditures. 
B) the budget included an increase in the tax rate. 
C) the budget included an increase in unspecified government spending. 
D) the growth in GDP was expected to be large enough to lead to an increase in tax revenues despite the tax cut. 
E) the growth in GDP was expected to be small enough to require less government spending.

Question 10

Nearly half of the publicly held U.S.federal debt are held by foreigners.

Accepted Answer

A) True 
 B)False

Question 11

The federal budget experienced surpluses from _____.

Accepted Answer

A) 1998 to 2001 
B) 2002 to 2006 
C) 1970 to 1973 
D) 1991 to 1994 
E) 1985 to 1988 
A) 1998 to 2001 
B) 2002 to 2006 
C) 1970 to 1973 
D) 1991 to 1994 
E) 1985 to 1988

Question 12

Biennial budgets have replaced the annual budget process for the federal government.

Accepted Answer

A) True 
 B)False

Question 13

In order for the government to increase spending,it must increase taxes to finance that spending.

Accepted Answer

A) True 
 B)False

Question 14

If the fraction of U.S.government securities held by foreigners increases,_____.

Accepted Answer

A) current consumption by U.S.citizens can decrease 
B) current consumption by U.S.citizens can increase 
C) current interest payments will increase 
D) private investments will increase 
E) the burden of debt on future generations will decrease 
A) current consumption by U.S.citizens can decrease 
B) current consumption by U.S.citizens can increase 
C) current interest payments will increase 
D) private investments will increase 
E) the burden of debt on future generations will decrease

Question 15

A likely consequence of debt default is:

Accepted Answer

A) a decrease in the federal cost of borrowing. 
B) an increase in unemployment due to growing uncertainty. 
C) a sudden decline in the market interest rates. 
D) an increase in the credit flows in an economy. 
E) a sudden increase in the investment flows in the economy. 
A) a decrease in the federal cost of borrowing. 
B) an increase in unemployment due to growing uncertainty. 
C) a sudden decline in the market interest rates. 
D) an increase in the credit flows in an economy. 
E) a sudden increase in the investment flows in the economy.

Question 16

Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200.Which of the following is true in this case?

Accepted Answer

A) Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume. 
B) The budget deficit will increase by $200. 
C) The budget deficit will increase by $400. 
D) The budget deficit will decrease as the economy expands. 
E) There will be no change in the budget deficit. 
A) Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume. 
B) The budget deficit will increase by $200. 
C) The budget deficit will increase by $400. 
D) The budget deficit will decrease as the economy expands. 
E) There will be no change in the budget deficit.

Question 17

Which of the following is the chief link between the U.S.federal budget deficit and the U.S.trade deficit during the 1980s?

Accepted Answer

A) High U.S.interest rates led to a rise in the relative value of the dollar. 
B) High U.S.interest rates led to a decrease in the relative value of the dollar. 
C) Higher interest rates resulted in the crowding out of some private investment,reducing the stimulating effect of the government's deficit. 
D) The U.S.price level declined relative to that of foreign countries,causing U.S.interest rates to fall. 
E) The additional fiscal stimulus provided by a higher government deficit encouraged some firms to invest more. 
A) High U.S.interest rates led to a rise in the relative value of the dollar. 
B) High U.S.interest rates led to a decrease in the relative value of the dollar. 
C) Higher interest rates resulted in the crowding out of some private investment,reducing the stimulating effect of the government's deficit. 
D) The U.S.price level declined relative to that of foreign countries,causing U.S.interest rates to fall. 
E) The additional fiscal stimulus provided by a higher government deficit encouraged some firms to invest more.

Question 18

Government spending shrank the most in _____ relative to GDP between 1997 and 2016.

Accepted Answer

A) Canada 
B) Australia 
C) Germany 
D) Spain 
E) the U.K. 
A) Canada 
B) Australia 
C) Germany 
D) Spain 
E) the U.K.

Question 19

Which of the following correctly describes factors that contributed to the change in the federal budget deficit between 1990 and 1998?

Accepted Answer

A) Federal taxes were cut by President George H.W.Bush and Congress in 1990,which helped in his reelection campaign in 1992 and contributed to a continually rising budget deficit during the 1990s. 
B) Federal taxes were cut again by President Bill Clinton in 1993,which further contributed to a continually rising budget deficit during the 1990s. 
C) Accelerated growth in federal outlays triggered the rapid expansion of the federal workforce between 1990 and 1998,which further contributed to a continually rising budget deficit during the 1990s. 
D) Taxes were raised,spending was cut,productivity rose,consumer spending increased,the stock market was the strongest in history,and the country experienced a short-lived budget surplus. 
E) Defense and international programs were identified as the only two areas of potential spending cuts. 
A) Federal taxes were cut by President George H.W.Bush and Congress in 1990,which helped in his reelection campaign in 1992 and contributed to a continually rising budget deficit during the 1990s. 
B) Federal taxes were cut again by President Bill Clinton in 1993,which further contributed to a continually rising budget deficit during the 1990s. 
C) Accelerated growth in federal outlays triggered the rapid expansion of the federal workforce between 1990 and 1998,which further contributed to a continually rising budget deficit during the 1990s. 
D) Taxes were raised,spending was cut,productivity rose,consumer spending increased,the stock market was the strongest in history,and the country experienced a short-lived budget surplus. 
E) Defense and international programs were identified as the only two areas of potential spending cuts.

Question 20

The Budget Enforcement Act of 1990:

Accepted Answer

A) was a package of spending cuts and tax increases designed to reduce budget deficit. 
B) succeeded in balancing the budget cyclically. 
C) succeeded in balancing the budget within two years. 
D) identified defense and international programs as the only two areas of potential spending cuts. 
E) gave the President the authority to make unilateral spending cuts to balance the budget. 
A) was a package of spending cuts and tax increases designed to reduce budget deficit. 
B) succeeded in balancing the budget cyclically. 
C) succeeded in balancing the budget within two years. 
D) identified defense and international programs as the only two areas of potential spending cuts. 
E) gave the President the authority to make unilateral spending cuts to balance the budget.

If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security,the burden on future generations is slight.

According to Keynes' philosophy of government budgets,_____.

The functional finance philosophy is based on the idea that balancing the federal budget is less important than using it to promote an economy operating at its potential.

If a government runs a cyclically balanced budget,its revenue will equal its expenditure:

Interest payments in the United States increased during the 1980s because of:

If the functional finance approach to federal budgeting is followed,the federal government's budget deficit should be zero.

Some economists argue that federal government capital projects,which offer benefits over a number of years,should be financed through deficit financing.

When there are large federal budget deficits,the trade deficit tends to shrink.

In 1981,U.S.policy makers predicted a balanced budget as:

Nearly half of the publicly held U.S.federal debt are held by foreigners.

The federal budget experienced surpluses from _____.

Biennial budgets have replaced the annual budget process for the federal government.

In order for the government to increase spending,it must increase taxes to finance that spending.

If the fraction of U.S.government securities held by foreigners increases,_____.

A likely consequence of debt default is:

Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200.Which of the following is true in this case?

Which of the following is the chief link between the U.S.federal budget deficit and the U.S.trade deficit during the 1980s?

Government spending shrank the most in _____ relative to GDP between 1997 and 2016.

Which of the following correctly describes factors that contributed to the change in the federal budget deficit between 1990 and 1998?

The Budget Enforcement Act of 1990:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters

Exam 12: Federal Budgets and Public Policy

If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security,the burden on future generations is slight.

According to Keynes' philosophy of government budgets,_____.

The functional finance philosophy is based on the idea that balancing the federal budget is less important than using it to promote an economy operating at its potential.

If a government runs a cyclically balanced budget,its revenue will equal its expenditure:

Interest payments in the United States increased during the 1980s because of:

If the functional finance approach to federal budgeting is followed,the federal government's budget deficit should be zero.

Some economists argue that federal government capital projects,which offer benefits over a number of years,should be financed through deficit financing.

When there are large federal budget deficits,the trade deficit tends to shrink.

In 1981,U.S.policy makers predicted a balanced budget as:

Nearly half of the publicly held U.S.federal debt are held by foreigners.

The federal budget experienced surpluses from _____.

Biennial budgets have replaced the annual budget process for the federal government.

In order for the government to increase spending,it must increase taxes to finance that spending.

If the fraction of U.S.government securities held by foreigners increases,_____.

A likely consequence of debt default is:

Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200.Which of the following is true in this case?

Which of the following is the chief link between the U.S.federal budget deficit and the U.S.trade deficit during the 1980s?

Government spending shrank the most in _____ relative to GDP between 1997 and 2016.

Which of the following correctly describes factors that contributed to the change in the federal budget deficit between 1990 and 1998?

The Budget Enforcement Act of 1990:

The Art and Science of Economic Analysis

Some Tools of Economic Analysis

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the U S Economy

Unemployment and Inflation

Us Productivity and Growth

Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

The Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

Filters