Question 1

The structural deficit/surplus budget

Accepted Answer

A)  measures the federal budget deficit/surplus as if the economy were at full employment. 
B)  measures the federal budget deficit/surplus as if the economy were in recession. 
C)  measures the federal budget deficit/surplus as if the economy were suffering from high inflation. 
D)  is used when structural unemployment is at a peak. 
A)  measures the federal budget deficit/surplus as if the economy were at full employment. 
B)  measures the federal budget deficit/surplus as if the economy were in recession. 
C)  measures the federal budget deficit/surplus as if the economy were suffering from high inflation. 
D)  is used when structural unemployment is at a peak.

Question 2

Which of the following is not true with regard to the burden of the U.S.national debt?

Accepted Answer

A)  The debt does burden future generations to the extent that it is sold to foreigners. 
B)  Budget deficits are not appropriate for stabilization purposes under any circumstances. 
C)  The debt will reduce the nation's capital stock if incurred during a fully employed economy. 
D)  The large deficits of the 1980s and early 2000 were particularly worrisome because they were not attributable to recessions. 
A)  The debt does burden future generations to the extent that it is sold to foreigners. 
B)  Budget deficits are not appropriate for stabilization purposes under any circumstances. 
C)  The debt will reduce the nation's capital stock if incurred during a fully employed economy. 
D)  The large deficits of the 1980s and early 2000 were particularly worrisome because they were not attributable to recessions.

Question 3

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 does the official budget produce a surplus?

Accepted Answer

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

Question 4

By 2007 the deficit

Accepted Answer

A)  was out of control and increased substantially soon thereafter. 
B)  seemed under control but increased substantially soon thereafter. 
C)  was out of control but decreased substantially soon thereafter. 
D)  seemed under control and decreased substantially soon thereafter. 
A)  was out of control and increased substantially soon thereafter. 
B)  seemed under control but increased substantially soon thereafter. 
C)  was out of control but decreased substantially soon thereafter. 
D)  seemed under control and decreased substantially soon thereafter.

Question 5

At levels of GDP above full employment, the federal budget would usually be in a deficit position.

Accepted Answer

A) True 
 B)False

Question 6

If the government ran a major deficit, and there was no noticeable effect on the level of GDP, this could be taken as evidence of

Accepted Answer

A)  crowding-in. 
B)  structural deficit. 
C)  crowding-out. 
D)  monetary policy ineffectiveness. 
A)  crowding-in. 
B)  structural deficit. 
C)  crowding-out. 
D)  monetary policy ineffectiveness.

Question 7

The fallacy in the strict crowding-out argument comes from supposing that

Accepted Answer

A)  the Federal Reserve always accommodates the U.S.Treasury in its financing of the deficit. 
B)  corporations always outbid small businesses for government contracts. 
C)  the economy's flow of saving is fixed. 
D)  investors will spend more when G increases. 
A)  the Federal Reserve always accommodates the U.S.Treasury in its financing of the deficit. 
B)  corporations always outbid small businesses for government contracts. 
C)  the economy's flow of saving is fixed. 
D)  investors will spend more when G increases.

Question 8

The crowding-in effect results from

Accepted Answer

A)  a low MPS. 
B)  induced investment. 
C)  induced consumption. 
D)  rising interest rates. 
A)  a low MPS. 
B)  induced investment. 
C)  induced consumption. 
D)  rising interest rates.

Question 9

Monetizing the debt has what effect on the economy?

Accepted Answer

A)  slow increase in AS with steady inflation 
B)  rapid increase in AD with an increase in inflation 
C)  rapid increase in AS with a drop in inflation 
D)  decrease in AD with an increase in inflation 
A)  slow increase in AS with steady inflation 
B)  rapid increase in AD with an increase in inflation 
C)  rapid increase in AS with a drop in inflation 
D)  decrease in AD with an increase in inflation

Question 10

To correct the budget deficit for inflation, we should

Accepted Answer

A)  multiply the budget deficit by the price deflator for GDP. 
B)  subtract interest payments from tax revenues. 
C)  divide the budget deficit by nominal GDP. 
D)  divide the budget deficit by the consumer price index. 
A)  multiply the budget deficit by the price deflator for GDP. 
B)  subtract interest payments from tax revenues. 
C)  divide the budget deficit by nominal GDP. 
D)  divide the budget deficit by the consumer price index.

Exam 33: Budget Deficits in the Short and Long Run

The structural deficit/surplus budget

Which of the following is not true with regard to the burden of the U.S.national debt?

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 does the official budget produce a surplus?

By 2007 the deficit

At levels of GDP above full employment, the federal budget would usually be in a deficit position.

If the government ran a major deficit, and there was no noticeable effect on the level of GDP, this could be taken as evidence of

The fallacy in the strict crowding-out argument comes from supposing that

The crowding-in effect results from

Monetizing the debt has what effect on the economy?

To correct the budget deficit for inflation, we should

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

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

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