Question 1

The official fiscal year budget deficits disappeared from 1998 to 2001.

Accepted Answer

A) True 
 B)False

Question 2

Budget surplus is the amount by which the government's receipts exceed expenditures during a specified period of time, usually a year.

Accepted Answer

A) True 
 B)False

Question 3

The budget deficit

Accepted Answer

A)  is the value of the government's indebtedness at a moment in time. 
B)  was $13.5 trillion in fiscal 2014. 
C)  is the amount by which the government's expenditures exceed receipts during a specific time period. 
D)  all of the above are correct. 
A)  is the value of the government's indebtedness at a moment in time. 
B)  was $13.5 trillion in fiscal 2014. 
C)  is the amount by which the government's expenditures exceed receipts during a specific time period. 
D)  all of the above are correct.

Question 4

Increases in government spending or tax cuts normally

Accepted Answer

A)  pushes interest rates up. 
B)  pulls interest rates down. 
C)  has no impact on interest rates. 
D)  none of these. 
A)  pushes interest rates up. 
B)  pulls interest rates down. 
C)  has no impact on interest rates. 
D)  none of these.

Question 5

The American national debt is an obligation to pay U.S.$.

Accepted Answer

A) True 
 B)False

Question 6

The national debt is defined as the total

Accepted Answer

A)  amount that U.S. citizens owe to foreigners. 
B)  value that U.S. citizens borrow from foreigners during any time period. 
C)  value of government's indebtedness at any moment in time. 
D)  amount by which government's expenditures exceed receipts during any time period. 
A)  amount that U.S. citizens owe to foreigners. 
B)  value that U.S. citizens borrow from foreigners during any time period. 
C)  value of government's indebtedness at any moment in time. 
D)  amount by which government's expenditures exceed receipts during any time period.

Question 7

How sensitive is the structural deficit to the state of the economy?

Accepted Answer

A)  It is insensitive to the state of the economy. 
B)  The structural deficit changes cyclically with the economy. 
C)  Changes in the structural deficit trigger opposite swings in the economy. 
D)  The structural deficit changes countercyclically with the economy. 
A)  It is insensitive to the state of the economy. 
B)  The structural deficit changes cyclically with the economy. 
C)  Changes in the structural deficit trigger opposite swings in the economy. 
D)  The structural deficit changes countercyclically with the economy.

Question 8

A large national debt can lead to a nation to bequeath less capital to future generations.

Accepted Answer

A) True 
 B)False

Question 9

There is a fundamental difference between nations that borrow in their own currency (such as the United States) and nations that borrow in some other currency (often the U.S. dollar).

Accepted Answer

A) True 
 B)False

Question 10

Figure 32-1
 
In Figure 32-1, 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 11

The structural deficit does not depend on the state of the economy.

Accepted Answer

A) True 
 B)False

Question 12

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 13

The crowding-out effect is more likely to dominate the crowding-in effect when investment is relatively

Accepted Answer

A)  insensitive to interest rates and to GDP. 
B)  insensitive to interest rates but sensitive to GDP. 
C)  sensitive to interest rates and to GDP. 
D)  sensitive to interest rates and insensitive to GDP. 
A)  insensitive to interest rates and to GDP. 
B)  insensitive to interest rates but sensitive to GDP. 
C)  sensitive to interest rates and to GDP. 
D)  sensitive to interest rates and insensitive to GDP.

Question 14

The structural deficit can be defined as

Accepted Answer

A)  the deficit that is structurally obstructing economic recovery to reach level of high employment. 
B)  a hypothetical construct that estimates the deficit, given current tax rates and expenditure policies, if the economy were operating at some fixed high-employment level. 
C)  the deficit necessary to restructure the economy and reach a desired high-employment level. 
D)  the deficit that would prevail if fiscal policy were structured differently in order to reach a desired high-employment level. 
A)  the deficit that is structurally obstructing economic recovery to reach level of high employment. 
B)  a hypothetical construct that estimates the deficit, given current tax rates and expenditure policies, if the economy were operating at some fixed high-employment level. 
C)  the deficit necessary to restructure the economy and reach a desired high-employment level. 
D)  the deficit that would prevail if fiscal policy were structured differently in order to reach a desired high-employment level.

Question 15

In the long run, the economy will be near full employment, and crowding out is the stronger force.

Accepted Answer

A) True 
 B)False

Question 16

The purpose of fiscal policy should be to

Accepted Answer

A)  balance the budget to be fiscally responsible. 
B)  balance aggregate supply and aggregate demand. 
C)  keep taxes low to keep voters happy. 
D)  minimize government spending to avoid wasting money. 
A)  balance the budget to be fiscally responsible. 
B)  balance aggregate supply and aggregate demand. 
C)  keep taxes low to keep voters happy. 
D)  minimize government spending to avoid wasting money.

Question 17

The policy mix that the Clinton administration sought in early 1993 was a

Accepted Answer

A)  smaller budget deficit and tighter monetary policy. 
B)  smaller budget deficit and looser monetary policy. 
C)  larger budget deficit and looser monetary policy. 
D)  larger budget deficit and tighter monetary policy. 
A)  smaller budget deficit and tighter monetary policy. 
B)  smaller budget deficit and looser monetary policy. 
C)  larger budget deficit and looser monetary policy. 
D)  larger budget deficit and tighter monetary policy.

Question 18

During the late 1980s and early 1990s, most of the budget deficits were accounted for by

Accepted Answer

A)  the decline of foreign investment in the United States. 
B)  the downturn in the economy. 
C)  deliberate fiscal policy changes. 
D)  all of the above are correct. 
A)  the decline of foreign investment in the United States. 
B)  the downturn in the economy. 
C)  deliberate fiscal policy changes. 
D)  all of the above are correct.

Question 19

Figure 32-1
 
In Figure 32-1, 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 20

The central bank is said to monetize the deficit when it

Accepted Answer

A)  prints Federal Reserve notes to satisfy the increased demand for money. 
B)  sells government bonds from its own portfolio of government securities. 
C)  requires member banks to buy the bonds to finance the deficit. 
D)  purchases the bonds that the government issues. 
A)  prints Federal Reserve notes to satisfy the increased demand for money. 
B)  sells government bonds from its own portfolio of government securities. 
C)  requires member banks to buy the bonds to finance the deficit. 
D)  purchases the bonds that the government issues.

Exam 32: Budget Deficits in the Short and Long Run

The official fiscal year budget deficits disappeared from 1998 to 2001.

Budget surplus is the amount by which the government's receipts exceed expenditures during a specified period of time, usually a year.

The budget deficit

Increases in government spending or tax cuts normally

The American national debt is an obligation to pay U.S.$.

The national debt is defined as the total

How sensitive is the structural deficit to the state of the economy?

A large national debt can lead to a nation to bequeath less capital to future generations.

There is a fundamental difference between nations that borrow in their own currency (such as the United States) and nations that borrow in some other currency (often the U.S. dollar).

Figure 32-1 In Figure 32-1, 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?

The structural deficit does not depend on the state of the economy.

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

The crowding-out effect is more likely to dominate the crowding-in effect when investment is relatively

The structural deficit can be defined as

In the long run, the economy will be near full employment, and crowding out is the stronger force.

The purpose of fiscal policy should be to

The policy mix that the Clinton administration sought in early 1993 was a

During the late 1980s and early 1990s, most of the budget deficits were accounted for by

Figure 32-1 In Figure 32-1, 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?

The central bank is said to monetize the deficit when it

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

Contemporary Issues in the Us Economy

Filters