Question 1

A serious burden of a budget deficit and an increase in the national debt comes on the supply side because large budget deficits

Accepted Answer

A)  discourage consumption and therefore lead to production cutbacks. 
B)  lead to lower interest rates and therefore to excessive optimism by consumers and businesspeople. 
C)  discourage investment and therefore may reduce the growth of the nation's capital stock. 
D)  discourage foreign investment and therefore limit employment opportunities. 
A)  discourage consumption and therefore lead to production cutbacks. 
B)  lead to lower interest rates and therefore to excessive optimism by consumers and businesspeople. 
C)  discourage investment and therefore may reduce the growth of the nation's capital stock. 
D)  discourage foreign investment and therefore limit employment opportunities. C

Question 2

Figure 16-3
  
-Figure 16-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money.If the Federal Reserve does not want interest rates to rise,it will

Accepted Answer

A)  shift the money supply curve to the right by monetizing the deficit. 
B)  shift the money supply curve to the left by open market sales of government securities. 
C)  maintain the current targets for both M1 and M2 money stocks. 
D)  engage in contractionary monetary policy, such as increases in the discount rate. 
A)  shift the money supply curve to the right by monetizing the deficit. 
B)  shift the money supply curve to the left by open market sales of government securities. 
C)  maintain the current targets for both M1 and M2 money stocks. 
D)  engage in contractionary monetary policy, such as increases in the discount rate. A

Question 3

What is the difference between the deficit and the debt?

Accepted Answer

The budget deficit is the difference over some time period,usually a year,between government receipts and outlays (expenditures plus transfers).When outlays exceed receipts,the budget is in deficit.The national debt is the accumulation of past deficits.The budget deficits in the 1980s and the early 1990s were often over $150 billion a year or more.The national debt at the end of 1998 was about $3.3 billion on a net basis.

Question 4

Compared to the size of GDP in 2010,the net national debt was approximately

Accepted Answer

A)  10% as large. 
B)  33% as large. 
C)  60% as large. 
D)  about twice as large. 
A)  10% as large. 
B)  33% as large. 
C)  60% as large. 
D)  about twice as large.

Question 5

Conventional budget accounting practices tend to overstate deficits in inflationary periods because they

Accepted Answer

A)  ignore the inflation tax. 
B)  confuse repayment of principal with real interest expenditures. 
C)  double count some expenditures. 
D)  understate real interest rates. 
A)  ignore the inflation tax. 
B)  confuse repayment of principal with real interest expenditures. 
C)  double count some expenditures. 
D)  understate real interest rates.

Question 6

From 2004 to 2008,the federal budget deficit,on an official fiscal-year basis was

Accepted Answer

A)  large and growing larger. 
B)  "negative," that is, the budget was in surplus. 
C)  declining. 
D)  increased by the rising Social Security deficit. 
A)  large and growing larger. 
B)  "negative," that is, the budget was in surplus. 
C)  declining. 
D)  increased by the rising Social Security deficit.

Question 7

Is the national debt a burden to future generations?

Accepted Answer

A)  No, as long as foreigners own a significant share of the national debt. 
B)  No, as long as the national debt is owned purely by U.S. citizens. 
C)  Yes, debt is always a burden to future generations. 
D)  Yes, unless foreigners increase their share of the national debt. 
A)  No, as long as foreigners own a significant share of the national debt. 
B)  No, as long as the national debt is owned purely by U.S. citizens. 
C)  Yes, debt is always a burden to future generations. 
D)  Yes, unless foreigners increase their share of the national debt.

Question 8

If a budget deficit increases interest rates,it is possible that investment will

Accepted Answer

A)  fall, leading to a larger capital stock. 
B)  fall, so that there is a smaller capital stock. 
C)  rise, because investment is directly related to interest rates. 
D)  rise, because investment is more attractive when interest rates are higher. 
A)  fall, leading to a larger capital stock. 
B)  fall, so that there is a smaller capital stock. 
C)  rise, because investment is directly related to interest rates. 
D)  rise, because investment is more attractive when interest rates are higher.

Question 9

The crowding-in effect depends on the sensitivity of investment to

Accepted Answer

A)  GDP, as does the crowding-out effect. 
B)  interest rates, whereas the crowding-out effect depends on the sensitivity of investment to GDP. 
C)  interest rates, as does the crowding-out effect. 
D)  GDP, whereas the crowding-out effect depends on the sensitivity of investment to interest rates. 
A)  GDP, as does the crowding-out effect. 
B)  interest rates, whereas the crowding-out effect depends on the sensitivity of investment to GDP. 
C)  interest rates, as does the crowding-out effect. 
D)  GDP, whereas the crowding-out effect depends on the sensitivity of investment to interest rates.

Question 10

Differentiate between "off-budget" deficit and the "on-budget" deficit.

Accepted Answer

Social Security expenditures and the pay

Question 11

The remarkable fact about the structural deficit after 1983 was that it was

Accepted Answer

A)  very high. 
B)  very small for a period of economic recovery. 
C)  very high during peacetime. 
D)  high during Republican administrations. 
A)  very high. 
B)  very small for a period of economic recovery. 
C)  very high during peacetime. 
D)  high during Republican administrations.

Question 12

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 2010. 
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 2010. 
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 13

Argentina in 2001 faced a debt problem more serious than the U.S.debt problem because Argentina was obligated to repay its debt in

Accepted Answer

A)  U.S. dollars. 
B)  their own currencies. 
C)  a relatively short period of time. 
D)  large installments. 
A)  U.S. dollars. 
B)  their own currencies. 
C)  a relatively short period of time. 
D)  large installments.

Question 14

The budget deficits of the 1980s and early 1990s differ from others in the post-World War II era in that they were

Accepted Answer

A)  a result of the Fed rather than a change in fiscal policy. 
B)  temporary rather than structural, and pose no threat to the economy. 
C)  not contracted to fight a war or end a recession. 
D)  contracted as part of a program to plan the economy. 
A)  a result of the Fed rather than a change in fiscal policy. 
B)  temporary rather than structural, and pose no threat to the economy. 
C)  not contracted to fight a war or end a recession. 
D)  contracted as part of a program to plan the economy.

Question 15

A constitutional amendment requiring an annually balanced budget would help stabilize the economy.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements about the national debt has the most validity?

Accepted Answer

A)  Our large national debt can bankrupt the nation. 
B)  If only Americans hold the debt, then payments of interest and principal are simply transfers from some Americans to other Americans. 
C)  Our large national debt can lead to subjection by the people (especially foreigners) who hold the debt. 
D)  The national debt represents a burden to future generations who will have to make huge payments of interest and principal. 
A)  Our large national debt can bankrupt the nation. 
B)  If only Americans hold the debt, then payments of interest and principal are simply transfers from some Americans to other Americans. 
C)  Our large national debt can lead to subjection by the people (especially foreigners) who hold the debt. 
D)  The national debt represents a burden to future generations who will have to make huge payments of interest and principal.

Question 17

Monetization of the deficit (or debt)means that

Accepted Answer

A)  the government uses monetary policy to control the economy rather than fiscal policy. 
B)  inflation accounting corrects for price increases. 
C)  the Fed buys newly issued debt and increases the money supply. 
D)  the amount of money in circulation is equal to the size of the debt. 
A)  the government uses monetary policy to control the economy rather than fiscal policy. 
B)  inflation accounting corrects for price increases. 
C)  the Fed buys newly issued debt and increases the money supply. 
D)  the amount of money in circulation is equal to the size of the debt.

Question 18

Until 1983,almost all U.S.national debt stemmed from financing wars or from the loss tax revenues that accompany recession.

Accepted Answer

A) True 
 B)False

Question 19

During the period from 1945 to 1975,the debt to GDP ratio

Accepted Answer

A)  remained steady. 
B)  rose slightly. 
C)  increased rapidly. 
D)  fell steadily. 
A)  remained steady. 
B)  rose slightly. 
C)  increased rapidly. 
D)  fell steadily.

Question 20

In contrast to Argentina in 2001,the United States debt is less of a burden because the U.S.debt is

Accepted Answer

A)  an obligation to pay over a longer period of time. 
B)  owed entirely to U.S. citizens and banks. 
C)  an obligation to pay in domestic currency. 
D)  an obligation to pay in foreign currency. 
A)  an obligation to pay over a longer period of time. 
B)  owed entirely to U.S. citizens and banks. 
C)  an obligation to pay in domestic currency. 
D)  an obligation to pay in foreign currency.

A serious burden of a budget deficit and an increase in the national debt comes on the supply side because large budget deficits

Figure 16-3 -Figure 16-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money.If the Federal Reserve does not want interest rates to rise,it will

What is the difference between the deficit and the debt?

Compared to the size of GDP in 2010,the net national debt was approximately

Conventional budget accounting practices tend to overstate deficits in inflationary periods because they

From 2004 to 2008,the federal budget deficit,on an official fiscal-year basis was

Is the national debt a burden to future generations?

If a budget deficit increases interest rates,it is possible that investment will

The crowding-in effect depends on the sensitivity of investment to

Differentiate between "off-budget" deficit and the "on-budget" deficit.

The remarkable fact about the structural deficit after 1983 was that it was

The budget deficit

Argentina in 2001 faced a debt problem more serious than the U.S.debt problem because Argentina was obligated to repay its debt in

The budget deficits of the 1980s and early 1990s differ from others in the post-World War II era in that they were

A constitutional amendment requiring an annually balanced budget would help stabilize the economy.

Which of the following statements about the national debt has the most validity?

Monetization of the deficit (or debt)means that

Until 1983,almost all U.S.national debt stemmed from financing wars or from the loss tax revenues that accompany recession.

During the period from 1945 to 1975,the debt to GDP ratio

In contrast to Argentina in 2001,the United States debt is less of a burden because the U.S.debt is

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

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Exam 16: Budget Deficits in the Short and Long Run

A serious burden of a budget deficit and an increase in the national debt comes on the supply side because large budget deficits

Figure 16-3 -Figure 16-3 shows the impact of deficit spending and the corresponding economic expansion on the demand curve for money.If the Federal Reserve does not want interest rates to rise,it will

What is the difference between the deficit and the debt?

Compared to the size of GDP in 2010,the net national debt was approximately

Conventional budget accounting practices tend to overstate deficits in inflationary periods because they

From 2004 to 2008,the federal budget deficit,on an official fiscal-year basis was

Is the national debt a burden to future generations?

If a budget deficit increases interest rates,it is possible that investment will

The crowding-in effect depends on the sensitivity of investment to

Differentiate between "off-budget" deficit and the "on-budget" deficit.

The remarkable fact about the structural deficit after 1983 was that it was

The budget deficit

Argentina in 2001 faced a debt problem more serious than the U.S.debt problem because Argentina was obligated to repay its debt in

The budget deficits of the 1980s and early 1990s differ from others in the post-World War II era in that they were

A constitutional amendment requiring an annually balanced budget would help stabilize the economy.

Which of the following statements about the national debt has the most validity?

Monetization of the deficit (or debt)means that

Until 1983,almost all U.S.national debt stemmed from financing wars or from the loss tax revenues that accompany recession.

During the period from 1945 to 1975,the debt to GDP ratio

In contrast to Argentina in 2001,the United States debt is less of a burden because the U.S.debt is

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