Question 1

As a result of the increased deficit associated with discretionary fiscal policy, _____

Accepted Answer

A)  both the interest rate and real output fall. 
B)  both the interest rate and nominal output rise. 
C)  the interest rate falls and real output rises. 
D)  the interest rate rises and nominal output falls. 
E)  the natural rate of unemployment rises and the interest rate falls. 
A)  both the interest rate and real output fall. 
B)  both the interest rate and nominal output rise. 
C)  the interest rate falls and real output rises. 
D)  the interest rate rises and nominal output falls. 
E)  the natural rate of unemployment rises and the interest rate falls. D

Question 2

Which of the following countries has the largest projected net debt as a percentage of its GDP for 2017?

Accepted Answer

A)  Japan 
B)  the United States 
C)  Germany 
D)  Italy 
E)  Australia 
A)  Japan 
B)  the United States 
C)  Germany 
D)  Italy 
E)  Australia A

Question 3

Since 1970, the federal government budget has never been in surplus.

Accepted Answer

A) True 
 B)False  False

Question 4

Is there justification for shifting some of the cost of capital projects to future taxpayers through issuing debt?

Accepted Answer

A)  Yes, future taxes should be increased. 
B)  No, future taxes should be decreased. 
C)  Yes, because they will benefit from these investments. 
D)  No, because they will not benefit from these investments. 
E)  No. Capital projects should never be financed by issuing debt. 
A)  Yes, future taxes should be increased. 
B)  No, future taxes should be decreased. 
C)  Yes, because they will benefit from these investments. 
D)  No, because they will not benefit from these investments. 
E)  No. Capital projects should never be financed by issuing debt.

Question 5

If a federal budget deficit causes crowding out, _____

Accepted Answer

A)  real GDP does not increase by as much as the spending multiplier would predict, because the marginal propensity to consume decreases. 
B)  real GDP does not increase by as much as the spending multiplier would predict, because investment decreases. 
C)  interest rates fall, reducing the burden of the national debt. 
D)  firms become more willing to invest. 
E)  interest rates fall, so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit. 
A)  real GDP does not increase by as much as the spending multiplier would predict, because the marginal propensity to consume decreases. 
B)  real GDP does not increase by as much as the spending multiplier would predict, because investment decreases. 
C)  interest rates fall, reducing the burden of the national debt. 
D)  firms become more willing to invest. 
E)  interest rates fall, so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit.

Question 6

What happened in Greece in 2010?

Accepted Answer

A)  The debt had become low and was therefore safe. 
B)  The debt had become too low and was therefore risky. 
C)  The debt had become too high and was therefore risky. 
D)  The debt had become too high and was therefore safe. 
E)  A credit upgrade was instituted. 
A)  The debt had become low and was therefore safe. 
B)  The debt had become too low and was therefore risky. 
C)  The debt had become too high and was therefore risky. 
D)  The debt had become too high and was therefore safe. 
E)  A credit upgrade was instituted.

Question 7

A budget resolution _____

Accepted Answer

A)  is a continuing resolution of the previous budget. 
B)  is the congressional gestation period. 
C)  is a resolution on the dates of the budget cycle. 
D)  is a proposal on total outlays, spending by major category, and expected revenues. 
E)  is an agreement on total outlays, spending by major category, and expected revenues. 
A)  is a continuing resolution of the previous budget. 
B)  is the congressional gestation period. 
C)  is a resolution on the dates of the budget cycle. 
D)  is a proposal on total outlays, spending by major category, and expected revenues. 
E)  is an agreement on total outlays, spending by major category, and expected revenues.

Question 8

Deficit spending is a way of _____

Accepted Answer

A)  billing future taxpayers for current spending. 
B)  billing future taxpayers for future spending. 
C)  billing current taxpayers for current spending. 
D)  billing current taxpayers for future spending. 
E)  suddenly increasing the investment flows in the economy. 
A)  billing future taxpayers for current spending. 
B)  billing future taxpayers for future spending. 
C)  billing current taxpayers for current spending. 
D)  billing current taxpayers for future spending. 
E)  suddenly increasing the investment flows in the economy.

Question 9

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 10

Except for World War II, the U.S. deficits from 2009 to 2012 were the largest deficits in the nation's history relative to GDP, even larger than during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 11

The U.S. federal budget is determined exclusively by Congress.

Accepted Answer

A) True 
 B)False

Question 12

Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP.

Accepted Answer

A) True 
 B)False

Question 13

In the past century, how many times has Congress changed the debt ceiling?

Accepted Answer

A)  about 100 times 
B)  about 80 times 
C)  about 50 times 
D)  about 20 times 
E)  never 
A)  about 100 times 
B)  about 80 times 
C)  about 50 times 
D)  about 20 times 
E)  never

Question 14

The president's budget is presented to Congress _____

Accepted Answer

A)  in the form of the Economic Report of the President. 
B)  in a report followed shortly by the Economic Report of the President. 
C)  at the beginning of the fiscal year. 
D)  in a report that should be voted up or down within 60 days. 
E)  in a report that requires a two-thirds vote for ratification. 
A)  in the form of the Economic Report of the President. 
B)  in a report followed shortly by the Economic Report of the President. 
C)  at the beginning of the fiscal year. 
D)  in a report that should be voted up or down within 60 days. 
E)  in a report that requires a two-thirds vote for ratification.

Question 15

The accepted philosophy on U.S. federal deficits prior to the Great Depression was that _____

Accepted Answer

A)  the budget should be balanced cyclically. 
B)  a budget deficit does not matter as long as the economy is at full employment. 
C)  the budget should be annually balanced. 
D)  deficits dampen aggregate demand in the short run and reduce the federal debt. 
E)  spending decreases during expansions and increases during recessions. 
A)  the budget should be balanced cyclically. 
B)  a budget deficit does not matter as long as the economy is at full employment. 
C)  the budget should be annually balanced. 
D)  deficits dampen aggregate demand in the short run and reduce the federal debt. 
E)  spending decreases during expansions and increases during recessions.

Question 16

The federal budget has been in deficit in all but 9 years since 1960.

Accepted Answer

A) True 
 B)False

Question 17

The U.S. federal debt as a percentage of GDP is currently on the rise.

Accepted Answer

A) True 
 B)False

Question 18

What happens to deficits during expansions?

Accepted Answer

A)  They increase, because tax revenues decline while spending programs increase. 
B)  They decrease, because tax revenues decline while spending programs decrease. 
C)  They increase, because personal income and corporate profits increase, boosting tax revenue. 
D)  They decrease, because personal income and corporate profits increase, boosting tax revenue. 
E)  They decrease during recessions and increase during expansions. 
A)  They increase, because tax revenues decline while spending programs increase. 
B)  They decrease, because tax revenues decline while spending programs decrease. 
C)  They increase, because personal income and corporate profits increase, boosting tax revenue. 
D)  They decrease, because personal income and corporate profits increase, boosting tax revenue. 
E)  They decrease during recessions and increase during expansions.

Question 19

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 20

Prior to the Great Depression, when did federal deficits primarily occur?

Accepted Answer

A)  during peacetime 
B)  during wartime 
C)  during recessions 
D)  during economic expansions 
E)  deficits never occurred prior to the Great Depression 
A)  during peacetime 
B)  during wartime 
C)  during recessions 
D)  during economic expansions 
E)  deficits never occurred prior to the Great Depression

As a result of the increased deficit associated with discretionary fiscal policy, _____

Which of the following countries has the largest projected net debt as a percentage of its GDP for 2017?

Since 1970, the federal government budget has never been in surplus.

Is there justification for shifting some of the cost of capital projects to future taxpayers through issuing debt?

If a federal budget deficit causes crowding out, _____

What happened in Greece in 2010?

A budget resolution _____

Deficit spending is a way of _____

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

Except for World War II, the U.S. deficits from 2009 to 2012 were the largest deficits in the nation's history relative to GDP, even larger than during the Great Depression.

The U.S. federal budget is determined exclusively by Congress.

Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP.

In the past century, how many times has Congress changed the debt ceiling?

The president's budget is presented to Congress _____

The accepted philosophy on U.S. federal deficits prior to the Great Depression was that _____

The federal budget has been in deficit in all but 9 years since 1960.

The U.S. federal debt as a percentage of GDP is currently on the rise.

What happens to deficits during expansions?

A likely consequence of debt default is _____

Prior to the Great Depression, when did federal deficits primarily occur?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 12: Federal Budgets and Public Policy.

As a result of the increased deficit associated with discretionary fiscal policy, _____

Which of the following countries has the largest projected net debt as a percentage of its GDP for 2017?

Since 1970, the federal government budget has never been in surplus.

Is there justification for shifting some of the cost of capital projects to future taxpayers through issuing debt?

If a federal budget deficit causes crowding out, _____

What happened in Greece in 2010?

A budget resolution _____

Deficit spending is a way of _____

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

Except for World War II, the U.S. deficits from 2009 to 2012 were the largest deficits in the nation's history relative to GDP, even larger than during the Great Depression.

The U.S. federal budget is determined exclusively by Congress.

Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP.

In the past century, how many times has Congress changed the debt ceiling?

The president's budget is presented to Congress _____

The accepted philosophy on U.S. federal deficits prior to the Great Depression was that _____

The federal budget has been in deficit in all but 9 years since 1960.

The U.S. federal debt as a percentage of GDP is currently on the rise.

What happens to deficits during expansions?

A likely consequence of debt default is _____

Prior to the Great Depression, when did federal deficits primarily occur?

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters