Question 1

Suppose the economy is currently at full employment. It is likely that:

Accepted Answer

A)  a sustained deficit will lead to an increase in the rate of inflation. 
B)  a sustained deficit will have no affect on the rate of inflation. 
C)  a sustained deficit will lead to a increase in GDP. 
D)  a sustained deficit will lead to an decrease in the rate of inflation. 
A)  a sustained deficit will lead to an increase in the rate of inflation. 
B)  a sustained deficit will have no affect on the rate of inflation. 
C)  a sustained deficit will lead to a increase in GDP. 
D)  a sustained deficit will lead to an decrease in the rate of inflation. A

Question 2

The assertion that large budget deficits have an adverse impact on the economy is rooted in the idea that deficits would:

Accepted Answer

A)  raise interest rates and therefore lower investment. 
B)  eliminate the balance of payments deficit. 
C)  impose a burden on present generations. 
D)  reduce inflation. 
A)  raise interest rates and therefore lower investment. 
B)  eliminate the balance of payments deficit. 
C)  impose a burden on present generations. 
D)  reduce inflation. A

Question 3

Use the following diagram to answer the following questions.
  
-Refer to Loanable Funds. Suppose the demand for loanable funds is initially D₁ and the supply of loanable funds is S. If the interest rate is currently greater than i₁, then:

Accepted Answer

A)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and the interest rate will rise. 
B)  the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and the interest rate will decrease. 
C)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and the interest rate will decrease. 
D)  the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and the interest rate will increase. 
A)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and the interest rate will rise. 
B)  the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and the interest rate will decrease. 
C)  the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and the interest rate will decrease. 
D)  the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and the interest rate will increase. C

Question 4

Which of the following in not true about Net exports (NX):

Accepted Answer

A)  Net exports is exports minus imports. 
B)  Net exports have been negative for the last 3 decades. 
C)  Because of net exports, the flow of dollars out of the United States to purchase foreign goods and services is less than the flow of dollars coming in. 
D)  Net exports is a measure of goods and services exported and imported by the United States. 
A)  Net exports is exports minus imports. 
B)  Net exports have been negative for the last 3 decades. 
C)  Because of net exports, the flow of dollars out of the United States to purchase foreign goods and services is less than the flow of dollars coming in. 
D)  Net exports is a measure of goods and services exported and imported by the United States.

Question 5

Suppose that after many years of balancing the budget a country then runs a surplus of $1.5 billion in one year and a deficit of $2 billion the next year. What is the country's national debt?

Accepted Answer

The national debt wi

Question 6

The fiscal imbalance is a measure of the future value of the current deficit.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is False?

Accepted Answer

A)  The case for lowering taxes with a budget surplus is stronger if the economy is at less than full employment. 
B)  Sustained budget deficits will produce sustained annual reductions in domestic investment. 
C)  Older generations have a greater stake in reducing the national debt than younger generations. 
D)  It would takes several years before the benefits of a reduced national debt would be felt by Americans. 
A)  The case for lowering taxes with a budget surplus is stronger if the economy is at less than full employment. 
B)  Sustained budget deficits will produce sustained annual reductions in domestic investment. 
C)  Older generations have a greater stake in reducing the national debt than younger generations. 
D)  It would takes several years before the benefits of a reduced national debt would be felt by Americans.

Question 8

The increase in the portion of the national debt held by foreigners is cause for concern because:

Accepted Answer

A)  foreigners will have increasing political influence. 
B)  when the debt is repaid, there may be a reduction in the amount of goods and services available to citizens. 
C)  there is a redistribution of income from taxpayers to debt holders. 
D)  The above statement is incorrect. There are no economic consequences associated with increased foreign holdings of the national debt. 
A)  foreigners will have increasing political influence. 
B)  when the debt is repaid, there may be a reduction in the amount of goods and services available to citizens. 
C)  there is a redistribution of income from taxpayers to debt holders. 
D)  The above statement is incorrect. There are no economic consequences associated with increased foreign holdings of the national debt.

Question 9

Is the following statement true or False? "Citizens should be concerned if a greater proportion of the national debt is held by foreigners." Defend your answer.

Accepted Answer

There may be cause for concern if the pr

Question 10

Which debt is likely to be a more serious problem? A $110 billion national debt in a country where GDP is $2,000 billion, or a $100 million national debt in a country where GDP is $1,000 million?

Accepted Answer

In the first country, the debt is 5.5 pe

Question 11

Higher productivity growth will affect the deficit by:

Accepted Answer

A)  increasing budget outlays, hence increasing the deficit, ceteris paribus. 
B)  increasing the tax base, hence decreasing the deficit, ceteris paribus. 
C)  increasing output less than the increase in social programs, thereby decreasing the debt. 
D)  both a and b, but not c 
A)  increasing budget outlays, hence increasing the deficit, ceteris paribus. 
B)  increasing the tax base, hence decreasing the deficit, ceteris paribus. 
C)  increasing output less than the increase in social programs, thereby decreasing the debt. 
D)  both a and b, but not c

Question 12

Use the following diagram to answer the following questions.
  
-Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:

Accepted Answer

A)  cause demand to shift from D₂ to D₁. 
B)  cause demand to shift from D₁ to D₂. 
C)  cause the equilibrium rate of interest to change from i₂ to i₁. 
D)  cause the equilibrium quantity of funds supplied to fall. 
A)  cause demand to shift from D₂ to D₁. 
B)  cause demand to shift from D₁ to D₂. 
C)  cause the equilibrium rate of interest to change from i₂ to i₁. 
D)  cause the equilibrium quantity of funds supplied to fall.

Question 13

A deficit financed by issuing U.S. Treasury bonds to the private sector will have an insignificant effect on the interest rate if:

Accepted Answer

A)  the economy is at the peak of the business cycle. 
B)  unemployment rates are relatively low. 
C)  the economy is near the peak of the business cycle. 
D)  the economy is in a severe recession. 
A)  the economy is at the peak of the business cycle. 
B)  unemployment rates are relatively low. 
C)  the economy is near the peak of the business cycle. 
D)  the economy is in a severe recession.

Question 14

Explain how the federal government saves the Social Security surplus.

Accepted Answer

The Social Security surplus is considere

Question 15

Suppose that the government has current financial assets of $500 billion, that government receipts next year will be $3 trillion, and that government outlays next year will be $3.5 trillion. Given an interest rate of 6 percent, what is the one-year fiscal imbalance?

Accepted Answer

FIt = PVFOt - PVFRt - CVFAt,
The fiscal

Question 16

The Social Security portion of the budget is called the:

Accepted Answer

A)  off-budget surplus. 
B)  Social Security surplus. 
C)  on-budget surplus. 
D)  unified budget surplus. 
A)  off-budget surplus. 
B)  Social Security surplus. 
C)  on-budget surplus. 
D)  unified budget surplus.

Question 17

Suppose the federal government incurs a deficit because the economy enters a recession. In attempts to balance the budget, Congress enacts a temporary increase in marginal tax rates. This policy will:

Accepted Answer

A)  balance the budget and restore economic stability as individuals become confident about government's ability to shrink the deficit. 
B)  likely cause aggregate demand to fall, thereby worsening the recession. 
C)  likely cause aggregate demand to increase, thereby restoring full employment. 
D)  cause aggregate demand to fall as consumption decreases; however, this decrease will be offset by an increase in investment as interest rates fall in response to the decreased demand for loanable funds. 
A)  balance the budget and restore economic stability as individuals become confident about government's ability to shrink the deficit. 
B)  likely cause aggregate demand to fall, thereby worsening the recession. 
C)  likely cause aggregate demand to increase, thereby restoring full employment. 
D)  cause aggregate demand to fall as consumption decreases; however, this decrease will be offset by an increase in investment as interest rates fall in response to the decreased demand for loanable funds.

Question 18

The public debt can decline while the gross federal debt grows if:

Accepted Answer

A)  The total outstanding debt of the federal government declines. 
B)  The public debt is retired. 
C)  Less of the gross federal debt is financed by the government itself. 
D)  More of the gross federal debt is financed by the government itself. 
A)  The total outstanding debt of the federal government declines. 
B)  The public debt is retired. 
C)  Less of the gross federal debt is financed by the government itself. 
D)  More of the gross federal debt is financed by the government itself.

Question 19

The government is justified in running a deficit and financing it by issuing U.S. Treasury bonds to the private sector when:

Accepted Answer

A)  the economy is in the contractionary phase of the business cycle. 
B)  the economy is in the expansionary phase of the business cycle. 
C)  the economy is at the peak of the business cycle. 
D)  The government should never run a deficit as this will force up interest rates. 
A)  the economy is in the contractionary phase of the business cycle. 
B)  the economy is in the expansionary phase of the business cycle. 
C)  the economy is at the peak of the business cycle. 
D)  The government should never run a deficit as this will force up interest rates.

Question 20

Which of the following is not true regarding the use of the budget surplus to increase government spending levels?

Accepted Answer

A)  A greater role for government in the economy is undesirable. 
B)  Increased spending would put downward pressure on the price level. 
C)  Increased spending would increase aggregate demand. 
D)  A projected surplus may never materialize and increased spending would just increase the deficit. 
A)  A greater role for government in the economy is undesirable. 
B)  Increased spending would put downward pressure on the price level. 
C)  Increased spending would increase aggregate demand. 
D)  A projected surplus may never materialize and increased spending would just increase the deficit.

Suppose the economy is currently at full employment. It is likely that:

The assertion that large budget deficits have an adverse impact on the economy is rooted in the idea that deficits would:

Use the following diagram to answer the following questions. -Refer to Loanable Funds. Suppose the demand for loanable funds is initially D₁ and the supply of loanable funds is S. If the interest rate is currently greater than i₁, then:

Which of the following in not true about Net exports (NX):

Suppose that after many years of balancing the budget a country then runs a surplus of $1.5 billion in one year and a deficit of $2 billion the next year. What is the country's national debt?

The fiscal imbalance is a measure of the future value of the current deficit.

Which of the following statements is False?

The increase in the portion of the national debt held by foreigners is cause for concern because:

Is the following statement true or False? "Citizens should be concerned if a greater proportion of the national debt is held by foreigners." Defend your answer.

Which debt is likely to be a more serious problem? A $110 billion national debt in a country where GDP is $2,000 billion, or a $100 million national debt in a country where GDP is $1,000 million?

Higher productivity growth will affect the deficit by:

Use the following diagram to answer the following questions. -Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:

A deficit financed by issuing U.S. Treasury bonds to the private sector will have an insignificant effect on the interest rate if:

Explain how the federal government saves the Social Security surplus.

Suppose that the government has current financial assets of $500 billion, that government receipts next year will be $3 trillion, and that government outlays next year will be $3.5 trillion. Given an interest rate of 6 percent, what is the one-year fiscal imbalance?

The Social Security portion of the budget is called the:

Suppose the federal government incurs a deficit because the economy enters a recession. In attempts to balance the budget, Congress enacts a temporary increase in marginal tax rates. This policy will:

The public debt can decline while the gross federal debt grows if:

The government is justified in running a deficit and financing it by issuing U.S. Treasury bonds to the private sector when:

Which of the following is not true regarding the use of the budget surplus to increase government spending levels?

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Inflation: a Monetary Phenomenon

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

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Exam 15: Sustained Budget Deficits: Is This Any Way to Run a Government

Suppose the economy is currently at full employment. It is likely that:

The assertion that large budget deficits have an adverse impact on the economy is rooted in the idea that deficits would:

Use the following diagram to answer the following questions. -Refer to Loanable Funds. Suppose the demand for loanable funds is initially D₁ and the supply of loanable funds is S. If the interest rate is currently greater than i₁, then:

Which of the following in not true about Net exports (NX):

Suppose that after many years of balancing the budget a country then runs a surplus of $1.5 billion in one year and a deficit of $2 billion the next year. What is the country's national debt?

The fiscal imbalance is a measure of the future value of the current deficit.

Which of the following statements is False?

The increase in the portion of the national debt held by foreigners is cause for concern because:

Is the following statement true or False? "Citizens should be concerned if a greater proportion of the national debt is held by foreigners." Defend your answer.

Which debt is likely to be a more serious problem? A $110 billion national debt in a country where GDP is $2,000 billion, or a $100 million national debt in a country where GDP is $1,000 million?

Higher productivity growth will affect the deficit by:

Use the following diagram to answer the following questions. -Refer to Loanable Funds. An increase in the federal budget deficit financed by issuing U.S. Treasury bonds would most likely:

A deficit financed by issuing U.S. Treasury bonds to the private sector will have an insignificant effect on the interest rate if:

Explain how the federal government saves the Social Security surplus.

Suppose that the government has current financial assets of $500 billion, that government receipts next year will be $3 trillion, and that government outlays next year will be $3.5 trillion. Given an interest rate of 6 percent, what is the one-year fiscal imbalance?

The Social Security portion of the budget is called the:

Suppose the federal government incurs a deficit because the economy enters a recession. In attempts to balance the budget, Congress enacts a temporary increase in marginal tax rates. This policy will:

The public debt can decline while the gross federal debt grows if:

The government is justified in running a deficit and financing it by issuing U.S. Treasury bonds to the private sector when:

Which of the following is not true regarding the use of the budget surplus to increase government spending levels?

Economic Growth: an Introduction to Scarcity and Choice

An Introduction to Economic Systems and the Workings of the Price System

Competitive Markets and Government Policy: Agriculture

Efficiency in Resource Allocation: How Much Do We Have How Much Do We Want

Market Power: Does It Help or Hurt the Economy

Air Pollution: Balancing Benefits and Costs

Health Care: How Much for Whom

Crime and Drugs: a Modern Dilemma

College Education: Is It Worth the Cost

Educational Reform: the Role of Incentives and Choice

Poverty: Old and New Approaches to a Persistent Problem

Tracking and Explaining the Macroeconomy

Unemployment: the Legacy of Recession, Technological Change, and Free Choice

Inflation: a Monetary Phenomenon

Social Security: Leading Issues and Approaches to Reform

International Trade: Beneficial, but Controversial

Financing Trade and the Trade Deficit

Filters