Question 1

When the price level rises,the:

Accepted Answer

A)  real deficit increases. 
B)  real deficit falls. 
C)  nation forgoes more consumption to pay the debt. 
D)  real burden of the deficit is not affected. 
A)  real deficit increases. 
B)  real deficit falls. 
C)  nation forgoes more consumption to pay the debt. 
D)  real burden of the deficit is not affected.

Question 2

The U.S.government uses:

Accepted Answer

A)  cash accounting for discretionary spending and capital accounting for defense spending. 
B)  cash accounting for discretionary spending and capital accounting for nondiscretionary spending. 
C)  only cash accounting. 
D)  only capital accounting. 
A)  cash accounting for discretionary spending and capital accounting for defense spending. 
B)  cash accounting for discretionary spending and capital accounting for nondiscretionary spending. 
C)  only cash accounting. 
D)  only capital accounting.

Question 3

Compare and contrast static scoring of the budget with dynamic scoring when it comes to evaluating the effect of a policy change.

Accepted Answer

Both the static and the dynamic approach

Question 4

Which of the following occurs when the generational accounting measure is used?

Accepted Answer

A)  Males born in 1998 are projected to pay less in taxes than they will receive in benefits from the government. 
B)  Males born in 1998 are projected to pay more in taxes than they will receive in benefits from the government. 
C)  Males over age 60 are projected to pay more in taxes than they will receive in benefits from the government over their lifetime. 
D)  This measure does not attempt to project future tax liabilities. 
A)  Males born in 1998 are projected to pay less in taxes than they will receive in benefits from the government. 
B)  Males born in 1998 are projected to pay more in taxes than they will receive in benefits from the government. 
C)  Males over age 60 are projected to pay more in taxes than they will receive in benefits from the government over their lifetime. 
D)  This measure does not attempt to project future tax liabilities.

Question 5

Which of the following is TRUE about balanced budget requirements (BBRs)?

Accepted Answer

A)  Only the federal government has a BBR. 
B)  BBRs that require that the governor/president submit a balanced budget or that the legislature pass a balanced budget are more effective than BBRs that require that the budget is balanced at the end of the year. 
C)  BBRs that require that the governor/president submit a balanced budget or that the legislature pass a balanced budget are less effective than BBRs that require that the budget is balanced at the end of the year. 
D)  BBRs have never been an effective method of reducing the size of the government's budget deficit. 
A)  Only the federal government has a BBR. 
B)  BBRs that require that the governor/president submit a balanced budget or that the legislature pass a balanced budget are more effective than BBRs that require that the budget is balanced at the end of the year. 
C)  BBRs that require that the governor/president submit a balanced budget or that the legislature pass a balanced budget are less effective than BBRs that require that the budget is balanced at the end of the year. 
D)  BBRs have never been an effective method of reducing the size of the government's budget deficit.

Question 6

The difference between the present discounted value (PDV)of projected expenditures each year in the future and the PDV of projected revenues each year in the future is the PDV of the government's:

Accepted Answer

A)  generational imbalance. 
B)  structural deficit. 
C)  cyclically adjusted deficit. 
D)  fiscal imbalance. 
A)  generational imbalance. 
B)  structural deficit. 
C)  cyclically adjusted deficit. 
D)  fiscal imbalance.

Question 7

Under which president did the United States experience the greatest increase in the deficit?

Accepted Answer

A)  Jimmy Carter 
B)  Ronald Reagan 
C)  William Clinton 
D)  George W.Bush 
A)  Jimmy Carter 
B)  Ronald Reagan 
C)  William Clinton 
D)  George W.Bush

Question 8

Which of the following is TRUE?

Accepted Answer

A)  Static scoring and dynamic scoring do not account for a policy's effects on behavior. 
B)  Static scoring and dynamic scoring both account for a policy's effects on behavior. 
C)  Static scoring accounts for a policy's effect on the size of the economy. 
D)  Dynamic scoring assumes that the size of the economy is fixed. 
A)  Static scoring and dynamic scoring do not account for a policy's effects on behavior. 
B)  Static scoring and dynamic scoring both account for a policy's effects on behavior. 
C)  Static scoring accounts for a policy's effect on the size of the economy. 
D)  Dynamic scoring assumes that the size of the economy is fixed.

Question 9

Complete the following sentence: Government __________ existed throughout the 1980s.

Accepted Answer

A)  surpluses 
B)  deficits 
C)  balanced budget requirements 
D)  spending reductions 
A)  surpluses 
B)  deficits 
C)  balanced budget requirements 
D)  spending reductions

Question 10

Suppose that the consumer price index rose by 3% from 2013 to 2014.Suppose that the price of a pizza increased by 5% during that time.Which of the following is TRUE?

Accepted Answer

A)  The nominal price of pizza decreased. 
B)  The real price of pizza increased. 
C)  The real price of pizza did not change. 
D)  The real price of pizza decreased. 
A)  The nominal price of pizza decreased. 
B)  The real price of pizza increased. 
C)  The real price of pizza did not change. 
D)  The real price of pizza decreased.

Question 11

If the present discounted value of $200 received 3 years from now is $134.32,what is the interest rate?

Accepted Answer

A)  9.6% 
B)  10% 
C)  12% 
D)  14% 
A)  9.6% 
B)  10% 
C)  12% 
D)  14%

Question 12

Suppose that the Consumer Price Index rises 3% from this year to next year.And suppose that the price of your favorite pizza rises 3% over that time as well.Which of the following is TRUE?

Accepted Answer

A)  The nominal price of pizza has increased. 
B)  The real price of pizza has increased. 
C)  The real price of pizza has fallen. 
D)  The nominal price of pizza has remained the same. 
A)  The nominal price of pizza has increased. 
B)  The real price of pizza has increased. 
C)  The real price of pizza has fallen. 
D)  The nominal price of pizza has remained the same.

Question 13

Which one of the following factors is a concern about long-run imbalance measures?

Accepted Answer

A)  The measures are politically motivated; objective forecasters typically don't acknowledge them. 
B)  The measures depend,critically,on assumptions about things like the future growth rates of costs and incomes. 
C)  The measures assume that government policy will change over time. 
D)  The measures do not take into account the political motivations of decision makers. 
A)  The measures are politically motivated; objective forecasters typically don't acknowledge them. 
B)  The measures depend,critically,on assumptions about things like the future growth rates of costs and incomes. 
C)  The measures assume that government policy will change over time. 
D)  The measures do not take into account the political motivations of decision makers.

Question 14

If debt is a nominal obligation to borrowers:

Accepted Answer

A)  debt is irrelevant for government. 
B)  inflation decreases the burden of the national debt. 
C)  inflation increases the burden of the national debt. 
D)  inflation has no effect on the burden of the national debt. 
A)  debt is irrelevant for government. 
B)  inflation decreases the burden of the national debt. 
C)  inflation increases the burden of the national debt. 
D)  inflation has no effect on the burden of the national debt.

Question 15

Suppose the economy is in a recession and that revenues for the current year are equal to expenditures.
(a)What is the budget deficit in this case?
(b)How would a cyclically adjusted budget deficit be different? Explain.

Accepted Answer

(b)A cyclically adjusted budget deficit

Question 16

Suppose you paid $2.50 for a beer in 2004 and $3 exactly a year later.The price in 2004 is measured in _______ dollars; the price in 2005 is measured in _________ dollars.

Accepted Answer

A)  real; real 
B)  nominal; real 
C)  real; nominal 
D)  nominal; nominal 
A)  real; real 
B)  nominal; real 
C)  real; nominal 
D)  nominal; nominal

Question 17

Suppose that the federal government is considering two alternative spending bills.The first would purchase land for $80 billion to protect an endangered species,while the second would use the $80 billion to build new highways.How would these spending bills affect the cash and capital accounts of the federal government?

Accepted Answer

Both bills would require an expenditure

Question 18

_____ accounting measures the deficit as the difference between current spending and current revenues,while _____ accounting takes into account the change in the value of the government's net asset holdings.

Accepted Answer

A)  Short-term; long-term 
B)  Long-term; short-term 
C)  Cash; capital 
D)  Capital; cash 
A)  Short-term; long-term 
B)  Long-term; short-term 
C)  Cash; capital 
D)  Capital; cash

Question 19

Which of the following is TRUE?

Accepted Answer

A)  Neither the federal nor state governments have been able to control deficits for long periods. 
B)  Both the federal and state governments have been able to control deficits for long periods. 
C)  Both the federal and state governments have effective balanced budget requirements in place. 
D)  State governments have been able to control deficits for long periods while the federal government has not. 
A)  Neither the federal nor state governments have been able to control deficits for long periods. 
B)  Both the federal and state governments have been able to control deficits for long periods. 
C)  Both the federal and state governments have effective balanced budget requirements in place. 
D)  State governments have been able to control deficits for long periods while the federal government has not.

Question 20

Which of the following must be TRUE?

Accepted Answer

A)  If debt increased from one year to the next,there must have been a budget deficit. 
B)  If debt decreased from one year to the next,there must have been a budget surplus. 
C)  If debt increased from one year to the next,entitlement spending must have been increased. 
D)  If debt increased from one year to the next,discretionary spending must have been increased. 
A)  If debt increased from one year to the next,there must have been a budget deficit. 
B)  If debt decreased from one year to the next,there must have been a budget surplus. 
C)  If debt increased from one year to the next,entitlement spending must have been increased. 
D)  If debt increased from one year to the next,discretionary spending must have been increased.

Exam 4: Budget Analysis and Deficit Financing

When the price level rises,the:

The U.S.government uses:

Compare and contrast static scoring of the budget with dynamic scoring when it comes to evaluating the effect of a policy change.

Which of the following occurs when the generational accounting measure is used?

Which of the following is TRUE about balanced budget requirements (BBRs)?

The difference between the present discounted value (PDV)of projected expenditures each year in the future and the PDV of projected revenues each year in the future is the PDV of the government's:

Under which president did the United States experience the greatest increase in the deficit?

Which of the following is TRUE?

Complete the following sentence: Government __________ existed throughout the 1980s.

Suppose that the consumer price index rose by 3% from 2013 to 2014.Suppose that the price of a pizza increased by 5% during that time.Which of the following is TRUE?

If the present discounted value of $200 received 3 years from now is $134.32,what is the interest rate?

Suppose that the Consumer Price Index rises 3% from this year to next year.And suppose that the price of your favorite pizza rises 3% over that time as well.Which of the following is TRUE?

Which one of the following factors is a concern about long-run imbalance measures?

If debt is a nominal obligation to borrowers:

Suppose the economy is in a recession and that revenues for the current year are equal to expenditures. (a)What is the budget deficit in this case? (b)How would a cyclically adjusted budget deficit be different? Explain.

Suppose you paid $2.50 for a beer in 2004 and $3 exactly a year later.The price in 2004 is measured in _______ dollars; the price in 2005 is measured in _________ dollars.

_____ accounting measures the deficit as the difference between current spending and current revenues,while _____ accounting takes into account the change in the value of the government's net asset holdings.

Which of the following is TRUE?

Which of the following must be TRUE?

Why Study Public Finance

Theoretical Tools of Public Finance

Empirical Tools of Public Finance

Externalities- Problems and Solutions

Externalities in Action- Environmental and Health Externalities

Public Goods

Cost-Benefit Analysis

Political Economy

State and Local Government Expenditures

Education

Social Insurance- the New Function of Government

Social Security

Unemployment Insurance, disability Insurance, and Workers Compensation

Health Insurance I- Health Economics and Private Health Insurance

Health Insurance Ii- Medicare, medicaid, and Health Care Reform

Income Distribution and Welfare Programs

Taxation- How It Works and What It Means

The Equity Implications of Taxation- Tax Incidence

Taxes on Labor Supply

Taxes on Savings

Taxes on Risk Taking and Wealth

Taxation of Business Income

Fundamental Tax Reform and Consumption Tax

Filters

Suppose you paid $2.50 for a beer in 2004 and $3 exactly a year later.The price in 2004 is measured in _ dollars; the price in 2005 is measured in ___ dollars.

_ accounting measures the deficit as the difference between current spending and current revenues,while _ accounting takes into account the change in the value of the government's net asset holdings.