Question 1

Given what you know about the sizes of economies, which of the following countries probably would find it impossible to borrow more than $1 trillion?

Accepted Answer

A)  Egypt 
B)  Vietnam 
C)  Russia 
D)  Croatia 
E)  All of these answers are correct. 
A)  Egypt 
B)  Vietnam 
C)  Russia 
D)  Croatia 
E)  All of these answers are correct. E

Question 2

What is Norway's debt-to-GDP situation? Why? Given this, what is it doing for the future?

Accepted Answer

Norway has a negative debt-to-GDP ratio because of its holding of oil and natural gas, thus it is a net lender. Because both oil and gas are depletable natural resources, Norway established the Government Petroleum Fund to help finance future government expenditures.

Question 3

Refer to the following figure when answering  
Figure 18.2: Government Outlays and Receipts as a Percentage of GDP, 1947-2012  
-Consider Figure 18.2. What was the cause of the huge budget deficit beginning in 1981?

Accepted Answer

A)  the oil crisis 
B)  the Great Recession 
C)  President Reagan's defense expenditures and tax cuts 
D)  the first Gulf War 
E)  the Volcker recession 
A)  the oil crisis 
B)  the Great Recession 
C)  President Reagan's defense expenditures and tax cuts 
D)  the first Gulf War 
E)  the Volcker recession B

Question 4

If current generations are depleting nonrenewable resources, they must compensate future generations by:

Accepted Answer

A)  investing in capital 
B)  investing in education 
C)  investing in research 
D)  All of these answers are correct. 
E)  None of these answers are correct. 
A)  investing in capital 
B)  investing in education 
C)  investing in research 
D)  All of these answers are correct. 
E)  None of these answers are correct.

Question 5

If we assume that $T r _ { t } = \Delta M _ { t } = 0$ , which of the following represents the government's budget constraint?

Accepted Answer

A)  $G _ { t } + i B _ { t } = T _ { t } + \Delta B _ { t }$ 
B)  $B _ { t } + 1 = ( 1 + i ) B _ { t } + G _ { t } - T _ { t }$ 
C)  $G _ { t } = T r _ { t }$ 
D)  $G _ { t } = T _ { t }$ 
E)  $B _ { t + 1 } = ( 1 + i ) B _ { t } + G _ { t }$ 
A)  $G _ { t } + i B _ { t } = T _ { t } + \Delta B _ { t }$ 
B)  $B _ { t } + 1 = ( 1 + i ) B _ { t } + G _ { t } - T _ { t }$ 
C)  $G _ { t } = T r _ { t }$ 
D)  $G _ { t } = T _ { t }$ 
E)  $B _ { t + 1 } = ( 1 + i ) B _ { t } + G _ { t }$

Question 6

The difference between the gross federal debt and the debt by the public is debt held by:

Accepted Answer

A)  other government entities 
B)  the social security administration 
C)  foreign central banks 
D)  All of these answers are correct. 
E)  None of these answers are correct. 
A)  other government entities 
B)  the social security administration 
C)  foreign central banks 
D)  All of these answers are correct. 
E)  None of these answers are correct.

Question 7

An explanation of why governments are willing to burden future generations with debt to finance a war today is that future generations will enjoy peace and must pay something.

Accepted Answer

A) True 
 B)False

Question 8

The federal government's largest source of revenue in 2011 was:

Accepted Answer

A)  Medicare taxes 
B)  social security taxes 
C)  personal income taxes 
D)  corporate income taxes 
E)  natural resource extraction royalties 
A)  Medicare taxes 
B)  social security taxes 
C)  personal income taxes 
D)  corporate income taxes 
E)  natural resource extraction royalties

Question 9

The best indicator of whether a country can borrow is the credibility of the central government.

Accepted Answer

A) True 
 B)False

Question 10

An implication of the intertemporal budget constraint is that the government can borrow as much as it wants.

Accepted Answer

A) True 
 B)False

Question 11

The federal government's largest expenditure in 2011 was:

Accepted Answer

A)  net interest payments 
B)  the environment 
C)  social security 
D)  defense 
E)  health 
A)  net interest payments 
B)  the environment 
C)  social security 
D)  defense 
E)  health

Question 12

If the economy grows faster than the debt, the government can continue to accumulate debt.

Accepted Answer

A) True 
 B)False

Question 13

The government debt is:

Accepted Answer

A)  the total accumulation of deficits in the current period 
B)  the outstanding stock of bonds that have been issued in the past 
C)  the annual difference between government spending and tax revenues 
D)  equal to total tax receipts 
E)  None of these answers are correct. 
A)  the total accumulation of deficits in the current period 
B)  the outstanding stock of bonds that have been issued in the past 
C)  the annual difference between government spending and tax revenues 
D)  equal to total tax receipts 
E)  None of these answers are correct.

Question 14

Income minus taxes is often called:

Accepted Answer

A)  government expenditures 
B)  consumption 
C)  investment 
D)  gross income 
E)  None of these answers are correct. 
A)  government expenditures 
B)  consumption 
C)  investment 
D)  gross income 
E)  None of these answers are correct.

Question 15

Which country has the highest share of medical expenses to GDP?

Accepted Answer

A)  Japan 
B)  Germany 
C)  the United States 
D)  France 
E)  the United Kingdom 
A)  Japan 
B)  Germany 
C)  the United States 
D)  France 
E)  the United Kingdom

Question 16

An implication of the intertemporal budget constraint is that:

Accepted Answer

A)  the government can borrow only as much as it can credibly pay back 
B)  the government can borrow as much as it wants 
C)  the government must always have a balanced budget 
D)  the government must balance its budget over the business cycle 
E)  all generations pay the same amount of taxes 
A)  the government can borrow only as much as it can credibly pay back 
B)  the government can borrow as much as it wants 
C)  the government must always have a balanced budget 
D)  the government must balance its budget over the business cycle 
E)  all generations pay the same amount of taxes

Question 17

In the past decade, which country has restructured its debt?

Accepted Answer

A)  Greece 
B)  Brazil 
C)  the United Kingdom 
D)  Spain 
E)  India 
A)  Greece 
B)  Brazil 
C)  the United Kingdom 
D)  Spain 
E)  India

Question 18

The difference between the primary and total deficits is that the primary deficit:

Accepted Answer

A)  is always balanced 
B)  includes spending on interest 
C)  excludes spending on interest 
D)  is never balanced 
E)  equals zero 
A)  is always balanced 
B)  includes spending on interest 
C)  excludes spending on interest 
D)  is never balanced 
E)  equals zero

Question 19

Germany has the highest share of medical expenses to GDP.

Accepted Answer

A) True 
 B)False

Question 20

According to the Congressional Budget Office report "A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," the share of government spending in GDP will ________, assuming current federal government spending patterns.

Accepted Answer

A)  climb to 40 percent by 2075 
B)  climb to 40 percent by 2015 
C)  climb to 100 percent in 2075 
D)  fall to 0 percent in 2075 
E)  not change between now and 2075 
A)  climb to 40 percent by 2075 
B)  climb to 40 percent by 2015 
C)  climb to 100 percent in 2075 
D)  fall to 0 percent in 2075 
E)  not change between now and 2075

Exam 18: The Government and the Macroeconomy

Given what you know about the sizes of economies, which of the following countries probably would find it impossible to borrow more than $1 trillion?

What is Norway's debt-to-GDP situation? Why? Given this, what is it doing for the future?

Refer to the following figure when answering Figure 18.2: Government Outlays and Receipts as a Percentage of GDP, 1947-2012 -Consider Figure 18.2. What was the cause of the huge budget deficit beginning in 1981?

If current generations are depleting nonrenewable resources, they must compensate future generations by:

If we assume that Trt=ΔMt=0T r _ { t } = \Delta M _ { t } = 0Trt​=ΔMt​=0 , which of the following represents the government's budget constraint?

The difference between the gross federal debt and the debt by the public is debt held by:

An explanation of why governments are willing to burden future generations with debt to finance a war today is that future generations will enjoy peace and must pay something.

The federal government's largest source of revenue in 2011 was:

The best indicator of whether a country can borrow is the credibility of the central government.

An implication of the intertemporal budget constraint is that the government can borrow as much as it wants.

The federal government's largest expenditure in 2011 was:

If the economy grows faster than the debt, the government can continue to accumulate debt.

The government debt is:

Income minus taxes is often called:

Which country has the highest share of medical expenses to GDP?

An implication of the intertemporal budget constraint is that:

In the past decade, which country has restructured its debt?

The difference between the primary and total deficits is that the primary deficit:

Germany has the highest share of medical expenses to GDP.

According to the Congressional Budget Office report "A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," the share of government spending in GDP will ________, assuming current federal government spending patterns.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market, Wages, and Unemployment

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

If we assume that $T r _ { t } = \Delta M _ { t } = 0$ , which of the following represents the government's budget constraint?