Question 1

Media reports often suggest that the increasing public debt is a burden on future generations.What they mean is that

Accepted Answer

A) it reduces the current level of investment. 
B) it makes predicting future unemployment levels unpredictable. 
C) it causes deflation. 
D) it reduces both nominal and real interest rates. 
A) it reduces the current level of investment. 
B) it makes predicting future unemployment levels unpredictable. 
C) it causes deflation. 
D) it reduces both nominal and real interest rates.

Question 2

What is the short-run effect of increased deficit spending on an economy experiencing a recessionary gap?

Accepted Answer

A) Aggregate demand increases,and the gap closes. 
B) Aggregate supply increases,closing the gap. 
C) Aggregate demand decreases,and the gap widens. 
D) Aggregate demand will increase,creating an inflationary gap. 
A) Aggregate demand increases,and the gap closes. 
B) Aggregate supply increases,closing the gap. 
C) Aggregate demand decreases,and the gap widens. 
D) Aggregate demand will increase,creating an inflationary gap.

Question 3

When foreign residents buy U.S.Treasury securities to finance the budget deficit,

Accepted Answer

A) we can also anticipate an increase in the trade deficit. 
B) we can also anticipate a decrease in the trade deficit. 
C) the trade deficit will not be affected. 
D) the public debt will be reduced. 
A) we can also anticipate an increase in the trade deficit. 
B) we can also anticipate a decrease in the trade deficit. 
C) the trade deficit will not be affected. 
D) the public debt will be reduced.

Question 4

If the net public debt expanded last year,then which of the following most likely occurred during the year?

Accepted Answer

A) The government's budget was balanced. 
B) The government experienced a budget surplus. 
C) The government experienced a budget deficit. 
D) The government's tax collections exceeded its spending. 
A) The government's budget was balanced. 
B) The government experienced a budget surplus. 
C) The government experienced a budget deficit. 
D) The government's tax collections exceeded its spending.

Question 5

If no foreign residents owned any of the U.S.public debt,then it would be true that

Accepted Answer

A) there would be no distributional consequences associates with he public debt. 
B) U.S.residents would essentially owe the public debt to themselves. 
C) there would be no interest payments on the public debt. 
D) the public debt would naturally disappear over time. 
A) there would be no distributional consequences associates with he public debt. 
B) U.S.residents would essentially owe the public debt to themselves. 
C) there would be no interest payments on the public debt. 
D) the public debt would naturally disappear over time.

Question 6

Which of the following has NOT been proposed as a possible economic solution to reducing the government deficit?

Accepted Answer

A) Reducing expenditures 
B) Increasing taxes for the rich 
C) Increasing the number of entitlements 
D) Increasing taxes for everyone 
A) Reducing expenditures 
B) Increasing taxes for the rich 
C) Increasing the number of entitlements 
D) Increasing taxes for everyone

Question 7

When was the last year the United States had a budget surplus?

Accepted Answer

A) 2009 
B) 1984 
C) 1993 
D) 2001 
A) 2009 
B) 1984 
C) 1993 
D) 2001

Question 8

Are federal budget deficits related to trade deficits?

Accepted Answer

A) Yes.If U.S.consumers buy too many imported goods,they do not have funds to save,and a budget deficit results. 
B) No.The budget deficit is entirely a domestic matter,while the trade deficit only affects U.S.citizens who travel abroad. 
C) Yes.Higher deficit spending goes up results in more government borrowing,and foreign residents who lend funds to the U.S.government have fewer resources to spend U.S.export goods. 
D) Yes,but only if the quality of U.S.goods and services is deteriorating. 
A) Yes.If U.S.consumers buy too many imported goods,they do not have funds to save,and a budget deficit results. 
B) No.The budget deficit is entirely a domestic matter,while the trade deficit only affects U.S.citizens who travel abroad. 
C) Yes.Higher deficit spending goes up results in more government borrowing,and foreign residents who lend funds to the U.S.government have fewer resources to spend U.S.export goods. 
D) Yes,but only if the quality of U.S.goods and services is deteriorating.

Question 9

When analyzing the effects of the government budget deficit,

Accepted Answer

A) no distinction must be made between an economy where full employment exists and one where substantial unemployment exists. 
B) it is important to examine the effects of the reported capital budget and the reported operating budget separately. 
C) there should be a comparison of the effect of the deficit to the effects of higher taxes needed to eliminate it. 
D) the baseline budget should be used since it is the most accurate. 
A) no distinction must be made between an economy where full employment exists and one where substantial unemployment exists. 
B) it is important to examine the effects of the reported capital budget and the reported operating budget separately. 
C) there should be a comparison of the effect of the deficit to the effects of higher taxes needed to eliminate it. 
D) the baseline budget should be used since it is the most accurate.

Question 10

According to the text,the net public debt to Gross Domestic Product (GDP)ratio is currently about

Accepted Answer

A) 10%. 
B) 25%. 
C) 60%. 
D) 120%. 
A) 10%. 
B) 25%. 
C) 60%. 
D) 120%.

Question 11

Suppose the economy is initially experiencing a short-run recessionary gap.An increase in the size of the budget deficit will

Accepted Answer

A) increase the size of the recessionary gap. 
B) reduce the size of the recessionary gap. 
C) lead to an increase in prices with no increase in real GDP. 
D) lead to a decrease in prices with an increase in real GDP. 
A) increase the size of the recessionary gap. 
B) reduce the size of the recessionary gap. 
C) lead to an increase in prices with no increase in real GDP. 
D) lead to a decrease in prices with an increase in real GDP.

Question 12

Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?

Accepted Answer

A) The amount has not varied much over time. 
B) The amount has varied a lot over time. 
C) The amount has steadily increased over time. 
D) The amount has steadily decreased over time. 
A) The amount has not varied much over time. 
B) The amount has varied a lot over time. 
C) The amount has steadily increased over time. 
D) The amount has steadily decreased over time.

Question 13

To compare the net public debt of various countries,the debt has to be compared to

Accepted Answer

A) the country's trade deficit. 
B) the country's current budget deficit or surplus. 
C) the country's real GDP. 
D) the country's national defense expenditure. 
A) the country's trade deficit. 
B) the country's current budget deficit or surplus. 
C) the country's real GDP. 
D) the country's national defense expenditure.

Question 14

One of the long-run effects of higher government budget deficits is

Accepted Answer

A) a redistribution of real Gross Domestic Product (GDP)away from government-provided goods and toward more privately provided goods. 
B) an increase in the government's share of the nation's economic activity. 
C) growth in the economy's private sector at the same time the government sector shrinks. 
D) a fall in the equilibrium price level. 
A) a redistribution of real Gross Domestic Product (GDP)away from government-provided goods and toward more privately provided goods. 
B) an increase in the government's share of the nation's economic activity. 
C) growth in the economy's private sector at the same time the government sector shrinks. 
D) a fall in the equilibrium price level.

Question 15

Explain how deficit spending can benefit future generations.

Accepted Answer

If the rate of return on borro

Question 16

As a possible approach to eliminating the government budget deficit,increasing taxes for everyone would

Accepted Answer

A) mean only a small increase in taxes. 
B) lead to an inflationary gap. 
C) transfer more goods and services to the government sector. 
D) lead to a large increase in taxes for every worker. 
A) mean only a small increase in taxes. 
B) lead to an inflationary gap. 
C) transfer more goods and services to the government sector. 
D) lead to a large increase in taxes for every worker.

Question 17

Ceteris paribus,deficit spending results in higher interest rates,which can

Accepted Answer

A) accelerate growth in investment spending. 
B) ultimately have a positive impact on productivity gains and society's standard of living. 
C) increase the wealth of future generations. 
D) crowd out private investment. 
A) accelerate growth in investment spending. 
B) ultimately have a positive impact on productivity gains and society's standard of living. 
C) increase the wealth of future generations. 
D) crowd out private investment.

Question 18

The difference between the gross public debt and the net public debt is

Accepted Answer

A) the sum of all previously accumulated government budget deficits and surpluses. 
B) the sum of all previously issued U.S.government securities that have been purchased by foreign residents. 
C) all private-sector borrowing from private sources. 
D) all government interagency borrowing. 
A) the sum of all previously accumulated government budget deficits and surpluses. 
B) the sum of all previously issued U.S.government securities that have been purchased by foreign residents. 
C) all private-sector borrowing from private sources. 
D) all government interagency borrowing.

Question 19

All of the following are possible explanations for the increase in U.S.government budget deficits as a percentage of GDP since the early 2001 EXCEPT

Accepted Answer

A) increases in tax revenues. 
B) increases in payments for entitlements. 
C) increases in government spending. 
D) decreases in tax rates. 
A) increases in tax revenues. 
B) increases in payments for entitlements. 
C) increases in government spending. 
D) decreases in tax rates.

Question 20

Suppose that the government of Summerfield spends $2 trillion in 2013 and receives tax revenues of $1.5 trillion.Which of the following is true?

Accepted Answer

A) Summerfield has a budget surplus of $0.5 trillion. 
B) Summerfield has a budget deficit of $0.5 trillion. 
C) Summerfield has a trade deficit of $0.5 trillion. 
D) Summerfield has a trade surplus of $0.5 trillion. 
A) Summerfield has a budget surplus of $0.5 trillion. 
B) Summerfield has a budget deficit of $0.5 trillion. 
C) Summerfield has a trade deficit of $0.5 trillion. 
D) Summerfield has a trade surplus of $0.5 trillion.

Media reports often suggest that the increasing public debt is a burden on future generations.What they mean is that

What is the short-run effect of increased deficit spending on an economy experiencing a recessionary gap?

When foreign residents buy U.S.Treasury securities to finance the budget deficit,

If the net public debt expanded last year,then which of the following most likely occurred during the year?

If no foreign residents owned any of the U.S.public debt,then it would be true that

Which of the following has NOT been proposed as a possible economic solution to reducing the government deficit?

When was the last year the United States had a budget surplus?

Are federal budget deficits related to trade deficits?

When analyzing the effects of the government budget deficit,

According to the text,the net public debt to Gross Domestic Product (GDP)ratio is currently about

Suppose the economy is initially experiencing a short-run recessionary gap.An increase in the size of the budget deficit will

Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?

To compare the net public debt of various countries,the debt has to be compared to

One of the long-run effects of higher government budget deficits is

Explain how deficit spending can benefit future generations.

As a possible approach to eliminating the government budget deficit,increasing taxes for everyone would

Ceteris paribus,deficit spending results in higher interest rates,which can

The difference between the gross public debt and the net public debt is

All of the following are possible explanations for the increase in U.S.government budget deficits as a percentage of GDP since the early 2001 EXCEPT

Suppose that the government of Summerfield spends $2 trillion in 2013 and receives tax revenues of $1.5 trillion.Which of the following is true?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 14: Deficit Spending and the Public Debt

Media reports often suggest that the increasing public debt is a burden on future generations.What they mean is that

What is the short-run effect of increased deficit spending on an economy experiencing a recessionary gap?

When foreign residents buy U.S.Treasury securities to finance the budget deficit,

If the net public debt expanded last year,then which of the following most likely occurred during the year?

If no foreign residents owned any of the U.S.public debt,then it would be true that

Which of the following has NOT been proposed as a possible economic solution to reducing the government deficit?

When was the last year the United States had a budget surplus?

Are federal budget deficits related to trade deficits?

When analyzing the effects of the government budget deficit,

According to the text,the net public debt to Gross Domestic Product (GDP)ratio is currently about

Suppose the economy is initially experiencing a short-run recessionary gap.An increase in the size of the budget deficit will

Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?

To compare the net public debt of various countries,the debt has to be compared to

One of the long-run effects of higher government budget deficits is

Explain how deficit spending can benefit future generations.

As a possible approach to eliminating the government budget deficit,increasing taxes for everyone would

Ceteris paribus,deficit spending results in higher interest rates,which can

The difference between the gross public debt and the net public debt is

All of the following are possible explanations for the increase in U.S.government budget deficits as a percentage of GDP since the early 2001 EXCEPT

Suppose that the government of Summerfield spends $2 trillion in 2013 and receives tax revenues of $1.5 trillion.Which of the following is true?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, real GDP, and the Multiplier

Fiscal Policy

Money, banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters