Question 1

Which of the following is the best measure of the total amount that the federal government owes to private owners of U.S.Treasury securities?

Accepted Answer

A) Government interagency borrowing 
B) The government budget deficit 
C) The gross public debt 
D) The net public debt 
A) Government interagency borrowing 
B) The government budget deficit 
C) The gross public debt 
D) The net public debt

Question 2

Other things being equal,what is the effect of deficit spending on interest rates?

Accepted Answer

A) Interest rates decline. 
B) Interest rates rise. 
C) Interest rates hold constant because the demand for credit decreases. 
D) There is no impact unless the Federal Reserve decides to alter the money supply. 
A) Interest rates decline. 
B) Interest rates rise. 
C) Interest rates hold constant because the demand for credit decreases. 
D) There is no impact unless the Federal Reserve decides to alter the money supply.

Question 3

To evaluate relative changes in the net public debt,we must

Accepted Answer

A) look at the absolute amount owed by the government. 
B) compare it to the nation's real GDP. 
C) look at the annual percentage change in the public debt. 
D) compare it to the debts of all developed countries. 
A) look at the absolute amount owed by the government. 
B) compare it to the nation's real GDP. 
C) look at the annual percentage change in the public debt. 
D) compare it to the debts of all developed countries.

Question 4

Assume the economy is closed and that it is operating at full employment.Which statement is true when the size of the budget deficit decreases?

Accepted Answer

A) The interest rate will decrease,leading to an increase in investment and capital formation. 
B) Demand and supply of credit will increase. 
C) A reduction in the growth of productivity,and a reduction in society's standard of living will occur. 
D) The increased amount of public goods will crowd out privately produced goods. 
A) The interest rate will decrease,leading to an increase in investment and capital formation. 
B) Demand and supply of credit will increase. 
C) A reduction in the growth of productivity,and a reduction in society's standard of living will occur. 
D) The increased amount of public goods will crowd out privately produced goods.

Question 5

If the public debt increased by the same amount each year during the past three years,then

Accepted Answer

A) the U.S.government must have operated with the same budget surpluses during the past three years. 
B) the U.S.government must have experienced budget surpluses that increased by the same amount each of the past three years. 
C) the U.S.Treasury must have issued securities to fund a flow of government spending that exceeded a flow of tax revenues by the same amount during each of the past three years. 
D) during each of the past three years,the U.S.Treasury must have bought back the same amount of securities that had previously been issued to cover deficits experienced more than three years ago. 
A) the U.S.government must have operated with the same budget surpluses during the past three years. 
B) the U.S.government must have experienced budget surpluses that increased by the same amount each of the past three years. 
C) the U.S.Treasury must have issued securities to fund a flow of government spending that exceeded a flow of tax revenues by the same amount during each of the past three years. 
D) during each of the past three years,the U.S.Treasury must have bought back the same amount of securities that had previously been issued to cover deficits experienced more than three years ago.

Question 6

In the long run,higher government budget deficits will

Accepted Answer

A) lead to a redistribution of real GDP from privately produced goods and services to government produced goods and services. 
B) lead to a redistribution of real GDP from government produced goods and services to privately produced goods and services. 
C) cause the price level to go down on government goods but not on private goods. 
D) lead to a reduction in the amount of goods and services produced by the government and private sector. 
A) lead to a redistribution of real GDP from privately produced goods and services to government produced goods and services. 
B) lead to a redistribution of real GDP from government produced goods and services to privately produced goods and services. 
C) cause the price level to go down on government goods but not on private goods. 
D) lead to a reduction in the amount of goods and services produced by the government and private sector.

Question 7

Among economists,it is generally believed that

Accepted Answer

A) the federal budget deficit will be eliminated within 10 years. 
B) the public debt will be paid off within 10 years. 
C) entitlement spending will continue to decline. 
D) the federal government will find it difficult to cut entitlement programs. 
A) the federal budget deficit will be eliminated within 10 years. 
B) the public debt will be paid off within 10 years. 
C) entitlement spending will continue to decline. 
D) the federal government will find it difficult to cut entitlement programs.

Question 8

An increase in the public debt would most likely indicate that

Accepted Answer

A) the budget deficit has increased. 
B) the budget deficit has decreased. 
C) the trade deficit has decreased. 
D) national saving has increased. 
A) the budget deficit has increased. 
B) the budget deficit has decreased. 
C) the trade deficit has decreased. 
D) national saving has increased.

Question 9

Explain how deficit spending could be a burden to future generations.

Accepted Answer

Deficit spending can lead to two negativ

Question 10

According to the text,approximately what percentage of U.S.net public debt is held by foreign residents?

Accepted Answer

A) 20% 
B) 50% 
C) 800% 
D) 90% 
A) 20% 
B) 50% 
C) 800% 
D) 90%

Question 11

In the short run,a fiscal policy action that results in a reduction in the size of the budget deficit will cause

Accepted Answer

A) an increase in real GDP with stable prices if the economy was below full employment. 
B) a reduction in real GDP with falling prices if the economy was below or at full employment. 
C) an inflationary gap if the economy was initially operating at full employment. 
D) an inflationary gap if the economy was initially operating below full employment. 
A) an increase in real GDP with stable prices if the economy was below full employment. 
B) a reduction in real GDP with falling prices if the economy was below or at full employment. 
C) an inflationary gap if the economy was initially operating at full employment. 
D) an inflationary gap if the economy was initially operating below full employment.

Question 12

Which of the following statements is false?

Accepted Answer

A) The federal budget deficit in 2004 was about 4 percent of the GDP. 
B) A budget deficit of $25 billion in a given year increases the public debt by $25 billion. 
C) The public debt of $25 billion is the accumulated debt of all U.S.individuals,firms,and institutions. 
D) During the past five years,the U.S.public debt has been increasing. 
A) The federal budget deficit in 2004 was about 4 percent of the GDP. 
B) A budget deficit of $25 billion in a given year increases the public debt by $25 billion. 
C) The public debt of $25 billion is the accumulated debt of all U.S.individuals,firms,and institutions. 
D) During the past five years,the U.S.public debt has been increasing.

Question 13

Noncontrollable expenditures are called "noncontrollable" because

Accepted Answer

A) they increase at the same rate as the public debt. 
B) they change without congressional action. 
C) only the president can approve these entitlement payments. 
D) the political process determines the size of the payments. 
A) they increase at the same rate as the public debt. 
B) they change without congressional action. 
C) only the president can approve these entitlement payments. 
D) the political process determines the size of the payments.

Question 14

When government spending is less than the tax revenues during a specific time period,this is known as a

Accepted Answer

A) government budget deficit. 
B) government budget surplus. 
C) balanced budget. 
D) public debt. 
A) government budget deficit. 
B) government budget surplus. 
C) balanced budget. 
D) public debt.

Question 15

Which of the following is NOT an example of a flow variable?

Accepted Answer

A) planned investment 
B) capital stock 
C) The federal deficit 
D) inventory investment 
A) planned investment 
B) capital stock 
C) The federal deficit 
D) inventory investment

Question 16

Are federal budget deficits related to trade deficits?

Accepted Answer

A) Yes.If U.S.consumers buy too many imported goods they don't have money 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.As deficit spending goes up,it is likely government borrowing will,too.Then foreign residents who lend funds to the U.S.government have less to spend on our goods,so U.S.exports will fall. 
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 don't have money 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.As deficit spending goes up,it is likely government borrowing will,too.Then foreign residents who lend funds to the U.S.government have less to spend on our goods,so U.S.exports will fall. 
D) Yes,but only if the quality of U.S.goods and services is deteriorating.

Question 17

While the budget deficit represents a ________,the public debt represents a ________.

Accepted Answer

A) flow;flow 
B) flow;stock 
C) stock;stock 
D) stock;flow 
A) flow;flow 
B) flow;stock 
C) stock;stock 
D) stock;flow

Question 18

Which of the following statements is correct?

Accepted Answer

A) Since the mid-1940s,expenditures on national defense have increased considerably as a percentage of total federal government spending. 
B) Since the mid-1940s,expenditures on income security and health programs have increased considerably as a percentage of total federal government spending. 
C) Taken together,expenditures on national defense and on income security and health programs now account for less than half of all federal government spending. 
D) Expenditures on national defense now account for more than twice as much federal government spending as expenditures on income security and health programs. 
A) Since the mid-1940s,expenditures on national defense have increased considerably as a percentage of total federal government spending. 
B) Since the mid-1940s,expenditures on income security and health programs have increased considerably as a percentage of total federal government spending. 
C) Taken together,expenditures on national defense and on income security and health programs now account for less than half of all federal government spending. 
D) Expenditures on national defense now account for more than twice as much federal government spending as expenditures on income security and health programs.

Question 19

Gross public debt is

Accepted Answer

A) an excess of government spending over government revenues during a given time period. 
B) a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C) the total value of budget deficits plus budget surpluses over the past five years. 
D) all federal government debt irrespective of who owns it. 
A) an excess of government spending over government revenues during a given time period. 
B) a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C) the total value of budget deficits plus budget surpluses over the past five years. 
D) all federal government debt irrespective of who owns it.

Question 20

In the long run,what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

Accepted Answer

A) Government deficit spending will increase equilibrium real Gross Domestic Product (GDP). 
B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP). 
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP)above the full-employment level. 
D) Higher government deficits will raise equilibrium Gross Domestic Product (GDP)above the full-employment level and also have an inflationary effect. 
A) Government deficit spending will increase equilibrium real Gross Domestic Product (GDP). 
B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP). 
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP)above the full-employment level. 
D) Higher government deficits will raise equilibrium Gross Domestic Product (GDP)above the full-employment level and also have an inflationary effect.

Which of the following is the best measure of the total amount that the federal government owes to private owners of U.S.Treasury securities?

Other things being equal,what is the effect of deficit spending on interest rates?

To evaluate relative changes in the net public debt,we must

Assume the economy is closed and that it is operating at full employment.Which statement is true when the size of the budget deficit decreases?

If the public debt increased by the same amount each year during the past three years,then

In the long run,higher government budget deficits will

Among economists,it is generally believed that

An increase in the public debt would most likely indicate that

Explain how deficit spending could be a burden to future generations.

According to the text,approximately what percentage of U.S.net public debt is held by foreign residents?

In the short run,a fiscal policy action that results in a reduction in the size of the budget deficit will cause

Which of the following statements is false?

Noncontrollable expenditures are called "noncontrollable" because

When government spending is less than the tax revenues during a specific time period,this is known as a

Which of the following is NOT an example of a flow variable?

Are federal budget deficits related to trade deficits?

While the budget deficit represents a ,the public debt represents a .

Which of the following statements is correct?

Gross public debt is

In the long run,what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

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

Which of the following is the best measure of the total amount that the federal government owes to private owners of U.S.Treasury securities?

Other things being equal,what is the effect of deficit spending on interest rates?

To evaluate relative changes in the net public debt,we must

Assume the economy is closed and that it is operating at full employment.Which statement is true when the size of the budget deficit decreases?

If the public debt increased by the same amount each year during the past three years,then

In the long run,higher government budget deficits will

Among economists,it is generally believed that

An increase in the public debt would most likely indicate that

Explain how deficit spending could be a burden to future generations.

According to the text,approximately what percentage of U.S.net public debt is held by foreign residents?

In the short run,a fiscal policy action that results in a reduction in the size of the budget deficit will cause

Which of the following statements is false?

Noncontrollable expenditures are called "noncontrollable" because

When government spending is less than the tax revenues during a specific time period,this is known as a

Which of the following is NOT an example of a flow variable?

Are federal budget deficits related to trade deficits?

While the budget deficit represents a ________,the public debt represents a ________.

Which of the following statements is correct?

Gross public debt is

In the long run,what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

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

While the budget deficit represents a ,the public debt represents a .