Question 1

Since 1940, the largest gross federal debt-to-GDP ratio occurred during ________, when it reached about ________ percent.

Accepted Answer

A)  9/11; 90 
B)  the oil crisis; 110 
C)  the Volcker recession; 50 
D)  World War II; 108 
E)  the Vietnam War; 65 
A)  9/11; 90 
B)  the oil crisis; 110 
C)  the Volcker recession; 50 
D)  World War II; 108 
E)  the Vietnam War; 65

Question 2

If a government has a difficult time raising funds by borrowing, it must print money, which generates inflation.

Accepted Answer

A) True 
 B)False

Question 3

The CBO forecasts that the number of workers per retiree in the Social Security program will ________ from ________ to ________ in the coming decades.

Accepted Answer

A)  fall; 7; 2 
B)  stay about the same; 3; 3 
C)  rise; 4; 12 
D)  fall; 3.3; 2 
E)  rise; 2; 3.1 
A)  fall; 7; 2 
B)  stay about the same; 3; 3 
C)  rise; 4; 12 
D)  fall; 3.3; 2 
E)  rise; 2; 3.1

Question 4

In 2015, the U.S. federal government spent, on average, ________ per person.

Accepted Answer

A)  $23,500 
B)  $4,250 
C)  $10,110 
D)  -$1,360 
E)  $11,470 
A)  $23,500 
B)  $4,250 
C)  $10,110 
D)  -$1,360 
E)  $11,470

Question 5

Which of the following is/are possible cause(s) of rising health care expenditures?

Accepted Answer

A)  people's preferences 
B)  the falling cost of health insurance 
C)  anecdotes about doctors who induce patients to spend less on medical care when they are young and healthy 
D)  All of these answers are correct. 
E)  None of these answers is correct. 
A)  people's preferences 
B)  the falling cost of health insurance 
C)  anecdotes about doctors who induce patients to spend less on medical care when they are young and healthy 
D)  All of these answers are correct. 
E)  None of these answers is correct.

Question 6

We can compensate future generations for the depletion of nonrenewable resources by increasing the stock of knowledge in the present.

Accepted Answer

A) True 
 B)False

Question 7

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

Question 8

The idea that present generations benefit from borrowing what future generations must pay is called:

Accepted Answer

A)  the budget deficit. 
B)  intertemporal substitution. 
C)  the intertemporal budget constraint. 
D)  generational accounting. 
E)  discretionary spending. 
A)  the budget deficit. 
B)  intertemporal substitution. 
C)  the intertemporal budget constraint. 
D)  generational accounting. 
E)  discretionary spending.

Question 9

When ________ hold(s), if the present value of government is held constant, budget deficits will not crowd out investment.

Accepted Answer

A)  adaptive expectations 
B)  generational accounting 
C)  crowding in 
D)  lower interest rates 
E)  None of these answers is correct. 
A)  adaptive expectations 
B)  generational accounting 
C)  crowding in 
D)  lower interest rates 
E)  None of these answers is correct.

Question 10

According to the Congressional Budget Office report "A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," the main culprit(s) for the increase in federal government spending to about 40 percent of GDP in 2075 is/are:

Accepted Answer

A)  Medicare 
B)  Medicaid 
C)  Social Security 
D)  All of these answers are correct. 
E)  None of these answers is correct. 
A)  Medicare 
B)  Medicaid 
C)  Social Security 
D)  All of these answers are correct. 
E)  None of these answers is correct.

Question 11

________ imply/implies that, holding the present value of government spending constant, budget deficits will not crowd out investment.

Accepted Answer

A)  Crowding in 
B)  Generational accounting 
C)  Ricardian equivalence 
D)  Lower interest rates 
E)  Lower taxes 
A)  Crowding in 
B)  Generational accounting 
C)  Ricardian equivalence 
D)  Lower interest rates 
E)  Lower taxes

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

The basic point of generational accounting is that high and rising debt-GDP ratios imply:

Accepted Answer

A)  higher interest rates in the future. 
B)  lower tax rates on future generations. 
C)  higher tax rates on future generations. 
D)  reduced government expenditures in the future. 
E)  rising government expenditures in the future. 
A)  higher interest rates in the future. 
B)  lower tax rates on future generations. 
C)  higher tax rates on future generations. 
D)  reduced government expenditures in the future. 
E)  rising government expenditures in the future.

Question 14

Refer to the following figure when answering the following questions.
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 2007?

Accepted Answer

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

Question 15

The ratio of all levels of government spending to GDP in the United States is about ________ percent.

Accepted Answer

A)  10 
B)  50 
C)  20 
D)  70 
E)  40 
A)  10 
B)  50 
C)  20 
D)  70 
E)  40

Question 16

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 is 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 is correct.

Question 17

The basic point of generational accounting is that high and rising debt-GDP ratios imply lower tax rates on future generations.

Accepted Answer

A) True 
 B)False

Question 18

If a government has a difficult time raising funds by borrowing, it ________, which generates ________.

Accepted Answer

A)  must print money; inflation 
B)  must print money; high real interest rates 
C)  raises taxes; inflation 
D)  raises taxes; unemployment 
E)  All of these answers are correct. 
A)  must print money; inflation 
B)  must print money; high real interest rates 
C)  raises taxes; inflation 
D)  raises taxes; unemployment 
E)  All of these answers are correct.

Question 19

The largest debt-to-GDP ratio is in the United States.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following countries has negative government debt?

Accepted Answer

A)  Mexico 
B)  the United States 
C)  Norway 
D)  Russia 
E)  Germany 
A)  Mexico 
B)  the United States 
C)  Norway 
D)  Russia 
E)  Germany

Exam 18: The Government and the Macroeconomy

Since 1940, the largest gross federal debt-to-GDP ratio occurred during ________, when it reached about ________ percent.

If a government has a difficult time raising funds by borrowing, it must print money, which generates inflation.

The CBO forecasts that the number of workers per retiree in the Social Security program will ________ from ________ to ________ in the coming decades.

In 2015, the U.S. federal government spent, on average, ________ per person.

Which of the following is/are possible cause(s) of rising health care expenditures?

We can compensate future generations for the depletion of nonrenewable resources by increasing the stock of knowledge in the present.

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.

The idea that present generations benefit from borrowing what future generations must pay is called:

When ________ hold(s), if the present value of government is held constant, budget deficits will not crowd out investment.

According to the Congressional Budget Office report "A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," the main culprit(s) for the increase in federal government spending to about 40 percent of GDP in 2075 is/are:

________ imply/implies that, holding the present value of government spending constant, budget deficits will not crowd out investment.

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

The basic point of generational accounting is that high and rising debt-GDP ratios imply:

Refer to the following figure when answering the following questions. 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 2007?

The ratio of all levels of government spending to GDP in the United States is about ________ percent.

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

The basic point of generational accounting is that high and rising debt-GDP ratios imply lower tax rates on future generations.

If a government has a difficult time raising funds by borrowing, it ________, which generates ________.

The largest debt-to-GDP ratio is in the United States.

Which of the following countries has negative government debt?

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

Since 1940, the largest gross federal debt-to-GDP ratio occurred during , when it reached about percent.

The CBO forecasts that the number of workers per retiree in the Social Security program will from to in the coming decades.

If a government has a difficult time raising funds by borrowing, it , which generates .