Question 1

One item that is considered part of the federal debt is:

Accepted Answer

A)  Treasury bills. 
B)  future Social Security benefits. 
C)  student loans, which may go into default. 
D)  potential liabilities of savings and loan associations. 
A)  Treasury bills. 
B)  future Social Security benefits. 
C)  student loans, which may go into default. 
D)  potential liabilities of savings and loan associations.

Question 2

According to the Mundell-Fleming model, if government spending is kept constant, but taxes are increased, what will be the short-run effect on net exports?

Accepted Answer

According to the Mundell-Fleming model,

Question 3

Government debt equals the:

Accepted Answer

A)  difference between current government purchases and taxes. 
B)  difference between saving and investment. 
C)  sum of past budget deficits and surpluses. 
D)  M1 money supply. 
A)  difference between current government purchases and taxes. 
B)  difference between saving and investment. 
C)  sum of past budget deficits and surpluses. 
D)  M1 money supply.

Question 4

According to the traditional view of government debt, if taxes are cut without cutting government spending, then the short-run effects will be:

Accepted Answer

A)  higher output and lower unemployment. 
B)  higher output and higher unemployment. 
C)  no change in output or unemployment. 
D)  no change in output and higher unemployment. 
A)  higher output and lower unemployment. 
B)  higher output and higher unemployment. 
C)  no change in output or unemployment. 
D)  no change in output and higher unemployment.

Question 5

According to the theory of Ricardian equivalence, if consumers are forward-looking, they will view a tax cut combined with no plans to reduce government spending as ______, so their consumption will ______.

Accepted Answer

A)  additional disposable income; increase. 
B)  additional disposable income; remain unchanged. 
C)  a rescheduling of taxes into the future; increase. 
D)  a rescheduling of taxes into the future; remain unchanged. 
A)  additional disposable income; increase. 
B)  additional disposable income; remain unchanged. 
C)  a rescheduling of taxes into the future; increase. 
D)  a rescheduling of taxes into the future; remain unchanged.

Question 6

The international impacts of a debt-financed tax cut, according to the traditional view of government debt, are a(n) ______ in net exports and a domestic currency _____.

Accepted Answer

A)  increase; appreciation 
B)  increase; depreciation 
C)  decrease; depreciation 
D)  decrease; appreciation 
A)  increase; appreciation 
B)  increase; depreciation 
C)  decrease; depreciation 
D)  decrease; appreciation

Question 7

Monetary policy is linked to fiscal policy when government spending is financed by:

Accepted Answer

A)  taxes. 
B)  borrowing from banks. 
C)  borrowing from foreigners. 
D)  printing money. 
A)  taxes. 
B)  borrowing from banks. 
C)  borrowing from foreigners. 
D)  printing money.

Question 8

A debt-financed tax cut will ______ saving in the traditional view and ______ saving in the view of Ricardian equivalence.

Accepted Answer

A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  decrease; not change 
A)  increase; increase 
B)  decrease; decrease 
C)  decrease; increase 
D)  decrease; not change

Question 9

According to the traditional viewpoint of government debt, a tax cut without a cut in government spending:

Accepted Answer

A)  stimulates consumer spending in the short run and reduces national saving. 
B)  stimulates consumer spending in the short run and reduces private saving. 
C)  has no effect on consumer spending but reduces national saving. 
D)  has no effect on consumer spending but reduces private saving. 
A)  stimulates consumer spending in the short run and reduces national saving. 
B)  stimulates consumer spending in the short run and reduces private saving. 
C)  has no effect on consumer spending but reduces national saving. 
D)  has no effect on consumer spending but reduces private saving.

Question 10

A measure of the expected rate of inflation can be found by the:

Accepted Answer

A)  yield on nominal bonds plus the yield on index bonds. 
B)  yield on nominal bonds minus the yield on index bonds. 
C)  observed rate of inflation minus the yield on real bonds. 
D)  observed rate of inflation minus the yield on nominal bonds. 
A)  yield on nominal bonds plus the yield on index bonds. 
B)  yield on nominal bonds minus the yield on index bonds. 
C)  observed rate of inflation minus the yield on real bonds. 
D)  observed rate of inflation minus the yield on nominal bonds.

Question 11

War is the generator of debt burden for countries. How does war generate debt for a country?

Accepted Answer

A country has to spend a lot of money wh

Question 12

Compared to the size of government debt as a percentage of GDP in other major industrial countries, the federal government of the United States:

Accepted Answer

A)  is one of the most heavily indebted governments. 
B)  has accumulated a relatively small debt. 
C)  has accumulated somewhat greater than average debt. 
D)  is one of the least indebted governments. 
A)  is one of the most heavily indebted governments. 
B)  has accumulated a relatively small debt. 
C)  has accumulated somewhat greater than average debt. 
D)  is one of the least indebted governments.

Question 13

According to the theory of Ricardian equivalence, tax cuts combined with no plans to reduce government spending ______ public saving and ______ private saving.

Accepted Answer

A)  reduce; reduce 
B)  reduce; increase 
C)  increase; increase 
D)  increase; reduce 
A)  reduce; reduce 
B)  reduce; increase 
C)  increase; increase 
D)  increase; reduce

Question 14

In a time of inflation when the real (i.e., deflated) value of the government debt is constant, then the conventionally:

Accepted Answer

A)  reported government budget will show a deficit equal to the inflation rate times the outstanding debt. 
B)  reported government budget will show a deficit equal to less than the inflation rate times the outstanding debt. 
C)  reported government budget will be balanced. 
D)  measured government budget will show a surplus equal to the inflation rate times the outstanding debt. 
A)  reported government budget will show a deficit equal to the inflation rate times the outstanding debt. 
B)  reported government budget will show a deficit equal to less than the inflation rate times the outstanding debt. 
C)  reported government budget will be balanced. 
D)  measured government budget will show a surplus equal to the inflation rate times the outstanding debt.

Question 15

According to supply siders, tax cuts can raise total tax revenue if the tax cuts generate large enough:

Accepted Answer

A)  decrease in aggregate supply. 
B)  increase in aggregate supply. 
C)  decrease in the money supply. 
D)  increase in the money supply. 
A)  decrease in aggregate supply. 
B)  increase in aggregate supply. 
C)  decrease in the money supply. 
D)  increase in the money supply.

Question 16

All of the following are arguments against Ricardian equivalence except:

Accepted Answer

A)  consumers make consumption decisions myopically. 
B)  consumers are rational and forward-looking in consumption decision-making. 
C)  consumers are borrowing-constrained. 
D)  consumers do not expect future taxes to fall on them. 
A)  consumers make consumption decisions myopically. 
B)  consumers are rational and forward-looking in consumption decision-making. 
C)  consumers are borrowing-constrained. 
D)  consumers do not expect future taxes to fall on them.

Question 17

Using fiscal policy, including automatic stabilizers, to stabilize output over a business cycle is not consistent with:

Accepted Answer

A)  rational expectations. 
B)  inflation targeting. 
C)  the natural-rate hypothesis. 
D)  a strict balanced-budget rule. 
A)  rational expectations. 
B)  inflation targeting. 
C)  the natural-rate hypothesis. 
D)  a strict balanced-budget rule.

Question 18

"The baby boomer generation is responsible for pushing the U.S. economy into more debt." Is this statement true or false? Give reasons supporting your answer.

Accepted Answer

As this generation is large, so as it gr

Question 19

When a government spends more than it collects in taxes, it runs a:

Accepted Answer

A)  trade deficit. 
B)  trade surplus. 
C)  budget surplus. 
D)  budget deficit. 
A)  trade deficit. 
B)  trade surplus. 
C)  budget surplus. 
D)  budget deficit.

Question 20

The cyclically adjusted budget deficit:

Accepted Answer

A)  adjusts the deficit for inflation. 
B)  estimates what the deficit would be if the economy were operating at the natural rate of output. 
C)  accounts for assets as well as liabilities. 
D)  measures the impact of fiscal policy on the lifetime incomes of individuals of different ages. 
A)  adjusts the deficit for inflation. 
B)  estimates what the deficit would be if the economy were operating at the natural rate of output. 
C)  accounts for assets as well as liabilities. 
D)  measures the impact of fiscal policy on the lifetime incomes of individuals of different ages.

One item that is considered part of the federal debt is:

According to the Mundell-Fleming model, if government spending is kept constant, but taxes are increased, what will be the short-run effect on net exports?

Government debt equals the:

According to the traditional view of government debt, if taxes are cut without cutting government spending, then the short-run effects will be:

According to the theory of Ricardian equivalence, if consumers are forward-looking, they will view a tax cut combined with no plans to reduce government spending as , so their consumption will .

The international impacts of a debt-financed tax cut, according to the traditional view of government debt, are a(n) __ in net exports and a domestic currency _.

Monetary policy is linked to fiscal policy when government spending is financed by:

A debt-financed tax cut will saving in the traditional view and saving in the view of Ricardian equivalence.

According to the traditional viewpoint of government debt, a tax cut without a cut in government spending:

A measure of the expected rate of inflation can be found by the:

War is the generator of debt burden for countries. How does war generate debt for a country?

Compared to the size of government debt as a percentage of GDP in other major industrial countries, the federal government of the United States:

According to the theory of Ricardian equivalence, tax cuts combined with no plans to reduce government spending public saving and private saving.

In a time of inflation when the real (i.e., deflated) value of the government debt is constant, then the conventionally:

According to supply siders, tax cuts can raise total tax revenue if the tax cuts generate large enough:

All of the following are arguments against Ricardian equivalence except:

Using fiscal policy, including automatic stabilizers, to stabilize output over a business cycle is not consistent with:

"The baby boomer generation is responsible for pushing the U.S. economy into more debt." Is this statement true or false? Give reasons supporting your answer.

When a government spends more than it collects in taxes, it runs a:

The cyclically adjusted budget deficit:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

The Financial System: Opportunities and Dangers

Filters

Exam 19: Government Debt and Budget Deficits

One item that is considered part of the federal debt is:

According to the Mundell-Fleming model, if government spending is kept constant, but taxes are increased, what will be the short-run effect on net exports?

Government debt equals the:

According to the traditional view of government debt, if taxes are cut without cutting government spending, then the short-run effects will be:

According to the theory of Ricardian equivalence, if consumers are forward-looking, they will view a tax cut combined with no plans to reduce government spending as ______, so their consumption will ______.

The international impacts of a debt-financed tax cut, according to the traditional view of government debt, are a(n) ______ in net exports and a domestic currency _____.

Monetary policy is linked to fiscal policy when government spending is financed by:

A debt-financed tax cut will ______ saving in the traditional view and ______ saving in the view of Ricardian equivalence.

According to the traditional viewpoint of government debt, a tax cut without a cut in government spending:

A measure of the expected rate of inflation can be found by the:

War is the generator of debt burden for countries. How does war generate debt for a country?

Compared to the size of government debt as a percentage of GDP in other major industrial countries, the federal government of the United States:

According to the theory of Ricardian equivalence, tax cuts combined with no plans to reduce government spending ______ public saving and ______ private saving.

In a time of inflation when the real (i.e., deflated) value of the government debt is constant, then the conventionally:

According to supply siders, tax cuts can raise total tax revenue if the tax cuts generate large enough:

All of the following are arguments against Ricardian equivalence except:

Using fiscal policy, including automatic stabilizers, to stabilize output over a business cycle is not consistent with:

"The baby boomer generation is responsible for pushing the U.S. economy into more debt." Is this statement true or false? Give reasons supporting your answer.

When a government spends more than it collects in taxes, it runs a:

The cyclically adjusted budget deficit:

The Science of Macroeconomics

The Data of Macroeconomics

National Income: Where It Comes From and Where It Goes

The Monetary System: What It Is and How It Works

Inflation: Its Causes, Effects, and Social Costs

The Open Economy

Unemployment and the Labor Market

Economic Growth I: Capital Accumulation and Population Growth

Economic Growth II: Technology, Empirics, and Policy

Introduction to Economic Fluctuations

Aggregate Demand I: Building the Is-Lm Model

Aggregate Demand Ii: Applying the Is-Lm Model

The Open Economy Revisited: the Mundell-Fleming Model and the Exchange-Rate Regime

Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment

A Dynamic Model of Economic Fluctuations

Understanding Consumer Behavior

The Theory of Investment

Alternative Perspectives on Stabilization Policy

The Financial System: Opportunities and Dangers

Filters

According to the theory of Ricardian equivalence, if consumers are forward-looking, they will view a tax cut combined with no plans to reduce government spending as , so their consumption will .

The international impacts of a debt-financed tax cut, according to the traditional view of government debt, are a(n) __ in net exports and a domestic currency _.

A debt-financed tax cut will saving in the traditional view and saving in the view of Ricardian equivalence.

According to the theory of Ricardian equivalence, tax cuts combined with no plans to reduce government spending public saving and private saving.