Question 1

For most of the time after World War II, interest payments on the national debt were around 1.5 percent of GDP.However, in the 1980s and 1990s, they increased to around

Accepted Answer

A) 1)8 percent	 of GDP 
B) 2)2 percent	 of GDP 
C) 3)0 percent	 of GDP 
D) 4)8 percent	 of GDP 
E) 5)2 percent	 of GDP 
A) 1)8 percent	 of GDP 
B) 2)2 percent	 of GDP 
C) 3)0 percent	 of GDP 
D) 4)8 percent	 of GDP 
E) 5)2 percent	 of GDP

Question 2

Which of the following happened in response to the Great Recession of 2007-09?

Accepted Answer

A) the U.S. government increased spending and cut taxes 
B) the U.S. government increased spending but did not cut taxes 
C) many European governments cut spending and raised taxes 
D) many European governments increased spending and cut taxes 
E) both 
A) and 
C)  
A) the U.S. government increased spending and cut taxes 
B) the U.S. government increased spending but did not cut taxes 
C) many European governments cut spending and raised taxes 
D) many European governments increased spending and cut taxes 
E) both 
A) and 
C)

Question 3

What was primarily responsible for the most recent debt crisis in Spain?

Accepted Answer

A) the Spanish government had borrowed too much, so its debt-to-GDP ratio was very high 
B) the Spanish government cut spending in an effort to free funds for private investments 
C) political instability 
D) Spanish banks held too many unsound mortgage loans and mortgage-backed securities 
E) all of the above 
A) the Spanish government had borrowed too much, so its debt-to-GDP ratio was very high 
B) the Spanish government cut spending in an effort to free funds for private investments 
C) political instability 
D) Spanish banks held too many unsound mortgage loans and mortgage-backed securities 
E) all of the above

Question 4

In which year did the amount of U.S.federal debt as a percentage of GNP that was held by the public reach its highest level?

Accepted Answer

A) 1866 
B) 1929 
C) 1949 
D) 1981 
E) 2010 
A) 1866 
B) 1929 
C) 1949 
D) 1981 
E) 2010

Question 5

In the period of 2000-2009, the largest source of total federal government revenue in the U.S.was

Accepted Answer

A) social insurance taxes 
B) corporate income taxes 
C) individual income taxes 
D) sales taxes 
E) sales of government assets 
A) social insurance taxes 
B) corporate income taxes 
C) individual income taxes 
D) sales taxes 
E) sales of government assets

Question 6

Which of the following is FALSE?

Accepted Answer

A) the estimated cost of unfunded liabilities is about 20 times the size of the current national debt 
B) promises to pay Social Security benefits for future retirees are not counted in the national debt 
C) the shortfall between future social insurance tax revenues and future payments to Social Security and Medicare is accounted for in the national debt 
D) the size of the national debt would be lower if one counted government asset holdings 
E) all of the above 
A) the estimated cost of unfunded liabilities is about 20 times the size of the current national debt 
B) promises to pay Social Security benefits for future retirees are not counted in the national debt 
C) the shortfall between future social insurance tax revenues and future payments to Social Security and Medicare is accounted for in the national debt 
D) the size of the national debt would be lower if one counted government asset holdings 
E) all of the above

Question 7

If we compare the debt-to-GDP ratios of the U.S.and Canada, we see that

Accepted Answer

A) in 2010 the ratio was much higher in the U.S. than in Canada 
B) the ratio increased sharply in the 1980s in both countries 
C) the ratio decreased steadily from 1996 to 2000 in both countries 
D) the ratio increased during the Great Recession in both countries 
E) all of the above 
A) in 2010 the ratio was much higher in the U.S. than in Canada 
B) the ratio increased sharply in the 1980s in both countries 
C) the ratio decreased steadily from 1996 to 2000 in both countries 
D) the ratio increased during the Great Recession in both countries 
E) all of the above

Question 8

The Treasury can retire part of the national debt only when

Accepted Answer

A) it can convince the Fed to buy government securities from the public 
B) it can issue new securities to replace the ones that are maturing 
C) federal government tax revenues exceed outlays 
D) the structural component of the budget surplus is positive 
E) the economy is at the full-employment level of output 
A) it can convince the Fed to buy government securities from the public 
B) it can issue new securities to replace the ones that are maturing 
C) federal government tax revenues exceed outlays 
D) the structural component of the budget surplus is positive 
E) the economy is at the full-employment level of output

Question 9

The primary deficit is equal to

Accepted Answer

A) the total deficit minus interest payments on the government debt 
B) the total government deficit minus all outstanding government securities held by foreign financial investors 
C) all government revenues minus all government outlays including interest payments on the national debt 
D) the federal government's deficit minus the deficit of state and local governments 
E) mandatory government outlays minus discretionary government outlays 
A) the total deficit minus interest payments on the government debt 
B) the total government deficit minus all outstanding government securities held by foreign financial investors 
C) all government revenues minus all government outlays including interest payments on the national debt 
D) the federal government's deficit minus the deficit of state and local governments 
E) mandatory government outlays minus discretionary government outlays

Question 10

Which of the following is FALSE about the Canadian debt-to-GDP ratio?

Accepted Answer

A) it remained under 50 percent from 1970 to 1983 
B) it reached a peak of over 80 percent in 1996 
C) it reached a peak of 75 percent in 2010 
D) it decreased sharply from 1997 to 2007 
E) it increased from 2008 to 2010 
A) it remained under 50 percent from 1970 to 1983 
B) it reached a peak of over 80 percent in 1996 
C) it reached a peak of 75 percent in 2010 
D) it decreased sharply from 1997 to 2007 
E) it increased from 2008 to 2010

Question 11

Which of the following countries did NOT experience an increase in long-term interest rates from 2008 to 2010?

Accepted Answer

A) Denmark 
B) Ireland 
C) Italy 
D) Portugal 
E) Spain 
A) Denmark 
B) Ireland 
C) Italy 
D) Portugal 
E) Spain

Question 12

If we compare spending as a percentage of GDP by local and state governments and by the federal government from 1960 to 2010, we realize that

Accepted Answer

A) federal government spending was more volatile than local and state government spending 
B)  local and state government spending was more volatile than federal government spending 
C) total spending by local and state governments exceeded federal government spending over the fifty year period 
D) federal government spending was at least three times as much as spending by local and state governments over the fifty year period 
E) spending by local and state governments followed the pattern of total government spending more closely than federal government spending did 
A) federal government spending was more volatile than local and state government spending 
B)  local and state government spending was more volatile than federal government spending 
C) total spending by local and state governments exceeded federal government spending over the fifty year period 
D) federal government spending was at least three times as much as spending by local and state governments over the fifty year period 
E) spending by local and state governments followed the pattern of total government spending more closely than federal government spending did

Question 13

In 2011, who owned the largest portion of the U.S.public debt?

Accepted Answer

A) private domestic investors 
B) international investors 
C) state and local governments 
D) the Federal Reserve 
E) the Social Security administration 
A) private domestic investors 
B) international investors 
C) state and local governments 
D) the Federal Reserve 
E) the Social Security administration

Question 14

From 2000 to 2009, average federal government outlays on net interest on the national debt totaled

Accepted Answer

A) 0)2 percent of GDP 
B) 0)9 percent of GDP 
C) 1)2 percent of GDP 
D) 1)7 percent of GDP 
E) 2)5 percent of GDP 
A) 0)2 percent of GDP 
B) 0)9 percent of GDP 
C) 1)2 percent of GDP 
D) 1)7 percent of GDP 
E) 2)5 percent of GDP

Question 15

Interest payments on the U.S.national debt as a fraction of all federal government spending

Accepted Answer

A) reached an all time high in 1945, then decreased continuously until 2008 when it started to increase again 
B) has always been fairly low and has never exceeded 6 percent 
C) exceeded 10 percent in the late 1940s but then remained much lower until the 1980s when it increased again until it exceeded 10 percent throughout the 1990s 
D) decreased sharply from the levels it reached in the 1940s but then increased steadily from 2000 to 2013 
E) none of the above 
A) reached an all time high in 1945, then decreased continuously until 2008 when it started to increase again 
B) has always been fairly low and has never exceeded 6 percent 
C) exceeded 10 percent in the late 1940s but then remained much lower until the 1980s when it increased again until it exceeded 10 percent throughout the 1990s 
D) decreased sharply from the levels it reached in the 1940s but then increased steadily from 2000 to 2013 
E) none of the above

Question 16

From 1962-69, defense spending was, on average, about 8.7 percent of GDP but by 2000-09 this average percentage had changed to

Accepted Answer

A) 12.8 percent of GDP 
B) 10.2 percent of GDP 
C) 5)6 percent of GDP 
D) 4)9 percent	 of GDP 
E) 3)8 percent	 of GDP 
A) 12.8 percent of GDP 
B) 10.2 percent of GDP 
C) 5)6 percent of GDP 
D) 4)9 percent	 of GDP 
E) 3)8 percent	 of GDP

Question 17

A country is likely to be faced with a debt crisis when

Accepted Answer

A) its debt-to-GDP ratio goes above 60 percent 
B) its debt-to-GDP ratio goes above 100 percent 
C) the interest rate on its debt reaches double digits 
D) its creditors believe that there is little chance that they will be paid back 
E) its government fails to implement austerity measures in times of high deficits 
A) its debt-to-GDP ratio goes above 60 percent 
B) its debt-to-GDP ratio goes above 100 percent 
C) the interest rate on its debt reaches double digits 
D) its creditors believe that there is little chance that they will be paid back 
E) its government fails to implement austerity measures in times of high deficits

Question 18

In 2013, the gross national debt in the U.S.was approximately

Accepted Answer

A) $1.1 trillion 
B) $3.3 trillion 
C) $12.1 trillion 
D) $16.4 trillion 
E) $19.6 trillion 
A) $1.1 trillion 
B) $3.3 trillion 
C) $12.1 trillion 
D) $16.4 trillion 
E) $19.6 trillion

Question 19

If we compare the U.S.federal government outlays as a percentage of GDP from 1960-69 to and from 2000-09, we see that on average

Accepted Answer

A) national defense spending was higher in 2000-09 
B) mandatory spending was lower in 2000-09 
C) non-defense discretionary spending was roughly the same in both periods 
D) net interest payments on the debt was more than twice as high in 2000-09 
E) total outlays increased from 14% in the earlier period to more than 30% in the later period 
A) national defense spending was higher in 2000-09 
B) mandatory spending was lower in 2000-09 
C) non-defense discretionary spending was roughly the same in both periods 
D) net interest payments on the debt was more than twice as high in 2000-09 
E) total outlays increased from 14% in the earlier period to more than 30% in the later period

Question 20

In 2011, what portion of the U.S.public debt was owned by the Federal Reserve?

Accepted Answer

A) 2 percent 
B)  6 percent 
C) 12 percent 
D) 16 percent 
E) 22 percent 
A) 2 percent 
B)  6 percent 
C) 12 percent 
D) 16 percent 
E) 22 percent

Exam 20: The national debt

For most of the time after World War II, interest payments on the national debt were around 1.5 percent of GDP.However, in the 1980s and 1990s, they increased to around

Which of the following happened in response to the Great Recession of 2007-09?

What was primarily responsible for the most recent debt crisis in Spain?

In which year did the amount of U.S.federal debt as a percentage of GNP that was held by the public reach its highest level?

In the period of 2000-2009, the largest source of total federal government revenue in the U.S.was

Which of the following is FALSE?

If we compare the debt-to-GDP ratios of the U.S.and Canada, we see that

The Treasury can retire part of the national debt only when

The primary deficit is equal to

Which of the following is FALSE about the Canadian debt-to-GDP ratio?

Which of the following countries did NOT experience an increase in long-term interest rates from 2008 to 2010?

If we compare spending as a percentage of GDP by local and state governments and by the federal government from 1960 to 2010, we realize that

In 2011, who owned the largest portion of the U.S.public debt?

From 2000 to 2009, average federal government outlays on net interest on the national debt totaled

Interest payments on the U.S.national debt as a fraction of all federal government spending

From 1962-69, defense spending was, on average, about 8.7 percent of GDP but by 2000-09 this average percentage had changed to

A country is likely to be faced with a debt crisis when

In 2013, the gross national debt in the U.S.was approximately

If we compare the U.S.federal government outlays as a percentage of GDP from 1960-69 to and from 2000-09, we see that on average

In 2011, what portion of the U.S.public debt was owned by the Federal Reserve?

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