Question 1

How did the impact of President Obama's fiscal stimulus in 2009 compare to the impact of President Bush's tax cuts and increased defense spending on the structural deficit?

Accepted Answer

A) President Obama's effect on the structural budget deficit was much lower than President Bush's. 
B) President Obama's effect on the structural budget deficit was much higher than President Bush's. 
C) President Obama and President Bush's impacts on the structural budget deficit were about equal. 
D) The impact on the structural budget was not measured-only the cyclical impact of these policies. 
A) President Obama's effect on the structural budget deficit was much lower than President Bush's. 
B) President Obama's effect on the structural budget deficit was much higher than President Bush's. 
C) President Obama and President Bush's impacts on the structural budget deficit were about equal. 
D) The impact on the structural budget was not measured-only the cyclical impact of these policies. B

Question 2

By using restrictive fiscal policy during the Great Depression,the government improved the economic situation.

Accepted Answer

A) True 
 B)False  False

Question 3

The use of government taxes and spending to alter economic outcomes is known as

Accepted Answer

A) Monetary policy. 
B) Fiscal policy. 
C) Incomes policy. 
D) Foreign trade policy. 
A) Monetary policy. 
B) Fiscal policy. 
C) Incomes policy. 
D) Foreign trade policy. B

Question 4

Which of the following is an argument against balancing the federal budget?

Accepted Answer

A) The economy will self-adjust so deficit spending is not necessary. 
B) An increase in government spending and taxes by the same amount does not affect income. 
C) Doing so may prevent the government from pulling the economy out of recession. 
D) None of the choices are correct. 
A) The economy will self-adjust so deficit spending is not necessary. 
B) An increase in government spending and taxes by the same amount does not affect income. 
C) Doing so may prevent the government from pulling the economy out of recession. 
D) None of the choices are correct.

Question 5

The largest single holder of the U.S.national debt after the U.S.government is

Accepted Answer

A) The foreign sector. 
B) The private sector. 
C) U.S.businesses. 
D) None of the choices are correct. 
A) The foreign sector. 
B) The private sector. 
C) U.S.businesses. 
D) None of the choices are correct.

Question 6

The national debt

Accepted Answer

A) Is paid off each fiscal year when the debt is refinanced. 
B) Will never be paid off in any given year,but it will be entirely paid off when it is refinanced over a number of years. 
C) Will be paid off when the budget is finally balanced. 
D) Equals the dollar amount of outstanding U.S.Treasury bonds. 
A) Is paid off each fiscal year when the debt is refinanced. 
B) Will never be paid off in any given year,but it will be entirely paid off when it is refinanced over a number of years. 
C) Will be paid off when the budget is finally balanced. 
D) Equals the dollar amount of outstanding U.S.Treasury bonds.

Question 7

An obligation to make future payment is

Accepted Answer

A) Debt refinancing. 
B) Debt service. 
C) A liability. 
D) An asset. 
A) Debt refinancing. 
B) Debt service. 
C) A liability. 
D) An asset.

Question 8

Externally held debt refers to that part of the national debt owned by private individuals,and internally held debt refers to that part owned by government agencies.

Accepted Answer

A) True 
 B)False

Question 9

A nation can forecast the following year's deficit without knowing how fast GDP will grow.

Accepted Answer

A) True 
 B)False

Question 10

External financing allows the economy to consume beyond its production possibilities temporarily.

Accepted Answer

A) True 
 B)False

Question 11

External debt of the United States refers to

Accepted Answer

A) The ownership of nongovernment debt by the government. 
B) Combined foreign debt held by sources outside the U.S.government. 
C) The debt of nongovernment organizations. 
D) U.S.government debt held by foreigners. 
A) The ownership of nongovernment debt by the government. 
B) Combined foreign debt held by sources outside the U.S.government. 
C) The debt of nongovernment organizations. 
D) U.S.government debt held by foreigners.

Question 12

The Gramm-Rudman-Hollings Act was an attempt to bring the federal budget into balance.

Accepted Answer

A) True 
 B)False

Question 13

In order to reduce the U.S.debt,

Accepted Answer

A) The government must use deficit spending. 
B) The government should spend less than it collects in tax revenues. 
C) There will be a transfer of revenue from bondholders to taxpayers. 
D) Foreign governments must lend more money to the U.S.government. 
A) The government must use deficit spending. 
B) The government should spend less than it collects in tax revenues. 
C) There will be a transfer of revenue from bondholders to taxpayers. 
D) Foreign governments must lend more money to the U.S.government.

Question 14

Automatic stabilizers tend to stabilize the level of economic activity because they

Accepted Answer

A) Are changed quickly by Congress. 
B) Increase the size of the multiplier. 
C) Increase spending during recessions and reduce spending during inflationary periods. 
D) Control the rate of change in prices. 
A) Are changed quickly by Congress. 
B) Increase the size of the multiplier. 
C) Increase spending during recessions and reduce spending during inflationary periods. 
D) Control the rate of change in prices.

Question 15

The burden of the internal portion of the debt is incurred

Accepted Answer

A) When the debt-financed activity takes place. 
B) Solely by the U.S.government. 
C) When the debt comes due. 
D) None of the choices are correct. 
A) When the debt-financed activity takes place. 
B) Solely by the U.S.government. 
C) When the debt comes due. 
D) None of the choices are correct.

Question 16

Which of the following is most likely to reduce a federal budget surplus?

Accepted Answer

A) A booming economy with rising inflation rates. 
B) A recession. 
C) Higher inflation and higher unemployment rates. 
D) Lower inflation and lower unemployment rates. 
A) A booming economy with rising inflation rates. 
B) A recession. 
C) Higher inflation and higher unemployment rates. 
D) Lower inflation and lower unemployment rates.

Question 17

For the United States,from the 1980s to today,there has been an increase in both absolute size and relative size (relative to GDP)for the federal government in

Accepted Answer

A) The deficit and the debt. 
B) The deficit,but not the debt. 
C) The debt,but not the deficit. 
D) Neither the deficit nor the debt. 
A) The deficit and the debt. 
B) The deficit,but not the debt. 
C) The debt,but not the deficit. 
D) Neither the deficit nor the debt.

Question 18

The structural deficit represents

Accepted Answer

A) Federal revenues minus federal expenditures at full employment under prevailing fiscal policy. 
B) Federal revenues minus expenditures under current fiscal policy at current output. 
C) A measure of the size of recessionary or inflationary gaps. 
D) The difference between expenditures at full employment and expenditures at cyclical unemployment. 
A) Federal revenues minus federal expenditures at full employment under prevailing fiscal policy. 
B) Federal revenues minus expenditures under current fiscal policy at current output. 
C) A measure of the size of recessionary or inflationary gaps. 
D) The difference between expenditures at full employment and expenditures at cyclical unemployment.

Question 19

If debt-financed less productive government spending crowds out more productive private investment,future generations will bear

Accepted Answer

A) All of the burden of the debt due to higher taxes. 
B) Zero burden as a result of the debt. 
C) Some of the burden of the debt due to lower productive capacity. 
D) A portion of the burden of the debt relative to the population size. 
A) All of the burden of the debt due to higher taxes. 
B) Zero burden as a result of the debt. 
C) Some of the burden of the debt due to lower productive capacity. 
D) A portion of the burden of the debt relative to the population size.

Question 20

Crowding out is most likely to occur when the federal government

Accepted Answer

A) Runs a surplus and pays off part of the debt. 
B) Has a balanced budget and refinances a portion of the debt that matures. 
C) Runs a deficit and raises taxes to generate more revenue. 
D) Runs a deficit and sells bonds to make up the difference. 
A) Runs a surplus and pays off part of the debt. 
B) Has a balanced budget and refinances a portion of the debt that matures. 
C) Runs a deficit and raises taxes to generate more revenue. 
D) Runs a deficit and sells bonds to make up the difference.

Exam 12: Deficits and Debt

How did the impact of President Obama's fiscal stimulus in 2009 compare to the impact of President Bush's tax cuts and increased defense spending on the structural deficit?

By using restrictive fiscal policy during the Great Depression,the government improved the economic situation.

The use of government taxes and spending to alter economic outcomes is known as

Which of the following is an argument against balancing the federal budget?

The largest single holder of the U.S.national debt after the U.S.government is

The national debt

An obligation to make future payment is

Externally held debt refers to that part of the national debt owned by private individuals,and internally held debt refers to that part owned by government agencies.

A nation can forecast the following year's deficit without knowing how fast GDP will grow.

External financing allows the economy to consume beyond its production possibilities temporarily.

External debt of the United States refers to

The Gramm-Rudman-Hollings Act was an attempt to bring the federal budget into balance.

In order to reduce the U.S.debt,

Automatic stabilizers tend to stabilize the level of economic activity because they

The burden of the internal portion of the debt is incurred

Which of the following is most likely to reduce a federal budget surplus?

For the United States,from the 1980s to today,there has been an increase in both absolute size and relative size (relative to GDP)for the federal government in

The structural deficit represents

If debt-financed less productive government spending crowds out more productive private investment,future generations will bear

Crowding out is most likely to occur when the federal government

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Competitive Markets

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

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