Question 1

The structural deficit/surplus budget

Accepted Answer

A) measures the federal budget deficit/surplus as if the economy were at full employment. 
B) measures the federal budget deficit/surplus as if the economy were in recession. 
C) measures the federal budget deficit/surplus as if the economy were suffering from high inflation. 
D) is used when structural unemployment is at a peak. 
A) measures the federal budget deficit/surplus as if the economy were at full employment. 
B) measures the federal budget deficit/surplus as if the economy were in recession. 
C) measures the federal budget deficit/surplus as if the economy were suffering from high inflation. 
D) is used when structural unemployment is at a peak.

Question 2

National debt is the federal government's total indebtedness at a moment in time.

Accepted Answer

A) True 
 B)False

Question 3

If the economy is near full employment and Congress cuts taxes, the proper monetary policy should be

Accepted Answer

A) expansionary to keep the economy fully employed. 
B) expansionary to counteract the increased deficit. 
C) contractionary to shift the aggregate demand curve outward. 
D) contractionary to counteract the effects of fiscal policy. 
A) expansionary to keep the economy fully employed. 
B) expansionary to counteract the increased deficit. 
C) contractionary to shift the aggregate demand curve outward. 
D) contractionary to counteract the effects of fiscal policy.

Question 4

Because the personal income tax is an automatic stabilizer,

Accepted Answer

A) inflationary gaps are impossible. 
B) the budget deficit grows during a recession. 
C) the deficit needed to cure a recessionary gap increases. 
D) the structural deficit grows during a recession. 
E) all of the above are correct. 
A) inflationary gaps are impossible. 
B) the budget deficit grows during a recession. 
C) the deficit needed to cure a recessionary gap increases. 
D) the structural deficit grows during a recession. 
E) all of the above are correct.

Question 5

No nation needs default on debts that call for repayment in its own currency.However, Russia astounded the financial world in 1998 by choosing to default on its

Accepted Answer

A) dollar denominated debt. 
B) ruble denominated debt. 
C) British sterling pounds denominated debt. 
D) none of these. 
A) dollar denominated debt. 
B) ruble denominated debt. 
C) British sterling pounds denominated debt. 
D) none of these.

Question 6

Future generations will be hurt by a high national debt if incurring the debt

Accepted Answer

A) was done to pay Social Security recipients. 
B) resulted in heavy commitments to bail out business firms. 
C) increased formation of capital. 
D) slowed the formation of capital. 
A) was done to pay Social Security recipients. 
B) resulted in heavy commitments to bail out business firms. 
C) increased formation of capital. 
D) slowed the formation of capital.

Question 7

When will the difference between the actual deficit and the structural deficit be the smallest?

Accepted Answer

A) In a major recession 
B) Below the natural rate of unemployment 
C) At full employment 
D) In an inflationary gap 
A) In a major recession 
B) Below the natural rate of unemployment 
C) At full employment 
D) In an inflationary gap

Question 8

"Crowding-out" refers to the process by which

Accepted Answer

A) high consumption leads to low saving and investment. 
B) the Fed prevents "runs" on banks. 
C) Fed sales of bonds reduce the ability of corporations to buy bonds. 
D) increased government spending raises interest rates, thus lowering investment spending. 
A) high consumption leads to low saving and investment. 
B) the Fed prevents "runs" on banks. 
C) Fed sales of bonds reduce the ability of corporations to buy bonds. 
D) increased government spending raises interest rates, thus lowering investment spending.

Question 9

List three bogus arguments about the "burden of the debt," and point out the errors in each of the arguments.

Accepted Answer

Argument 1: The debt will burden future

Question 10

Monetizing the deficit contributes to the inflationary pressures that are already present in the economy.

Accepted Answer

A) True 
 B)False

Question 11

In contrast to Argentina in 2001, the United States debt is less of a burden because the U.S.debt is

Accepted Answer

A) an obligation to pay over a longer period of time. 
B) owed entirely to U.S.citizens and banks. 
C) an obligation to pay in domestic currency. 
D) an obligation to pay in foreign currency. 
A) an obligation to pay over a longer period of time. 
B) owed entirely to U.S.citizens and banks. 
C) an obligation to pay in domestic currency. 
D) an obligation to pay in foreign currency.

Question 12

Falling GDP leads to higher transfer payments and lower tax receipts.

Accepted Answer

A) True 
 B)False

Question 13

Monetization of the deficit (or debt) means that

Accepted Answer

A) the government uses monetary policy to control the economy rather than fiscal policy. 
B) inflation accounting corrects for price increases. 
C) the Fed buys newly issued debt and increases the money supply. 
D) the amount of money in circulation is equal to the size of the debt. 
A) the government uses monetary policy to control the economy rather than fiscal policy. 
B) inflation accounting corrects for price increases. 
C) the Fed buys newly issued debt and increases the money supply. 
D) the amount of money in circulation is equal to the size of the debt.

Question 14

The primary conclusion of using inflation accounting is that inflation

Accepted Answer

A) distorts the tax system and results in slower economic growth. 
B) reduces the national debt to its nominal value instead of its real value. 
C) causes recessions and increases the structural deficit. 
D) distorts government budget accounting by exaggerating interest expense. 
A) distorts the tax system and results in slower economic growth. 
B) reduces the national debt to its nominal value instead of its real value. 
C) causes recessions and increases the structural deficit. 
D) distorts government budget accounting by exaggerating interest expense.

Question 15

The structural deficit or surplus

Accepted Answer

A) shows the government where to make cuts in expenditures to follow the balanced budget requirement. 
B) reveals the complicated structure underlying government spending and tax policy. 
C) is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. 
D) includes all government budgets-federal, state, and local. 
A) shows the government where to make cuts in expenditures to follow the balanced budget requirement. 
B) reveals the complicated structure underlying government spending and tax policy. 
C) is the hypothetical deficit or surplus under current fiscal policies if the economy were operating near full employment. 
D) includes all government budgets-federal, state, and local.

Question 16

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

Accepted Answer

A) A budget surplus and expansionary monetary policy 
B) A budget deficit and expansionary monetary policy 
C) A budget deficit and contractionary monetary policy 
D) A budget surplus and contractionary monetary policy 
A) A budget surplus and expansionary monetary policy 
B) A budget deficit and expansionary monetary policy 
C) A budget deficit and contractionary monetary policy 
D) A budget surplus and contractionary monetary policy

Question 17

Monetizing deficits has led to serious inflation in

Accepted Answer

A) the United States. 
B) Canada. 
C) the United Kingdom. 
D) Russia, Latin America, and Israel. 
E) All of the above are correct. 
A) the United States. 
B) Canada. 
C) the United Kingdom. 
D) Russia, Latin America, and Israel. 
E) All of the above are correct.

Question 18

From 2004 to 2008, the federal budget deficit, on an official fiscal-year basis, was

Accepted Answer

A) large and growing larger. 
B) "negative," that is, the budget was in surplus. 
C) declining. 
D) increased by the rising Social Security deficit. 
A) large and growing larger. 
B) "negative," that is, the budget was in surplus. 
C) declining. 
D) increased by the rising Social Security deficit.

Question 19

Between the years of 2001 and 2003, what happened to the structural deficit?

Accepted Answer

A) It declined rapidly. 
B) It fell steadily. 
C) It increased steadily. 
D) It remained fairly constant. 
A) It declined rapidly. 
B) It fell steadily. 
C) It increased steadily. 
D) It remained fairly constant.

Question 20

What is the difference between the deficit and the debt?

Accepted Answer

The budget deficit is the difference ove

Exam 32: Budget Deficits in the Short and Long Run

The structural deficit/surplus budget

National debt is the federal government's total indebtedness at a moment in time.

If the economy is near full employment and Congress cuts taxes, the proper monetary policy should be

Because the personal income tax is an automatic stabilizer,

No nation needs default on debts that call for repayment in its own currency.However, Russia astounded the financial world in 1998 by choosing to default on its

Future generations will be hurt by a high national debt if incurring the debt

When will the difference between the actual deficit and the structural deficit be the smallest?

"Crowding-out" refers to the process by which

List three bogus arguments about the "burden of the debt," and point out the errors in each of the arguments.

Monetizing the deficit contributes to the inflationary pressures that are already present in the economy.

In contrast to Argentina in 2001, the United States debt is less of a burden because the U.S.debt is

Falling GDP leads to higher transfer payments and lower tax receipts.

Monetization of the deficit (or debt) means that

The primary conclusion of using inflation accounting is that inflation

The structural deficit or surplus

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

Monetizing deficits has led to serious inflation in

From 2004 to 2008, the federal budget deficit, on an official fiscal-year basis, was

Between the years of 2001 and 2003, what happened to the structural deficit?

What is the difference between the deficit and the debt?

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

Filters