Question 1

After 1945, the national debt as a percent of GDP:

Accepted Answer

A) decreased slightly. 
B) decreased substantially. 
C) remained about the same. 
D) increased slightly. 
E) increased substantially. 
A) decreased slightly. 
B) decreased substantially. 
C) remained about the same. 
D) increased slightly. 
E) increased substantially.

Question 2

Most of the U.S. national debt is owed to ____. Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

Accepted Answer

A) foreigners; foreigners 
B) other U.S. citizens; bondholders 
C) foreigners; those needing government services 
D) other U.S. citizens; those needing government services 
A) foreigners; foreigners 
B) other U.S. citizens; bondholders 
C) foreigners; those needing government services 
D) other U.S. citizens; those needing government services

Question 3

The sum of past federal deficits is reflected in the federal:

Accepted Answer

A) cyclical debt. 
B) Congressional debt. 
C) national debt. 
D) GDP debt. 
A) cyclical debt. 
B) Congressional debt. 
C) national debt. 
D) GDP debt.

Question 4

In recent years, the national debt was about 120 percent of the U.S. GDP.

Accepted Answer

A) True 
 B)False

Question 5

If the national debt rises to the debt ceiling and there is currently a budget ________, the Congress and the President must agree to ________ the debt ceiling or else the federal government will have insufficient funds to pay its bills and will be forced to shut down.

Accepted Answer

A) surplus, lower 
B) deficit, raise 
C) none of the above 
A) surplus, lower 
B) deficit, raise 
C) none of the above

Question 6

How does the national debt as a percentage of GDP in the United States compared to the United Kingdom?

Accepted Answer

A) U.S. national debt ratio is smaller. 
B) U.S. national debt ratio is slightly larger. 
C) U.S. national debt ratio is substantially larger. 
D) U.S. national debt ratio is substantially smaller. 
A) U.S. national debt ratio is smaller. 
B) U.S. national debt ratio is slightly larger. 
C) U.S. national debt ratio is substantially larger. 
D) U.S. national debt ratio is substantially smaller.

Question 7

Which of the following statements is true ?

Accepted Answer

A) The national debt as a percentage of GDP is greater today than during any other period in our nation's history. 
B) A sizeable external national debt will transfer purchasing power away from foreigners to domestic citizens. 
C) Keynesian theory assumes a total crowding out effect associated with deficit spending. 
D) U.S. national debt is 12 times its size in 1980. 
A) The national debt as a percentage of GDP is greater today than during any other period in our nation's history. 
B) A sizeable external national debt will transfer purchasing power away from foreigners to domestic citizens. 
C) Keynesian theory assumes a total crowding out effect associated with deficit spending. 
D) U.S. national debt is 12 times its size in 1980.

Question 8

The U.S. Treasury is responsible for preparing and submitting the initial budget recommendation to the president.

Accepted Answer

A) True 
 B)False

Question 9

Crowding out occurs when the federal government:

Accepted Answer

A) raises taxes to finance a budget deficit. 
B) refinances maturing U.S. Treasury bonds. 
C) borrows by selling bonds to finance a deficit. 
D) uses a budget surplus to pay off part of the national debt. 
A) raises taxes to finance a budget deficit. 
B) refinances maturing U.S. Treasury bonds. 
C) borrows by selling bonds to finance a deficit. 
D) uses a budget surplus to pay off part of the national debt.

Question 10

When crowding out occurs, higher government spending results in higher interest rates, which in turn results in:

Accepted Answer

A) higher inflation. 
B) less consumption and investment. 
C) a larger debt ceiling. 
D) more tax revenues. 
A) higher inflation. 
B) less consumption and investment. 
C) a larger debt ceiling. 
D) more tax revenues.

Question 11

If the federal government has a budget surplus, then the national debt is:

Accepted Answer

A) reduced. 
B) fully repaid. 
C) negative. 
D) interest-free. 
A) reduced. 
B) fully repaid. 
C) negative. 
D) interest-free.

Question 12

Since the U.S. government can continue to issue new Treasury bonds, bills, and notes as old ones mature, we do not necessarily have to worry about suddenly have to pay back all of the national debt.

Accepted Answer

A) True 
 B)False

Question 13

The national debt is:

Accepted Answer

A) the difference between a nation's exports and imports of goods and services. 
B) the sum of the personal debt of all citizens in the United States. 
C) the cumulative effect of all past budget deficits and surpluses of the federal government. 
D) equal to the current size of the budget deficit. 
A) the difference between a nation's exports and imports of goods and services. 
B) the sum of the personal debt of all citizens in the United States. 
C) the cumulative effect of all past budget deficits and surpluses of the federal government. 
D) equal to the current size of the budget deficit.

Question 14

Among the major industrial economies, which of the following had the lowest national debt as a percent of GDP?

Accepted Answer

A) Canada 
B) Australia 
C) United States 
D) Italy 
A) Canada 
B) Australia 
C) United States 
D) Italy

Question 15

Supply-siders argue that:

Accepted Answer

A) reductions in government spending cut infrastructure investment which hurts private sector investment. 
B) increases in government spending increase infrastructure investment which helps private sector investment. 
C) increases in government spending causes private sector investment to fall because the government pushes up interest rates. 
D) reductions in government spending cause private sector investment to fall because the government pushes up interest rates by borrowing. 
E) increases in government spending causes consumption spending to fall because the government purchases push up interest rates. 
A) reductions in government spending cut infrastructure investment which hurts private sector investment. 
B) increases in government spending increase infrastructure investment which helps private sector investment. 
C) increases in government spending causes private sector investment to fall because the government pushes up interest rates. 
D) reductions in government spending cause private sector investment to fall because the government pushes up interest rates by borrowing. 
E) increases in government spending causes consumption spending to fall because the government purchases push up interest rates.

Question 16

Which of the following is false ?

Accepted Answer

A) The national debt's size decreased steadily after World War II. 
B) The national debt increases in size whenever the federal government has a surplus budget. 
C) The size of the national debt currently is about the same size as it was during World War II. 
D) All of the above are true. 
E) All of the above are false. 
A) The national debt's size decreased steadily after World War II. 
B) The national debt increases in size whenever the federal government has a surplus budget. 
C) The size of the national debt currently is about the same size as it was during World War II. 
D) All of the above are true. 
E) All of the above are false.

Question 17

Bonds owned by financial institutions represent ownership of the national debt by the private sector.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following countries has the largest national debt as a percentage of GDP?

Accepted Answer

A) France. 
B) Japan. 
C) United States. 
D) Canada. 
E) Italy. 
A) France. 
B) Japan. 
C) United States. 
D) Canada. 
E) Italy.

Question 19

Between 1998 and 2001, the federal budget was:

Accepted Answer

A) never in surplus. 
B) in surplus about as often as it was in deficit. 
C) in surplus. 
D) never in deficit. 
A) never in surplus. 
B) in surplus about as often as it was in deficit. 
C) in surplus. 
D) never in deficit.

Question 20

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government?

Accepted Answer

A) It increases the reported deficit. 
B) It reduces the reported deficit. 
C) It exerts no effect on the reported deficit. 
D) It increases the deficit during an economic boom but reduces it during a recession. 
A) It increases the reported deficit. 
B) It reduces the reported deficit. 
C) It exerts no effect on the reported deficit. 
D) It increases the deficit during an economic boom but reduces it during a recession.

Exam 13: Federal Deficits, Surpluses, and the National Debt

After 1945, the national debt as a percent of GDP:

Most of the U.S. national debt is owed to ____. Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

The sum of past federal deficits is reflected in the federal:

In recent years, the national debt was about 120 percent of the U.S. GDP.

If the national debt rises to the debt ceiling and there is currently a budget ________, the Congress and the President must agree to ________ the debt ceiling or else the federal government will have insufficient funds to pay its bills and will be forced to shut down.

How does the national debt as a percentage of GDP in the United States compared to the United Kingdom?

Which of the following statements is true ?

The U.S. Treasury is responsible for preparing and submitting the initial budget recommendation to the president.

Crowding out occurs when the federal government:

When crowding out occurs, higher government spending results in higher interest rates, which in turn results in:

If the federal government has a budget surplus, then the national debt is:

Since the U.S. government can continue to issue new Treasury bonds, bills, and notes as old ones mature, we do not necessarily have to worry about suddenly have to pay back all of the national debt.

The national debt is:

Among the major industrial economies, which of the following had the lowest national debt as a percent of GDP?

Supply-siders argue that:

Which of the following is false ?

Bonds owned by financial institutions represent ownership of the national debt by the private sector.

Which of the following countries has the largest national debt as a percentage of GDP?

Between 1998 and 2001, the federal budget was:

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Applying Graphs to Economics

Consumer Surplus, Producer Surplus, and Market Efficiency

the Self-Correcting Aggregate Demand and Supply Model

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

Filters

Most of the U.S. national debt is owed to . Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of .

If the national debt rises to the debt ceiling and there is currently a budget , the Congress and the President must agree to the debt ceiling or else the federal government will have insufficient funds to pay its bills and will be forced to shut down.