Question 1

"Crowding in" refers to federal government deficits:

Accepted Answer

A)  used for public infrastructure that will offset any decline in business investment. 
B)  which reduce private business and consumption spending. 
C)  which reduce future rates of economic growth. 
D)  when the economy is at full employment. 
A)  used for public infrastructure that will offset any decline in business investment. 
B)  which reduce private business and consumption spending. 
C)  which reduce future rates of economic growth. 
D)  when the economy is at full employment. A

Question 2

If Congress fails to pass a budget before the fiscal year starts, then federal agencies may continue to operate only if Congress has passed a:

Accepted Answer

A)  balanced budget amendment. 
B)  deficit reduction plan. 
C)  conference resolution. 
D)  continuing resolution. 
A)  balanced budget amendment. 
B)  deficit reduction plan. 
C)  conference resolution. 
D)  continuing resolution. D

Question 3

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve System because:

Accepted Answer

A)  the government will not have to repay the privately held debt. 
B)  only the privately held debt creates a net interest liability for the federal government. 
C)  the privately held debt does not create a net interest liability for the federal government. 
D)  taxes will have to be raised in order to pay the interest on the debt held by the Federal Reserve system. 
A)  the government will not have to repay the privately held debt. 
B)  only the privately held debt creates a net interest liability for the federal government. 
C)  the privately held debt does not create a net interest liability for the federal government. 
D)  taxes will have to be raised in order to pay the interest on the debt held by the Federal Reserve system. B

Question 4

If the federal government runs a budget _______, then the national debt becomes __________.

Accepted Answer

A)  surplus, larger 
B)  deficit, smaller 
C)  surplus, smaller 
D)  deficit, the size of the deficit 
A)  surplus, larger 
B)  deficit, smaller 
C)  surplus, smaller 
D)  deficit, the size of the deficit

Question 5

According to the crowding-out view, budget deficits will:

Accepted Answer

A)  reduce interest rates. 
B)  increase interest rates and retard private investment. 
C)  reduce the investments of foreigners in the United States. 
D)  increase the capital stock available to future generations. 
A)  reduce interest rates. 
B)  increase interest rates and retard private investment. 
C)  reduce the investments of foreigners in the United States. 
D)  increase the capital stock available to future generations.

Question 6

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 7

Which of the following owns the largest proportion of the national debt?

Accepted Answer

A)  foreigners 
B)  federal, state, and local governments and the Federal Reserve 
C)  private individuals, banks, and corporations 
D)  foreign governments 
A)  foreigners 
B)  federal, state, and local governments and the Federal Reserve 
C)  private individuals, banks, and corporations 
D)  foreign governments

Question 8

When the U. S. federal government runs a budget deficit, it borrows money by selling:

Accepted Answer

A)  Treasury bills, notes, and bonds. 
B)  publicly owned land. 
C)  its gold reserves. 
D)  financial assets located in foreign banks. 
A)  Treasury bills, notes, and bonds. 
B)  publicly owned land. 
C)  its gold reserves. 
D)  financial assets located in foreign banks.

Question 9

If the economy is at full employment:

Accepted Answer

A)  the aggregate demand curve cannot shift to the right. 
B)  government spending causes crowding in. 
C)  Keynesians argue that any crowding-out effect is small. 
D)  crowding out is complete. 
A)  the aggregate demand curve cannot shift to the right. 
B)  government spending causes crowding in. 
C)  Keynesians argue that any crowding-out effect is small. 
D)  crowding out is complete.

Question 10

Which of the following statements about crowding out is false ?

Accepted Answer

A)  It is not caused by a budget surplus. 
B)  It is caused by a budget deficit. 
C)  It can completely offset the multiplier. 
D)  It affects interest rates and not economic growth. 
A)  It is not caused by a budget surplus. 
B)  It is caused by a budget deficit. 
C)  It can completely offset the multiplier. 
D)  It affects interest rates and not economic growth.

Question 11

Are we passing the national debt burden on to our children?

Accepted Answer

One side of this argument is that the de

Question 12

Supply-siders feel that high levels of government spending:

Accepted Answer

A)  assist private sector investing by creating infrastructure. 
B)  have no impact on private sector investment. 
C)  complement private spending. 
D)  cause private sector investment to decline because of crowding out. 
A)  assist private sector investing by creating infrastructure. 
B)  have no impact on private sector investment. 
C)  complement private spending. 
D)  cause private sector investment to decline because of crowding out.

Question 13

What is the difference between the federal budget deficit and the national debt?

Accepted Answer

A)  The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses. 
B)  The budget deficit is the cumulative effect of all prior national debts. 
C)  The national debt includes all outstanding bonds, while the budget deficit excludes bonds held by government agencies. 
D)  There is no difference between the budget deficit and the national debt. 
A)  The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses. 
B)  The budget deficit is the cumulative effect of all prior national debts. 
C)  The national debt includes all outstanding bonds, while the budget deficit excludes bonds held by government agencies. 
D)  There is no difference between the budget deficit and the national debt.

Question 14

Which of the following statements is true ?

Accepted Answer

A)  The national debt is the current year's amount by which the government is spending more than it collects as taxes. 
B)  Deficits are financed by the government issuing for sale more government securities. 
C)  The debt ceiling refers to the amount of debt at which the government is officially declared as being bankrupt. 
D)  Internal national debt is the portion of the national debt owed to foreigners. 
A)  The national debt is the current year's amount by which the government is spending more than it collects as taxes. 
B)  Deficits are financed by the government issuing for sale more government securities. 
C)  The debt ceiling refers to the amount of debt at which the government is officially declared as being bankrupt. 
D)  Internal national debt is the portion of the national debt owed to foreigners.

Question 15

Does government borrowing crowd out private sector spending?

Accepted Answer

Crowding out refers to government defici

Question 16

The federal budget process begins when federal agencies submit their budget requests to the:

Accepted Answer

A)  Treasury Department. 
B)  Council of Economic Advisors (CE
A) . 
C)  Office of Management and Budget (OM
B) . 
D)  Congressional Budget Office (CBO). 
A)  Treasury Department. 
B)  Council of Economic Advisors (CE
A) . 
C)  Office of Management and Budget (OM
B) . 
D)  Congressional Budget Office (CBO).

Question 17

Exhibit 23-1: Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016
 
Given the information in Exhibit 23-1, which of the countries shown was closest to balancing its budget?

Accepted Answer

A)  Iceland 
B)  Latvia 
C)  Norway 
D)  United States 
A)  Iceland 
B)  Latvia 
C)  Norway 
D)  United States

Question 18

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Accepted Answer

A)  the president has the right to raise the debt ceiling. 
B)  federal agencies operate on the basis of the previous year's budget. 
C)  the interest rate paid on the national debt automatically increases. 
D)  the federal government shuts down. 
A)  the president has the right to raise the debt ceiling. 
B)  federal agencies operate on the basis of the previous year's budget. 
C)  the interest rate paid on the national debt automatically increases. 
D)  the federal government shuts down.

Question 19

Exhibit 23-1: Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016
 
Given the information in Exhibit 23-1, which of the following statements is correct?

Accepted Answer

A)  Canada was the closest of the countries shown to balancing its budget. 
B)  Norway likely had to sell government securities to finance its overspending. 
C)  Iceland experienced the largest deficit of the countries shown. 
D)  The national debts of Canada, Spain and United States increased in 2016. 
A)  Canada was the closest of the countries shown to balancing its budget. 
B)  Norway likely had to sell government securities to finance its overspending. 
C)  Iceland experienced the largest deficit of the countries shown. 
D)  The national debts of Canada, Spain and United States increased in 2016.

Question 20

The crowding-out effect refers to:

Accepted Answer

A)  higher interest rates and reduced private spending that results from financing federal budget deficits. 
B)  higher future taxes accompanying budget deficits to reduce private consumption. 
C)  the inflation rate to rise when the unemployment rate is low. 
D)  increases in private savings to reduce interest rates and, thereby, crowd-out government 
A)  higher interest rates and reduced private spending that results from financing federal budget deficits. 
B)  higher future taxes accompanying budget deficits to reduce private consumption. 
C)  the inflation rate to rise when the unemployment rate is low. 
D)  increases in private savings to reduce interest rates and, thereby, crowd-out government

Exam 23: Federal Deficits Surpluses and the National Debt

"Crowding in" refers to federal government deficits:

If Congress fails to pass a budget before the fiscal year starts, then federal agencies may continue to operate only if Congress has passed a:

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve System because:

If the federal government runs a budget _______, then the national debt becomes __________.

According to the crowding-out view, budget deficits will:

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

Which of the following owns the largest proportion of the national debt?

When the U. S. federal government runs a budget deficit, it borrows money by selling:

If the economy is at full employment:

Which of the following statements about crowding out is false ?

Are we passing the national debt burden on to our children?

Supply-siders feel that high levels of government spending:

What is the difference between the federal budget deficit and the national debt?

Which of the following statements is true ?

Does government borrowing crowd out private sector spending?

The federal budget process begins when federal agencies submit their budget requests to the:

Exhibit 23-1: Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016 Given the information in Exhibit 23-1, which of the countries shown was closest to balancing its budget?

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Exhibit 23-1: Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016 Given the information in Exhibit 23-1, which of the following statements is correct?

The crowding-out effect refers to:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

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

Understanding Direct and Inverse Relationships between Variables

Filters

If the federal government runs a budget _, then the national debt becomes ____.