Question 1

When measured as a percentage of GDP, the U.S. national debt reached its highest levels as a result of:

Accepted Answer

A)  World War II. 
B)  The Vietnam War. 
C)  The Reagan defense buildup and tax cut. 
D)  The Obama economic recovery program. 
A)  World War II. 
B)  The Vietnam War. 
C)  The Reagan defense buildup and tax cut. 
D)  The Obama economic recovery program.

Question 2

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

Accepted Answer

One side of this argument is that the de

Question 3

Since 1990, the net interest payment as a percentage of GDP has:

Accepted Answer

A)  declined. 
B)  doubled. 
C)  tripled. 
D)  quadrupled. 
A)  declined. 
B)  doubled. 
C)  tripled. 
D)  quadrupled.

Question 4

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 5

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 6

Which of the following groups analyzes federal budgets proposals?

Accepted Answer

A)  The Council of Economic Advisors. 
B)  The Office of Management and Budget. 
C)  The Congressional Budget Office. 
D)  The House and Senate Budget Committees. 
A)  The Council of Economic Advisors. 
B)  The Office of Management and Budget. 
C)  The Congressional Budget Office. 
D)  The House and Senate Budget Committees.

Question 7

The sum of past federal budget deficits increases the:

Accepted Answer

A)  GDP debt. 
B)  trade debt plus debt. 
C)  national debt. 
D)  Congressional debt. 
A)  GDP debt. 
B)  trade debt plus debt. 
C)  national debt. 
D)  Congressional debt.

Question 8

The national debt is best described as the:

Accepted Answer

A)  amount by which this year's federal spending exceeds its taxes. 
B)  value of all U. S. Treasury bonds owned by foreigners. 
C)  sum of all federal budget deficits, past and present. 
D)  percentage of GDP needed to finance a country's investment. 
A)  amount by which this year's federal spending exceeds its taxes. 
B)  value of all U. S. Treasury bonds owned by foreigners. 
C)  sum of all federal budget deficits, past and present. 
D)  percentage of GDP needed to finance a country's investment.

Question 9

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

Accepted Answer

A)  surplus, larger 
B)  deficit, smaller 
C)  surplus, smaller 
D)  none of the above 
A)  surplus, larger 
B)  deficit, smaller 
C)  surplus, smaller 
D)  none of the above

Question 10

Increased government borrowing stimulates private borrowing because of its effect on interest rates.

Accepted Answer

A) True 
 B)False

Question 11

Currently, the Social Security Trust Fund is running a:

Accepted Answer

A)  deficit, which reduces the size of the budget deficit. 
B)  surplus, which reduces the size of the budget deficit. 
C)  surplus, which increases the size of the budget deficit. 
D)  deficit, which increases the size of the budget deficit. 
A)  deficit, which reduces the size of the budget deficit. 
B)  surplus, which reduces the size of the budget deficit. 
C)  surplus, which increases the size of the budget deficit. 
D)  deficit, which increases the size of the budget deficit.

Question 12

Crowding out refers to the situation in which:

Accepted Answer

A)  borrowing by the federal government raises interest rates and causes firms to invest less. 
B)  foreigners sell their bonds and purchase U.S. goods and services. 
C)  borrowing by the federal government causes state and local governments to lower their taxes. 
D)  increased federal taxes to balance the budget causes interest rates to increase and consumer credit decreases. 
A)  borrowing by the federal government raises interest rates and causes firms to invest less. 
B)  foreigners sell their bonds and purchase U.S. goods and services. 
C)  borrowing by the federal government causes state and local governments to lower their taxes. 
D)  increased federal taxes to balance the budget causes interest rates to increase and consumer credit decreases.

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is true if all the national debt were owned internally?

Accepted Answer

A)  The federal government would not need to refinance the national debt. 
B)  The federal government would not need to worry about raising taxes to pay interest on the national debt. 
C)  We would still be concerned about the effect on the distribution of income from interest payments on the national debt. 
D)  All of the above are true. 
A)  The federal government would not need to refinance the national debt. 
B)  The federal government would not need to worry about raising taxes to pay interest on the national debt. 
C)  We would still be concerned about the effect on the distribution of income from interest payments on the national debt. 
D)  All of the above are true.

Question 16

The huge national debt of the United States is likely to lead to bankruptcy of the national government.

Accepted Answer

A) True 
 B)False

Question 17

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)  None of the above. 
A)  Foreigners. 
B)  Federal, state, and local governments and the Federal Reserve. 
C)  Private individuals, banks, and corporations. 
D)  None of the above.

Question 18

Currently, the national debt is approximately:

Accepted Answer

A)  50 percent of GDP. 
B)  60 percent of GDP. 
C)  100 percent of GDP. 
D)  120 percent of GDP. 
A)  50 percent of GDP. 
B)  60 percent of GDP. 
C)  100 percent of GDP. 
D)  120 percent of GDP.

Question 19

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

Question 20

"Crowding in" refers to federal government deficits:

Accepted Answer

A)  used for public infrastructure which will offset any decline in business investment. 
B)  which reduce private business and consumption spending. 
C)  which reduce future rates of economic growth. 
D)  all of the above. 
A)  used for public infrastructure which will offset any decline in business investment. 
B)  which reduce private business and consumption spending. 
C)  which reduce future rates of economic growth. 
D)  all of the above.

Exam 17: Federal Deficits, Surpluses, and the National Debt

When measured as a percentage of GDP, the U.S. national debt reached its highest levels as a result of:

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

Since 1990, the net interest payment as a percentage of GDP has:

Supply-siders argue that:

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

Which of the following groups analyzes federal budgets proposals?

The sum of past federal budget deficits increases the:

The national debt is best described as the:

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

Increased government borrowing stimulates private borrowing because of its effect on interest rates.

Currently, the Social Security Trust Fund is running a:

Crowding out refers to the situation in which:

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

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

Which of the following is true if all the national debt were owned internally?

The huge national debt of the United States is likely to lead to bankruptcy of the national government.

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

Currently, the national debt is approximately:

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.

"Crowding in" refers to federal government deficits:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Money and the Federal Reserve System

Money Creation

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

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

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

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.