Question 1

If government revenues fall short of expenditures,the difference can be financed by

Accepted Answer

A)  reducing taxes. 
B)  reducing the national debt. 
C)  declaring bankruptcy. 
D)  borrowing or creating new money. 
E)  buying gold. 
A)  reducing taxes. 
B)  reducing the national debt. 
C)  declaring bankruptcy. 
D)  borrowing or creating new money. 
E)  buying gold.

Question 2

If the actual federal budget shows a deficit but the structural budget deficit is falling,economists would conclude that

Accepted Answer

A)  the structural deficit is based on an incorrect estimate of potential output. 
B)  the actual budget deficit should be revised to equal the structural deficit. 
C)  government spending should be curtailed severely. 
D)  current fiscal policy is probably doing a fair job of stabilizing the economy. 
E)  the tax rate is too low. 
A)  the structural deficit is based on an incorrect estimate of potential output. 
B)  the actual budget deficit should be revised to equal the structural deficit. 
C)  government spending should be curtailed severely. 
D)  current fiscal policy is probably doing a fair job of stabilizing the economy. 
E)  the tax rate is too low.

Question 3

In general,appropriate fiscal policy would involve a budget

Accepted Answer

A)  deficit during a recession and a surplus during periods of inflationary full employment. 
B)  balanced annually regardless of the economic climate. 
C)  surplus at all times. 
D)  that completely eliminates the national debt in a single year. 
E)  that makes the actual budget deficit equal to the full-employment budget surplus. 
A)  deficit during a recession and a surplus during periods of inflationary full employment. 
B)  balanced annually regardless of the economic climate. 
C)  surplus at all times. 
D)  that completely eliminates the national debt in a single year. 
E)  that makes the actual budget deficit equal to the full-employment budget surplus.

Question 4

In addition to annually and cyclically balanced budget policies,a third approach argues that the government's budget should be

Accepted Answer

A)  set to promote the preferred combination of unemployment and inflation. 
B)  balanced over the course of the business cycle. 
C)  measured in current rather than constant dollars to accurately reflect the magnitude of fiscal stimulus. 
D)  designed to ensure persistent surpluses to reduce unemployment. 
E)  using the tax laws to stimulate investment. 
A)  set to promote the preferred combination of unemployment and inflation. 
B)  balanced over the course of the business cycle. 
C)  measured in current rather than constant dollars to accurately reflect the magnitude of fiscal stimulus. 
D)  designed to ensure persistent surpluses to reduce unemployment. 
E)  using the tax laws to stimulate investment.

Question 5

The federal budget is

Accepted Answer

A)  for a fiscal year, from January 1 to December 31. 
B)  a statement of the government's anticipated expenditures and revenues. 
C)  a statement of how much the various agencies of the federal government would like to spend. 
D)  managed by the Federal Reserve System. 
E)  submitted by the president to Congress and must be either rejected or accepted without modification. 
A)  for a fiscal year, from January 1 to December 31. 
B)  a statement of the government's anticipated expenditures and revenues. 
C)  a statement of how much the various agencies of the federal government would like to spend. 
D)  managed by the Federal Reserve System. 
E)  submitted by the president to Congress and must be either rejected or accepted without modification.

Question 6

If the structural deficit shows a surplus

Accepted Answer

A)  government officials should begin to slow down the economy to prevent the impending danger of inflation. 
B)  actual revenues exceed actual expenditures. 
C)  the actual unemployment rate must be less than 4 percent. 
D)  fiscal policy is not overly expansionary, since at full employment, the federal government would be running a surplus. 
E)  the economy is on a proper course, since the national debt is being retired without undue deflationary pressure. 
A)  government officials should begin to slow down the economy to prevent the impending danger of inflation. 
B)  actual revenues exceed actual expenditures. 
C)  the actual unemployment rate must be less than 4 percent. 
D)  fiscal policy is not overly expansionary, since at full employment, the federal government would be running a surplus. 
E)  the economy is on a proper course, since the national debt is being retired without undue deflationary pressure.

Question 7

Large federal government budget deficits financed by foreign lenders tend to

Accepted Answer

A)  depress net exports. 
B)  lower the value of the dollar and reduce imports. 
C)  crowd out domestic lenders and reduce investment. 
D)  immediately transfer purchasing power to the foreign investors. 
E)  reduce the size of the national debt, since the bonds are held by foreign investors. 
A)  depress net exports. 
B)  lower the value of the dollar and reduce imports. 
C)  crowd out domestic lenders and reduce investment. 
D)  immediately transfer purchasing power to the foreign investors. 
E)  reduce the size of the national debt, since the bonds are held by foreign investors.

Question 8

Approximately what share of the U.S.public debt is held by federal government agencies and NOT held by the public?

Accepted Answer

A)  20 percent 
B)  30 percent 
C)  40 percent 
D)  50 percent 
E)  60 percent 
A)  20 percent 
B)  30 percent 
C)  40 percent 
D)  50 percent 
E)  60 percent

Question 9

The popularity of the annually balanced budget policy has increased in recent decades because of a

Accepted Answer

A)  realization that the deficit has been growing at a faster rate than GDP. 
B)  sharp decline in U.S. overseas borrowing. 
C)  growing business support of higher taxes to firms. 
D)  gradual decline in inflation rates. 
E)  growing surplus in the structural deficit. 
A)  realization that the deficit has been growing at a faster rate than GDP. 
B)  sharp decline in U.S. overseas borrowing. 
C)  growing business support of higher taxes to firms. 
D)  gradual decline in inflation rates. 
E)  growing surplus in the structural deficit.

Question 10

During the Clinton administration,fiscal policy was

Accepted Answer

A)  successful in keeping the unemployment rate at about 4 percent. 
B)  the primary policy tool used to combat inflation. 
C)  exercised through the monetary authorities. 
D)  focused on reducing both tax rates and government spending. 
E)  dominated by a desire to reduce budget deficits. 
A)  successful in keeping the unemployment rate at about 4 percent. 
B)  the primary policy tool used to combat inflation. 
C)  exercised through the monetary authorities. 
D)  focused on reducing both tax rates and government spending. 
E)  dominated by a desire to reduce budget deficits.

Question 11

Some opposed to using federal budget surpluses to cut taxes argue that

Accepted Answer

A)  surpluses could disappear and deficits return in the future, so we should not take any chances and instead pay down the national debt. 
B)  since the tax has already been collected, there is no need to return it. 
C)  cutting taxes would set off a recession, reducing government revenue. 
D)  the larger the budget surplus, the greater the money supply, which automatically reduces taxes. 
E)  taxes are currently at historically low levels. 
A)  surpluses could disappear and deficits return in the future, so we should not take any chances and instead pay down the national debt. 
B)  since the tax has already been collected, there is no need to return it. 
C)  cutting taxes would set off a recession, reducing government revenue. 
D)  the larger the budget surplus, the greater the money supply, which automatically reduces taxes. 
E)  taxes are currently at historically low levels.

Question 12

About what percentage of national output does the United States' current national debt represent?

Accepted Answer

A)  between 10 and 25 percent 
B)  between 25 and 40 percent 
C)  between 40 and 55 percent 
D)  between 55 and 70 percent 
E)  over 70 percent 
A)  between 10 and 25 percent 
B)  between 25 and 40 percent 
C)  between 40 and 55 percent 
D)  between 55 and 70 percent 
E)  over 70 percent

Question 13

If the actual federal budget shows a deficit but the structural budget deficit is falling,most economists would attribute the deficit in the actual budget to

Accepted Answer

A)  unemployment. 
B)  unchecked government spending. 
C)  rising consumer demand. 
D)  incomplete data. 
E)  inflation. 
A)  unemployment. 
B)  unchecked government spending. 
C)  rising consumer demand. 
D)  incomplete data. 
E)  inflation.

Question 14

The fiscal policy recommendations of the Reagan administration generally advocated

Accepted Answer

A)  small changes in existing government tax and spending programs. 
B)  significant increases in defense spending, coupled with increased taxes. 
C)  holding taxes constant while significantly increasing both defense and nondefense spending. 
D)  increases in nondefense spending matched dollar for dollar by decreases in defense spending. 
E)  reductions in both taxes and non-defense-related government programs. 
A)  small changes in existing government tax and spending programs. 
B)  significant increases in defense spending, coupled with increased taxes. 
C)  holding taxes constant while significantly increasing both defense and nondefense spending. 
D)  increases in nondefense spending matched dollar for dollar by decreases in defense spending. 
E)  reductions in both taxes and non-defense-related government programs.

Question 15

According to the textbook discussion,the principal way in which one generation can impose a debt burden on succeeding generations is by

Accepted Answer

A)  using up some of the nation's productive capacity. 
B)  engaging in war. 
C)  failing to balance the budget. 
D)  maintaining stable price levels. 
E)  failing to pay off the national debt. 
A)  using up some of the nation's productive capacity. 
B)  engaging in war. 
C)  failing to balance the budget. 
D)  maintaining stable price levels. 
E)  failing to pay off the national debt.

Question 16

The difference between the budget deficit and the national debt is that the deficit is

Accepted Answer

A)  financed by borrowing; the debt is financed by selling bonds. 
B)  a long-term concept; the debt is a short-term concept. 
C)  the difference between the size of the debt and the amount of government revenues in a given year. 
D)  the estimated revenue shortfall; the debt is the actual revenue shortfall. 
E)  the difference between expenditures and revenues; the debt is the total amount owed by the government. 
A)  financed by borrowing; the debt is financed by selling bonds. 
B)  a long-term concept; the debt is a short-term concept. 
C)  the difference between the size of the debt and the amount of government revenues in a given year. 
D)  the estimated revenue shortfall; the debt is the actual revenue shortfall. 
E)  the difference between expenditures and revenues; the debt is the total amount owed by the government.

Question 17

The United States' national debt

Accepted Answer

A)  is approximately $100 billion. 
B)  is the amount the government owes foreign nations. 
C)  has been declining in absolute terms since World War II. 
D)  is composed of bonds, notes, and other government I.O.U.s of various kinds. 
E)  has been steadily increasing in relation to national output since World War II. 
A)  is approximately $100 billion. 
B)  is the amount the government owes foreign nations. 
C)  has been declining in absolute terms since World War II. 
D)  is composed of bonds, notes, and other government I.O.U.s of various kinds. 
E)  has been steadily increasing in relation to national output since World War II.

Question 18

The idea that an economy experiencing considerable unemployment and government deficit spending may increase output,which in turn may increase investment,is called the crowding-________ effect.

Accepted Answer

A)  out 
B)  through 
C)  over 
D)  in 
E)  under 
A)  out 
B)  through 
C)  over 
D)  in 
E)  under

Question 19

The Senate committee that considers major tax legislation before it goes to the entire Senate is the ________ Committee.

Accepted Answer

A)  Ways and Means 
B)  Finance 
C)  Tax Analysis 
D)  Tax Legislation 
E)  Senate Budget 
A)  Ways and Means 
B)  Finance 
C)  Tax Analysis 
D)  Tax Legislation 
E)  Senate Budget

Question 20

Which agency of the executive branch of the government is primarily responsible for preparing the budget proposal?

Accepted Answer

A)  General Accounting Office 
B)  Treasury Department 
C)  Office of Management and Budget 
D)  Congressional Budget Office 
E)  Internal Revenue Service 
A)  General Accounting Office 
B)  Treasury Department 
C)  Office of Management and Budget 
D)  Congressional Budget Office 
E)  Internal Revenue Service

Exam 24: Surpluses,deficits,public Debt,and the Federal Budget

If government revenues fall short of expenditures,the difference can be financed by

If the actual federal budget shows a deficit but the structural budget deficit is falling,economists would conclude that

In general,appropriate fiscal policy would involve a budget

In addition to annually and cyclically balanced budget policies,a third approach argues that the government's budget should be

The federal budget is

If the structural deficit shows a surplus

Large federal government budget deficits financed by foreign lenders tend to

Approximately what share of the U.S.public debt is held by federal government agencies and NOT held by the public?

The popularity of the annually balanced budget policy has increased in recent decades because of a

During the Clinton administration,fiscal policy was

Some opposed to using federal budget surpluses to cut taxes argue that

About what percentage of national output does the United States' current national debt represent?

If the actual federal budget shows a deficit but the structural budget deficit is falling,most economists would attribute the deficit in the actual budget to

The fiscal policy recommendations of the Reagan administration generally advocated

According to the textbook discussion,the principal way in which one generation can impose a debt burden on succeeding generations is by

The difference between the budget deficit and the national debt is that the deficit is

The United States' national debt

The idea that an economy experiencing considerable unemployment and government deficit spending may increase output,which in turn may increase investment,is called the crowding-________ effect.

The Senate committee that considers major tax legislation before it goes to the entire Senate is the ________ Committee.

Which agency of the executive branch of the government is primarily responsible for preparing the budget proposal?

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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