Question 1

Which of the following categories constitutes the majority of federal outlays in 2017?

Accepted Answer

A)  national defense 
B)  interest on the federal debt 
C)  Social Security, Medicare, and welfare 
D)  grants to states and localities 
E)  capital expenditures 
A)  national defense 
B)  interest on the federal debt 
C)  Social Security, Medicare, and welfare 
D)  grants to states and localities 
E)  capital expenditures

Question 2

Which of the following statements about the tax cut enacted in 1981 is correct?

Accepted Answer

A)  The tax cut caused the recession of 1982. 
B)  The tax cut and the recession of 1982 combined to produce one of the largest peacetime deficits ever experienced up to that time. 
C)  The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982. 
D)  The tax cut was opposed by supply-side economists. 
E)  The tax cut was favored by Congress but opposed by the president and passed over his veto. 
A)  The tax cut caused the recession of 1982. 
B)  The tax cut and the recession of 1982 combined to produce one of the largest peacetime deficits ever experienced up to that time. 
C)  The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982. 
D)  The tax cut was opposed by supply-side economists. 
E)  The tax cut was favored by Congress but opposed by the president and passed over his veto.

Question 3

A(n) _____ provides guaranteed benefits for those who qualify under government transfer programs such as Social Security or Medicare.

Accepted Answer

A)  entitlement program 
B)  excise tax 
C)  continuing resolution 
D)  biennial budget 
E)  employment benefits program 
A)  entitlement program 
B)  excise tax 
C)  continuing resolution 
D)  biennial budget 
E)  employment benefits program

Question 4

Which of the following reasons for maintaining federal budget deficits is inaccurate?

Accepted Answer

A)  Deficits boost domestic saving, which in the long run could promote economic growth. 
B)  Deficits help reduce the size and duration of recessions through automatic stabilizers. 
C)  Deficits are used to finance capital projects. 
D)  Public spending through deficit financing wins support from voters. 
E)  A federal budget deficit stimulates aggregate demand. 
A)  Deficits boost domestic saving, which in the long run could promote economic growth. 
B)  Deficits help reduce the size and duration of recessions through automatic stabilizers. 
C)  Deficits are used to finance capital projects. 
D)  Public spending through deficit financing wins support from voters. 
E)  A federal budget deficit stimulates aggregate demand.

Question 5

How much do American citizens own of the U.S. federal debt?

Accepted Answer

A)  about 60 percent 
B)  about 40 percent 
C)  about 20 percent 
D)  about 10 percent 
E)  none 
A)  about 60 percent 
B)  about 40 percent 
C)  about 20 percent 
D)  about 10 percent 
E)  none

Question 6

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

Accepted Answer

A)  deficit is a stock variable and the debt is a flow variable. 
B)  deficit is a flow variable and the debt is a stock variable. 
C)  debt includes interest payments and the deficit does not. 
D)  deficit can be positive, but the debt cannot. 
E)  debt can be negative, but the deficit cannot. 
A)  deficit is a stock variable and the debt is a flow variable. 
B)  deficit is a flow variable and the debt is a stock variable. 
C)  debt includes interest payments and the deficit does not. 
D)  deficit can be positive, but the debt cannot. 
E)  debt can be negative, but the deficit cannot.

Question 7

In the short run, a surplus federal budget _____

Accepted Answer

A)  reduces national saving. 
B)  reduces domestic saving. 
C)  stimulates aggregate demand. 
D)  inhibits economic growth in the long run. 
E)  reduces the federal debt. 
A)  reduces national saving. 
B)  reduces domestic saving. 
C)  stimulates aggregate demand. 
D)  inhibits economic growth in the long run. 
E)  reduces the federal debt.

Question 8

The opportunity cost of deficit spending is likely to be low _____

Accepted Answer

A)  only when it creates new physical capital. 
B)  only when it creates new human capital. 
C)  only when it improves existing physical capital. 
D)  only when it improves existing human capital. 
E)  when it creates or improves physical or human capital. 
A)  only when it creates new physical capital. 
B)  only when it creates new human capital. 
C)  only when it improves existing physical capital. 
D)  only when it improves existing human capital. 
E)  when it creates or improves physical or human capital.

Question 9

Automatic cuts to certain categories of federal spending between 2012 and 2021 to slow spending growth are known as _____

Accepted Answer

A)  an annually balanced budget. 
B)  a cyclically balanced budget. 
C)  crowding out. 
D)  crowding in. 
E)  sequestration. 
A)  an annually balanced budget. 
B)  a cyclically balanced budget. 
C)  crowding out. 
D)  crowding in. 
E)  sequestration.

Question 10

In the 1980s, tax rates were cut, government revenues fell below expectations, and there was a then-historic peacetime deficit.

Accepted Answer

A) True 
 B)False

Question 11

Suppose government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200. Which of the following is true in this case?

Accepted Answer

A)  Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume. 
B)  The budget deficit will increase by $200. 
C)  The budget deficit will increase by $400. 
D)  The budget deficit will decrease as the economy expands. 
E)  There will be no change in the budget deficit. 
A)  Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume. 
B)  The budget deficit will increase by $200. 
C)  The budget deficit will increase by $400. 
D)  The budget deficit will decrease as the economy expands. 
E)  There will be no change in the budget deficit.

Question 12

Prior to the Great Depression, deficits built during wars were _____

Accepted Answer

A)  continuing, because military spending increased after a war, but tax revenue did not. 
B)  continuing, because military spending dropped after a war, but tax revenue did not. 
C)  self-correcting, because military spending dropped after a war, but tax revenue did not. 
D)  self-correcting, because military spending increased after a war, but tax revenue did not. 
E)  nonexistent, either during war or peacetime. 
A)  continuing, because military spending increased after a war, but tax revenue did not. 
B)  continuing, because military spending dropped after a war, but tax revenue did not. 
C)  self-correcting, because military spending dropped after a war, but tax revenue did not. 
D)  self-correcting, because military spending increased after a war, but tax revenue did not. 
E)  nonexistent, either during war or peacetime.

Question 13

Sequestration refers to _____

Accepted Answer

A)  an increase in the tax rates for high-income households. 
B)  automatic cuts to certain categories of federal spending to slow spending growth. 
C)  low interest rates that crowded out private investment. 
D)  discretionary tax cuts and greater outlays on unemployment benefits. 
E)  greater outlays on national defense spending. 
A)  an increase in the tax rates for high-income households. 
B)  automatic cuts to certain categories of federal spending to slow spending growth. 
C)  low interest rates that crowded out private investment. 
D)  discretionary tax cuts and greater outlays on unemployment benefits. 
E)  greater outlays on national defense spending.

Question 14

Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.

Accepted Answer

A) True 
 B)False

Question 15

An annually balanced budget can only be met if automatic stabilizers are effective.

Accepted Answer

A) True 
 B)False

Question 16

If automatic stabilizers are creating budget deficits, the economy must be experiencing a decrease in output.

Accepted Answer

A) True 
 B)False

Question 17

Increasing U.S. trade deficits result in _____

Accepted Answer

A)  federal budget surpluses. 
B)  increased U.S. savings. 
C)  reduced purchases of U.S. government bonds by people in other countries. 
D)  the accumulation of dollars overseas. 
E)  increased U.S. investment abroad. 
A)  federal budget surpluses. 
B)  increased U.S. savings. 
C)  reduced purchases of U.S. government bonds by people in other countries. 
D)  the accumulation of dollars overseas. 
E)  increased U.S. investment abroad.

Question 18

Interest payments in the United States increased during the 1980s because of _____

Accepted Answer

A)  growing federal deficits. 
B)  a low tax rate. 
C)  growing budget surpluses. 
D)  a fall in government expenditure. 
E)  an increase in national savings. 
A)  growing federal deficits. 
B)  a low tax rate. 
C)  growing budget surpluses. 
D)  a fall in government expenditure. 
E)  an increase in national savings.

Question 19

If a budget is cyclically balanced, the government should run a surplus when the economy experiences an expansionary gap.

Accepted Answer

A) True 
 B)False

Question 20

A federal budget deficit _____

Accepted Answer

A)  stimulates aggregate supply. 
B)  reduces federal debt. 
C)  boosts economic growth. 
D)  reduces national saving. 
E)  boosts domestic saving. 
A)  stimulates aggregate supply. 
B)  reduces federal debt. 
C)  boosts economic growth. 
D)  reduces national saving. 
E)  boosts domestic saving.

Which of the following categories constitutes the majority of federal outlays in 2017?

Which of the following statements about the tax cut enacted in 1981 is correct?

A(n) _____ provides guaranteed benefits for those who qualify under government transfer programs such as Social Security or Medicare.

Which of the following reasons for maintaining federal budget deficits is inaccurate?

How much do American citizens own of the U.S. federal debt?

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

In the short run, a surplus federal budget _____

The opportunity cost of deficit spending is likely to be low _____

Automatic cuts to certain categories of federal spending between 2012 and 2021 to slow spending growth are known as _____

In the 1980s, tax rates were cut, government revenues fell below expectations, and there was a then-historic peacetime deficit.

Suppose government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200. Which of the following is true in this case?

Prior to the Great Depression, deficits built during wars were _____

Sequestration refers to _____

Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.

An annually balanced budget can only be met if automatic stabilizers are effective.

If automatic stabilizers are creating budget deficits, the economy must be experiencing a decrease in output.

Increasing U.S. trade deficits result in _____

Interest payments in the United States increased during the 1980s because of _____

If a budget is cyclically balanced, the government should run a surplus when the economy experiences an expansionary gap.

A federal budget deficit _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters

Exam 12: Federal Budgets and Public Policy.

Which of the following categories constitutes the majority of federal outlays in 2017?

Which of the following statements about the tax cut enacted in 1981 is correct?

A(n) _____ provides guaranteed benefits for those who qualify under government transfer programs such as Social Security or Medicare.

Which of the following reasons for maintaining federal budget deficits is inaccurate?

How much do American citizens own of the U.S. federal debt?

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

In the short run, a surplus federal budget _____

The opportunity cost of deficit spending is likely to be low _____

Automatic cuts to certain categories of federal spending between 2012 and 2021 to slow spending growth are known as _____

In the 1980s, tax rates were cut, government revenues fell below expectations, and there was a then-historic peacetime deficit.

Suppose government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200. Which of the following is true in this case?

Prior to the Great Depression, deficits built during wars were _____

Sequestration refers to _____

Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.

An annually balanced budget can only be met if automatic stabilizers are effective.

If automatic stabilizers are creating budget deficits, the economy must be experiencing a decrease in output.

Increasing U.S. trade deficits result in _____

Interest payments in the United States increased during the 1980s because of _____

If a budget is cyclically balanced, the government should run a surplus when the economy experiences an expansionary gap.

A federal budget deficit _____

The Art and Science of Economic Analysis.

Economic Tools and Economic Systems.

Economic Decision Makers.

Demand, Supply, and Markets.

Introduction to Macroeconomics.

Tracking the U. S. Economy.

Unemployment and Inflation.

Productivity and Growth.

Aggregate Demand.

Aggregate Supply.

Fiscal Policy.

Money and the Financial System.

Banking and the Money Supply.

Monetary Theory and Policy.

Macro Policy Debate: Active or Passive?

International Trade.

International Finance.

Economic Development.

Filters