Question 1

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) This is a trick question because 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) This is a trick question because there is no difference between the budget deficit and the national debt.

Question 2

When government debt is financed internally,future generations will

Accepted Answer

A) inherit a higher tax liability without additional interest income. 
B) inherit neither higher taxes nor additional interest income. 
C) inherit both higher taxes and additional interest income. 
D) receive lower interest income and a lower tax liability. 
A) inherit a higher tax liability without additional interest income. 
B) inherit neither higher taxes nor additional interest income. 
C) inherit both higher taxes and additional interest income. 
D) receive lower interest income and a lower tax liability.

Question 3

At year-end 2010,the national debt of the United States was approximately

Accepted Answer

A) 5 percent of GDP. 
B) 25 percent of GDP. 
C) 75 percent of GDP. 
D) 95 percent of GDP. 
A) 5 percent of GDP. 
B) 25 percent of GDP. 
C) 75 percent of GDP. 
D) 95 percent of GDP.

Question 4

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.

Question 5

Which of the following portions of the national debt impose a net interest burden on the federal government?

Accepted Answer

A) treasury bonds held by government agencies 
B) treasury bonds held by private investors 
C) treasury bonds held by the Federal Reserve system 
D) treasury bonds held in the Social Security Trust Fund 
A) treasury bonds held by government agencies 
B) treasury bonds held by private investors 
C) treasury bonds held by the Federal Reserve system 
D) treasury bonds held in the Social Security Trust Fund

Question 6

Which of the following is a valid concern about the national debt for a country whose debt is held entirely by its citizens?

Accepted Answer

A) The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit. 
B) Growth of the national debt will eventually lead to the bankruptcy of the government. 
C) When the debt comes due,future generations may be unable to pay it off. 
D) If the increases in the national debt reduce private expenditures on capital formation,future generations may have lower incomes because they will inherit a smaller stock of capital. 
A) The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit. 
B) Growth of the national debt will eventually lead to the bankruptcy of the government. 
C) When the debt comes due,future generations may be unable to pay it off. 
D) If the increases in the national debt reduce private expenditures on capital formation,future generations may have lower incomes because they will inherit a smaller stock of capital.

Question 7

Public choice analysis explains that

Accepted Answer

A) politicians have strong incentives to favor deficit finance over tax finance. 
B) policy makers believe the budget should be balanced except in times of war. 
C) the legislator who is a spending "watch dog" can save her constituents a substantial amount of tax money. 
D) given the way Congress operates,the apparent popularity of deficit financing is surprising. 
A) politicians have strong incentives to favor deficit finance over tax finance. 
B) policy makers believe the budget should be balanced except in times of war. 
C) the legislator who is a spending "watch dog" can save her constituents a substantial amount of tax money. 
D) given the way Congress operates,the apparent popularity of deficit financing is surprising.

Question 8

Which of the following is true of deficit spending and government debt?

Accepted Answer

A) The opportunity costs of government spending must be incurred today and cannot be passed on through deficit spending. 
B) Because of the national debt,future generations will incur liabilities without any corresponding benefits. 
C) Financing government spending with debt allows the government to pass the opportunity costs of government spending along to future generations. 
D) All of the public debt is owed to foreigners because the people who pay taxes are U.S.citizens. 
A) The opportunity costs of government spending must be incurred today and cannot be passed on through deficit spending. 
B) Because of the national debt,future generations will incur liabilities without any corresponding benefits. 
C) Financing government spending with debt allows the government to pass the opportunity costs of government spending along to future generations. 
D) All of the public debt is owed to foreigners because the people who pay taxes are U.S.citizens.

Question 9

A government with a national debt that is large and growing relative to the size of the economy will

Accepted Answer

A) eventually find it difficult to borrow in global credit markets. 
B) be able to borrow at lower interest rates than countries with less outstanding debt. 
C) have to allocate a large and growing amount of tax revenue to the payment of interest on the outstanding debt. 
D) do both a and c. 
A) eventually find it difficult to borrow in global credit markets. 
B) be able to borrow at lower interest rates than countries with less outstanding debt. 
C) have to allocate a large and growing amount of tax revenue to the payment of interest on the outstanding debt. 
D) do both a and c.

Question 10

In 2009,the privately held federal debt was approximately what percent of GDP?

Accepted Answer

A) 11 percent 
B) 31 percent 
C) 57 percent 
D) 100 percent 
A) 11 percent 
B) 31 percent 
C) 57 percent 
D) 100 percent

Question 11

The table below shows the revenues and expenditures for a new country during its first three years of existence.Use this data to answer the following question(s).
Table ST8-1
  
-Refer to Table ST8-1.Which of the following is correct regarding this government?

Accepted Answer

A) In the third year,it had a $50 national debt and ran a $30 deficit. 
B) In the third year,it ran a $50 deficit and its national debt after the third year was $60. 
C) In the third year,it ran a $50 surplus and its national debt after the third year was $30. 
D) In the third year,it ran a $50 deficit and its national debt after the third year was $30. 
A) In the third year,it had a $50 national debt and ran a $30 deficit. 
B) In the third year,it ran a $50 deficit and its national debt after the third year was $60. 
C) In the third year,it ran a $50 surplus and its national debt after the third year was $30. 
D) In the third year,it ran a $50 deficit and its national debt after the third year was $30.

Question 12

If the U.S.government were to run a substantial budget deficit,what would be the effects on the economy under the new classical view?

Accepted Answer

According to the new classical view,peop

Question 13

Why are the bonds held by the Fed and government agencies excluded from the privately held debt figures?

Accepted Answer

A) The U.S.Treasury does not have to pay off these bonds. 
B) These bonds were not issued by the Treasury. 
C) These bonds do not represent a net-interest obligation of the government. 
D) These bonds are not interest-bearing bonds. 
A) The U.S.Treasury does not have to pay off these bonds. 
B) These bonds were not issued by the Treasury. 
C) These bonds do not represent a net-interest obligation of the government. 
D) These bonds are not interest-bearing bonds.

Question 14

Indicate what might be done to restrain the tendency of the democratic process to generate budget deficits?

Accepted Answer

A balanced-budget amendment to the Const

Question 15

As baby-boomers reach retirement age and draw on Social Security and Medicare,

Accepted Answer

A) the Social Security Trust Fund will switch from running a deficit to a surplus. 
B) unfunded promises included in the federal budget will decrease. 
C) expenditures on these programs will increase the size of the federal debt. 
D) the federal debt as a share of GDP will decrease. 
A) the Social Security Trust Fund will switch from running a deficit to a surplus. 
B) unfunded promises included in the federal budget will decrease. 
C) expenditures on these programs will increase the size of the federal debt. 
D) the federal debt as a share of GDP will decrease.

Question 16

Widespread acceptance of the Keynesian theory of fiscal policy

Accepted Answer

A) caused most economists to reject the public choice view of budget deficits. 
B) relaxed the political pressure to balance the budget and,hence,paved the way for the persistent budget deficits of the last five decades. 
C) was based on the view that continual budget deficits would help stabilize the economy. 
D) increased the pressure for a constitutional amendment mandating that the federal government balance its budget. 
A) caused most economists to reject the public choice view of budget deficits. 
B) relaxed the political pressure to balance the budget and,hence,paved the way for the persistent budget deficits of the last five decades. 
C) was based on the view that continual budget deficits would help stabilize the economy. 
D) increased the pressure for a constitutional amendment mandating that the federal government balance its budget.

Question 17

As conventionally measured,budget deficit and surplus calculations include the revenues and expenditures of

Accepted Answer

A) only current government operations;government trust funds are omitted. 
B) all government trust funds except Social Security. 
C) the Social Security Trust Fund,but other government trust funds are omitted. 
D) all government trust funds,including Social Security. 
A) only current government operations;government trust funds are omitted. 
B) all government trust funds except Social Security. 
C) the Social Security Trust Fund,but other government trust funds are omitted. 
D) all government trust funds,including Social Security.

Question 18

If the federal government were to run a budget surplus,this would

Accepted Answer

A) increase the size of the national debt. 
B) reduce the size of the national debt. 
C) leave the size of the national debt unchanged. 
D) decrease the national debt only if the government also reduces the supply of money. 
A) increase the size of the national debt. 
B) reduce the size of the national debt. 
C) leave the size of the national debt unchanged. 
D) decrease the national debt only if the government also reduces the supply of money.

Question 19

The external debt is the portion of the national debt

Accepted Answer

A) owned by foreigners. 
B) owned by the public instead of the Fed. 
C) owned by any party other than the Treasury Department. 
D) attributable to off-budget federal programs. 
A) owned by foreigners. 
B) owned by the public instead of the Fed. 
C) owned by any party other than the Treasury Department. 
D) attributable to off-budget federal programs.

Question 20

Which of the following is a valid concern about the national debt for a country whose debt is held entirely by its citizens?

Accepted Answer

A) The welfare of future generations will be directly related to the per capita size of the national debt that they inherit. 
B) Growth of the national debt will eventually lead to the bankruptcy of the government. 
C) When the debt comes due,future generations may be unable to pay it off. 
D) If the increases in the national debt reduce private expenditures on capital formation,future generations may have lower incomes because they will inherit a smaller stock of capital. 
A) The welfare of future generations will be directly related to the per capita size of the national debt that they inherit. 
B) Growth of the national debt will eventually lead to the bankruptcy of the government. 
C) When the debt comes due,future generations may be unable to pay it off. 
D) If the increases in the national debt reduce private expenditures on capital formation,future generations may have lower incomes because they will inherit a smaller stock of capital.

Exam 36: The Federal Budget and the National Debt

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

When government debt is financed internally,future generations will

At year-end 2010,the national debt of the United States was approximately

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

Which of the following portions of the national debt impose a net interest burden on the federal government?

Which of the following is a valid concern about the national debt for a country whose debt is held entirely by its citizens?

Public choice analysis explains that

Which of the following is true of deficit spending and government debt?

A government with a national debt that is large and growing relative to the size of the economy will

In 2009,the privately held federal debt was approximately what percent of GDP?

The table below shows the revenues and expenditures for a new country during its first three years of existence.Use this data to answer the following question(s). Table ST8-1 -Refer to Table ST8-1.Which of the following is correct regarding this government?

If the U.S.government were to run a substantial budget deficit,what would be the effects on the economy under the new classical view?

Why are the bonds held by the Fed and government agencies excluded from the privately held debt figures?

Indicate what might be done to restrain the tendency of the democratic process to generate budget deficits?

As baby-boomers reach retirement age and draw on Social Security and Medicare,

Widespread acceptance of the Keynesian theory of fiscal policy

As conventionally measured,budget deficit and surplus calculations include the revenues and expenditures of

If the federal government were to run a budget surplus,this would

The external debt is the portion of the national debt

Which of the following is a valid concern about the national debt for a country whose debt is held entirely by its citizens?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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