Question 1

If a country with a large government debt uses money creation to service and repay the debt,this will lead to

Accepted Answer

A) lower interest rates. 
B) an appreciation of the nation's currency in the foreign exchange market. 
C) inflation,higher interest rates,and a financial crisis. 
D) rapid economic growth,as the expansionary monetary policy stimulates the economy and generates the additional tax revenue to service the larger debt. 
A) lower interest rates. 
B) an appreciation of the nation's currency in the foreign exchange market. 
C) inflation,higher interest rates,and a financial crisis. 
D) rapid economic growth,as the expansionary monetary policy stimulates the economy and generates the additional tax revenue to service the larger debt.

Question 2

External debt is that portion of the national debt

Accepted Answer

A) owed to investors outside the United States (foreign investors). 
B) owed to the Federal Reserve system. 
C) that the U.S.does not intend to repay. 
D) owed to U.S.citizens and corporations. 
A) owed to investors outside the United States (foreign investors). 
B) owed to the Federal Reserve system. 
C) that the U.S.does not intend to repay. 
D) owed to U.S.citizens and corporations.

Question 3

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 continual budget deficits of recent 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 continual budget deficits of recent 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 4

The large budget deficits of 2001-2011 were

Accepted Answer

A) financed entirely through borrowing from domestic sources. 
B) accompanied by a rapid increase in private investment,which will enhance the welfare of future generations of Americans. 
C) accompanied by an increase in consumption as a share of GDP,which indicates the current generation of Americans is gaining at the expense of future generations. 
D) accompanied by large trade surpluses,which will enhance the welfare of future generations of Americans. 
A) financed entirely through borrowing from domestic sources. 
B) accompanied by a rapid increase in private investment,which will enhance the welfare of future generations of Americans. 
C) accompanied by an increase in consumption as a share of GDP,which indicates the current generation of Americans is gaining at the expense of future generations. 
D) accompanied by large trade surpluses,which will enhance the welfare of future generations of Americans.

Question 5

The national debt is

Accepted Answer

A) the difference between a nation's exports and imports of goods and services. 
B) the sum of the personal debt of all citizens in the United States. 
C) the cumulative effect of all past budget deficits and surpluses of the federal government. 
D) equal to the current size of the budget deficit. 
A) the difference between a nation's exports and imports of goods and services. 
B) the sum of the personal debt of all citizens in the United States. 
C) the cumulative effect of all past budget deficits and surpluses of the federal government. 
D) equal to the current size of the budget deficit.

Question 6

The idea that a large public debt is "mortgaging the future of our children and grandchildren" is misleading because

Accepted Answer

A) it is the Federal Reserve that will be responsible for making interest payments on the debt. 
B) future generations will have to bear the opportunity costs of the resources that are used today. 
C) future generations will not owe any interest obligations on the debt. 
D) future generations will inherit interest payments along with interest obligations. 
A) it is the Federal Reserve that will be responsible for making interest payments on the debt. 
B) future generations will have to bear the opportunity costs of the resources that are used today. 
C) future generations will not owe any interest obligations on the debt. 
D) future generations will inherit interest payments along with interest obligations.

Question 7

Many people assert that the national debt is not a problem because "we owe it to ourselves." Is this true?

Accepted Answer

This idea is only True in a limited sens

Question 8

If the federal government runs a budget deficit,and the budget deficit as a percent of GDP is equal to the growth rate of real output,the

Accepted Answer

A) national debt will decrease as a share of GDP. 
B) national debt will remain a constant share of GDP. 
C) national debt will increase as a share of GDP. 
D) size of the national debt (in dollar value)will decline. 
A) national debt will decrease as a share of GDP. 
B) national debt will remain a constant share of GDP. 
C) national debt will increase as a share of GDP. 
D) size of the national debt (in dollar value)will decline.

Question 9

During 2009 and 2010,the federal government financed approximately ______ percent of its spending through borrowing.(Fill in the blank)

Accepted Answer

A) 20 
B) 30 
C) 40 
D) 60 
A) 20 
B) 30 
C) 40 
D) 60

Question 10

The new classical view of fiscal policy holds that

Accepted Answer

A) budget deficits will stimulate consumption. 
B) budget deficits will decrease the saving rate. 
C) individuals fail to recognize that debt-financing implies higher future taxes. 
D) individuals fully anticipate the added tax liability implied by the debt financing and will increase their saving so they can meet this obligation. 
A) budget deficits will stimulate consumption. 
B) budget deficits will decrease the saving rate. 
C) individuals fail to recognize that debt-financing implies higher future taxes. 
D) individuals fully anticipate the added tax liability implied by the debt financing and will increase their saving so they can meet this obligation.

Question 11

During the 1950s and 1960s,the national debt as a percent of GDP in the United States

Accepted Answer

A) soared to an all-time high. 
B) declined. 
C) increased. 
D) was virtually unchanged. 
A) soared to an all-time high. 
B) declined. 
C) increased. 
D) was virtually unchanged.

Question 12

The privately held government debt is that portion of the national debt that

Accepted Answer

A) must be paid off at some point in the future. 
B) is owed to domestic and foreign investors. 
C) cannot be refinanced by issuing new debt. 
D) is owned by agencies of the federal government. 
A) must be paid off at some point in the future. 
B) is owed to domestic and foreign investors. 
C) cannot be refinanced by issuing new debt. 
D) is owned by agencies of the federal government.

Question 13

Which country had the lowest government debt as a percent of GDP in 2009?

Accepted Answer

A) United States 
B) Spain 
C) United Kingdom 
D) Australia 
A) United States 
B) Spain 
C) United Kingdom 
D) Australia

Question 14

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.In the second year,this country

Accepted Answer

A) ran a surplus of $20. 
B) ran a surplus of $30. 
C) had a deficit of $20. 
D) had a deficit of $30. 
A) ran a surplus of $20. 
B) ran a surplus of $30. 
C) had a deficit of $20. 
D) had a deficit of $30.

Question 15

If the federal government were to run a budget deficit,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) increase the national debt only if the government also expands 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) increase the national debt only if the government also expands the supply of money.

Question 16

Which of the following is true?

Accepted Answer

A) A budget deficit will reduce the national debt. 
B) A budget deficit will increase the national debt. 
C) A balanced budget will increase the national debt. 
D) A budget surplus will increase the national debt. 
A) A budget deficit will reduce the national debt. 
B) A budget deficit will increase the national debt. 
C) A balanced budget will increase the national debt. 
D) A budget surplus will increase the national debt.

Question 17

If a budget deficit as a percent of GDP is greater than the growth of real output,the national debt will

Accepted Answer

A) decrease relative to the size of the economy. 
B) decrease in nominal terms. 
C) increase in nominal terms but decrease relative to the size of the economy. 
D) increase relative to the size of the economy. 
A) decrease relative to the size of the economy. 
B) decrease in nominal terms. 
C) increase in nominal terms but decrease relative to the size of the economy. 
D) increase relative to the size of the economy.

Exam 36: The Federal Budget and the National Debt

If a country with a large government debt uses money creation to service and repay the debt,this will lead to

External debt is that portion of the national debt

Widespread acceptance of the Keynesian theory of fiscal policy

The large budget deficits of 2001-2011 were

The national debt is

The idea that a large public debt is "mortgaging the future of our children and grandchildren" is misleading because

Many people assert that the national debt is not a problem because "we owe it to ourselves." Is this true?

If the federal government runs a budget deficit,and the budget deficit as a percent of GDP is equal to the growth rate of real output,the

During 2009 and 2010,the federal government financed approximately ______ percent of its spending through borrowing.(Fill in the blank)

The new classical view of fiscal policy holds that

During the 1950s and 1960s,the national debt as a percent of GDP in the United States

The privately held government debt is that portion of the national debt that

Which country had the lowest government debt as a percent of GDP in 2009?

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.In the second year,this country

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

Which of the following is true?

If a budget deficit as a percent of GDP is greater than the growth of real output,the national debt will

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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