Question 1

Japanese Prime Minister Ryutaro Hashimoto was called the "Herbert Hoover of Japan" because he

Accepted Answer

A) looked like a very distinguished politician. 
B) advocated vast public works to combat unemployment. 
C) advocated budget deficit reduction in the midst of a recession. 
D) advocated easier monetary policy and lower interest rates to combat recession. 
A) looked like a very distinguished politician. 
B) advocated vast public works to combat unemployment. 
C) advocated budget deficit reduction in the midst of a recession. 
D) advocated easier monetary policy and lower interest rates to combat recession.

Question 2

By 2007 the deficit

Accepted Answer

A) was out of control and increased substantially soon thereafter. 
B) seemed under control but increased substantially soon thereafter. 
C) was out of control but decreased substantially soon thereafter. 
D) seemed under control and decreased substantially soon thereafter. 
A) was out of control and increased substantially soon thereafter. 
B) seemed under control but increased substantially soon thereafter. 
C) was out of control but decreased substantially soon thereafter. 
D) seemed under control and decreased substantially soon thereafter.

Question 3

National debt is likely to fall when

Accepted Answer

A) there is a succession of budget deficits. 
B) government's expenditure falls short of its receipts. 
C) government's expenditures exceed its receipts. 
D) government expenditure equals revenue. 
A) there is a succession of budget deficits. 
B) government's expenditure falls short of its receipts. 
C) government's expenditures exceed its receipts. 
D) government expenditure equals revenue.

Question 4

The net national debt is smaller than the gross national debt because

Accepted Answer

A) some debt is held by foreigners. 
B) some debt is held by U.S.citizens. 
C) some debt is held by government agencies. 
D) the government does not have to pay all of the debt. 
A) some debt is held by foreigners. 
B) some debt is held by U.S.citizens. 
C) some debt is held by government agencies. 
D) the government does not have to pay all of the debt.

Question 5

A chart of the ratio of national debt to GDP from 1915 to 2014 would show

Accepted Answer

A) a continuous decline. 
B) sharp increases from 1945 to 1975. 
C) significant increases from 1983 to 1994. 
D) significant decreases from 2003 to 2010. 
A) a continuous decline. 
B) sharp increases from 1945 to 1975. 
C) significant increases from 1983 to 1994. 
D) significant decreases from 2003 to 2010.

Question 6

The national debt is defined as the total

Accepted Answer

A) amount that U.S.citizens owe to foreigners. 
B) value that U.S.citizens borrow from foreigners during any time period. 
C) value of government's indebtedness at any moment in time. 
D) amount by which government's expenditures exceed receipts during any time period. 
A) amount that U.S.citizens owe to foreigners. 
B) value that U.S.citizens borrow from foreigners during any time period. 
C) value of government's indebtedness at any moment in time. 
D) amount by which government's expenditures exceed receipts during any time period.

Question 7

Proper inflation accounting is necessary to measure the size of the real deficit because

Accepted Answer

A) as a lender, the government gains from inflation. 
B) otherwise, the deficit is understated in inflationary times. 
C) the government is a borrower that pays back dollars of less real value in inflationary times. 
D) interest payments tend to fall in inflationary times. 
A) as a lender, the government gains from inflation. 
B) otherwise, the deficit is understated in inflationary times. 
C) the government is a borrower that pays back dollars of less real value in inflationary times. 
D) interest payments tend to fall in inflationary times.

Question 8

In the late 1990s, the more than expected increases in tax revenues were the result of

Accepted Answer

A) rapid economic growth. 
B) rapid increases in the national debt. 
C) rising rates of inflation, and therefore, nominal incomes. 
D) rising balance of trade surpluses and the import duties they generated. 
A) rapid economic growth. 
B) rapid increases in the national debt. 
C) rising rates of inflation, and therefore, nominal incomes. 
D) rising balance of trade surpluses and the import duties they generated.

Question 9

The actual deficit is a poor measure of the government fiscal policy because it changes independently of intentional government policies.

Accepted Answer

A) True 
 B)False

Question 10

Suppose that the economy is currently at full employment.All other things being equal, if the government implements expansionary fiscal policy, then the appropriate monetary policy is

Accepted Answer

A) no change from the current policy. 
B) reduce the growth of the money supply. 
C) constant growth of the money supply. 
D) increase the growth of the money supply. 
A) no change from the current policy. 
B) reduce the growth of the money supply. 
C) constant growth of the money supply. 
D) increase the growth of the money supply.

Question 11

Give some arguments for and against a balanced budget requirement.

Accepted Answer

A balanced budget requirement would elim

Question 12

Explain why the portion of the national debt owed to foreigners is a serious matter, whereas the portion owed to U.S.citizens is of less concern.Why does the U.S.national debt pose less of a problem than the debts of Greece in 2010?

Accepted Answer

The portion owed to foreigners will redu

Question 13

In actual practice, does the Fed monetize the debt?

Accepted Answer

A) No, it did not do so even with large deficits in the 1980s and early 2000s. 
B) No longer, although it monetized much of the deficit in the 1980s. 
C) Yes, although it monetizes less now than in the 1980s. 
D) Yes, it has monetized the deficit steadily since the early 1970s. 
A) No, it did not do so even with large deficits in the 1980s and early 2000s. 
B) No longer, although it monetized much of the deficit in the 1980s. 
C) Yes, although it monetizes less now than in the 1980s. 
D) Yes, it has monetized the deficit steadily since the early 1970s.

Question 14

If the President and Congress agree to balance the budget during a recession, then the appropriate monetary policy is

Accepted Answer

A) no change from the current policy. 
B) reduce the growth of the money supply. 
C) constant growth of the money supply. 
D) increase the growth of the money supply. 
A) no change from the current policy. 
B) reduce the growth of the money supply. 
C) constant growth of the money supply. 
D) increase the growth of the money supply.

Question 15

The Federal Reserve may choose to monetize the debt in order to

Accepted Answer

A) reduce the burden of the national debt. 
B) shift the supply curve of money outward. 
C) shift the demand curve for money inward. 
D) reduce the volume of reserves in commercial banks. 
A) reduce the burden of the national debt. 
B) shift the supply curve of money outward. 
C) shift the demand curve for money inward. 
D) reduce the volume of reserves in commercial banks.

Question 16

If the economy suffers a recession for reasons unrelated to fiscal policy, the deficit should rise and

Accepted Answer

A) inflation should fall. 
B) interest rates should fall. 
C) real GDP should fall. 
D) All of the above are correct. 
A) inflation should fall. 
B) interest rates should fall. 
C) real GDP should fall. 
D) All of the above are correct.

Question 17

Why does the government not have to repay debt, as do private individuals?

Accepted Answer

A) Because the government can ignore creditors and refuse payment. 
B) Because the government, as a dictatorship, is unresponsive to demands for repayment. 
C) Because the government has no debt, it owes it to itself. 
D) Because the government does not have a finite life, as do individuals. 
A) Because the government can ignore creditors and refuse payment. 
B) Because the government, as a dictatorship, is unresponsive to demands for repayment. 
C) Because the government has no debt, it owes it to itself. 
D) Because the government does not have a finite life, as do individuals.

Question 18

The Fed and the government are working against each other if, as the government cuts taxes to promote economic growth, the Fed

Accepted Answer

A) sells government securities. 
B) buys government securities. 
C) lowers the discount rate. 
D) lowers the prime rate. 
A) sells government securities. 
B) buys government securities. 
C) lowers the discount rate. 
D) lowers the prime rate.

Question 19

Define the following terms and explain their importance to the study of macroeconomics:
a.structural budget deficit
b.monetize the deficit
c.crowding out
d.inflation accounting
e.mix of fiscal and monetary policy

Accepted Answer

a.The structural budget deficit is the h

Question 20

Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?

Accepted Answer

A) Because it adjusts over the business cycle, and reflects the fiscal stimulus of policy. 
B) Because it changes when policy changes, rather than when the economy changes. 
C) Because it changes when monetary policy changes, reflecting the interest rate cost of debt. 
D) Because it adjusts automatically, rather than requiring specific legislation. 
A) Because it adjusts over the business cycle, and reflects the fiscal stimulus of policy. 
B) Because it changes when policy changes, rather than when the economy changes. 
C) Because it changes when monetary policy changes, reflecting the interest rate cost of debt. 
D) Because it adjusts automatically, rather than requiring specific legislation.

Exam 33: Budget Deficits in the Short and Long Run

Japanese Prime Minister Ryutaro Hashimoto was called the "Herbert Hoover of Japan" because he

By 2007 the deficit

National debt is likely to fall when

The net national debt is smaller than the gross national debt because

A chart of the ratio of national debt to GDP from 1915 to 2014 would show

The national debt is defined as the total

Proper inflation accounting is necessary to measure the size of the real deficit because

In the late 1990s, the more than expected increases in tax revenues were the result of

The actual deficit is a poor measure of the government fiscal policy because it changes independently of intentional government policies.

Suppose that the economy is currently at full employment.All other things being equal, if the government implements expansionary fiscal policy, then the appropriate monetary policy is

Give some arguments for and against a balanced budget requirement.

Explain why the portion of the national debt owed to foreigners is a serious matter, whereas the portion owed to U.S.citizens is of less concern.Why does the U.S.national debt pose less of a problem than the debts of Greece in 2010?

In actual practice, does the Fed monetize the debt?

If the President and Congress agree to balance the budget during a recession, then the appropriate monetary policy is

The Federal Reserve may choose to monetize the debt in order to

If the economy suffers a recession for reasons unrelated to fiscal policy, the deficit should rise and

Why does the government not have to repay debt, as do private individuals?

The Fed and the government are working against each other if, as the government cuts taxes to promote economic growth, the Fed

Define the following terms and explain their importance to the study of macroeconomics: a.structural budget deficit b.monetize the deficit c.crowding out d.inflation accounting e.mix of fiscal and monetary policy

Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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