Question 1

Under a balanced budget policy, a sharp rise in GDP will cause

Accepted Answer

A) no serious budget changes. 
B) a tax cut or an increase in expenditures. 
C) a tax increase or expenditure cut. 
D) tax receipts to exceed government expenditures. 
A) no serious budget changes. 
B) a tax cut or an increase in expenditures. 
C) a tax increase or expenditure cut. 
D) tax receipts to exceed government expenditures.

Question 2

Monetizing deficits has lead to serious inflation in

Accepted Answer

A) the United States. 
B) Canada. 
C) the United Kingdom. 
D) Russia, Latin America, and Israel. 
E) All of the above are correct. 
A) the United States. 
B) Canada. 
C) the United Kingdom. 
D) Russia, Latin America, and Israel. 
E) All of the above are correct.

Question 3

The primary conclusion of using inflation accounting is that inflation

Accepted Answer

A) distorts the tax system, and results in slower economic growth. 
B) reduces the national debt to its nominal value instead of its real value. 
C) causes recessions, and increases the structural deficit. 
D) distorts government budget accounting by exaggerating interest expense. 
A) distorts the tax system, and results in slower economic growth. 
B) reduces the national debt to its nominal value instead of its real value. 
C) causes recessions, and increases the structural deficit. 
D) distorts government budget accounting by exaggerating interest expense.

Question 4

When (if at all) are budget deficits inflationary?

Accepted Answer

A) when AS is perfectly horizontal 
B) when AS has a very steep slope 
C) when AS has a downward slope 
D) when AS intersects AD 
A) when AS is perfectly horizontal 
B) when AS has a very steep slope 
C) when AS has a downward slope 
D) when AS intersects AD

Question 5

Compared to the size of GDP in 2014, the net national debt was approximately

Accepted Answer

A) 10% as large. 
B) 33% as large. 
C) 60% as large. 
D) about twice as large. 
A) 10% as large. 
B) 33% as large. 
C) 60% as large. 
D) about twice as large.

Question 6

The national debt

Accepted Answer

A) is increased by budget surpluses. 
B) is the value of the government's indebtedness at a moment in time. 
C) exceeded $20 trillion in 2014. 
D) All of the above are correct. 
A) is increased by budget surpluses. 
B) is the value of the government's indebtedness at a moment in time. 
C) exceeded $20 trillion in 2014. 
D) All of the above are correct.

Question 7

When will the difference between the actual deficit and the structural deficit be the smallest?

Accepted Answer

A) in a major recession 
B) in an inflationary gap 
C) at full employment 
A) in a major recession 
B) in an inflationary gap 
C) at full employment

Question 8

If the Fed decides to keep interest rates low when there is a large budget deficit, economists conclude that the Fed is

Accepted Answer

A) monetizing the debt. 
B) neutralizing the effects of the deficit. 
C) correcting the deficit for inflation. 
D) resisting the effects of the deficit. 
A) monetizing the debt. 
B) neutralizing the effects of the deficit. 
C) correcting the deficit for inflation. 
D) resisting the effects of the deficit.

Question 9

Whether or not deficits create a burden depends on how and why the government incurred the deficits in the first place.Explain.

Accepted Answer

If the government runs deficits to fight

Question 10

To maintain a balanced budget during the sag in personal spending in 2008 could cause a

Accepted Answer

A) further increase in aggregate demand and inflation. 
B) further increase in aggregate demand and unemployment. 
C) further decrease in aggregate demand and a recession. 
D) further decrease in aggregate demand and inflation. 
A) further increase in aggregate demand and inflation. 
B) further increase in aggregate demand and unemployment. 
C) further decrease in aggregate demand and a recession. 
D) further decrease in aggregate demand and inflation.

Question 11

E.Carey Brown, an MIT economist, studied government deficits during the Great Depression and found that even though actual deficits were large, the structural deficit changed very little.Which of the following statements is consistent with this finding?

Accepted Answer

A) Fiscal policy did not work during the Depression. 
B) Fiscal policy made the Depression worse. 
C) Fiscal policy was not tried during the Depression. 
D) Fiscal policy improved the economy during the Depression. 
A) Fiscal policy did not work during the Depression. 
B) Fiscal policy made the Depression worse. 
C) Fiscal policy was not tried during the Depression. 
D) Fiscal policy improved the economy during the Depression.

Question 12

If the U.S.government decided to pay off the national debt by creating money, what would be the most likely effect?

Accepted Answer

A) a substantial reduction in real GDP 
B) a deflationary collapse 
C) rapid inflation 
D) an increase in the trade surplus 
A) a substantial reduction in real GDP 
B) a deflationary collapse 
C) rapid inflation 
D) an increase in the trade surplus

Question 13

If the national debt is owned by domestic citizens:

Accepted Answer

A) the debt will not have to be repaid. 
B) future interest payments transfer funds from one group of Americans to another. 
C) the debt will have to be repaid first to domestic creditors, then to foreign creditors. 
D) future interest payments will go to pay foreign debt first, then debt owed to American citizens. 
A) the debt will not have to be repaid. 
B) future interest payments transfer funds from one group of Americans to another. 
C) the debt will have to be repaid first to domestic creditors, then to foreign creditors. 
D) future interest payments will go to pay foreign debt first, then debt owed to American citizens.

Question 14

Between 2009 and 2013:

Accepted Answer

A) both the actual and the structural deficit fell substantially. 
B) both the actual and the structural deficit rose subtantially. 
C) the actual deficit rose, while the structural deficit fell substantially. 
D) the structural deficit rose, while the actual deficit fell substantially. 
A) both the actual and the structural deficit fell substantially. 
B) both the actual and the structural deficit rose subtantially. 
C) the actual deficit rose, while the structural deficit fell substantially. 
D) the structural deficit rose, while the actual deficit fell substantially.

Question 15

Under a balanced budget policy, a sharp decline in GDP will cause

Accepted Answer

A) no serious budget changes. 
B) a tax cut or an increase in expenditures. 
C) a tax increase or expenditure cut. 
D) tax receipts to exceed government expenditures. 
A) no serious budget changes. 
B) a tax cut or an increase in expenditures. 
C) a tax increase or expenditure cut. 
D) tax receipts to exceed government expenditures.

Question 16

The structural deficit/surplus budget

Accepted Answer

A) measures the federal budget deficit/surplus as if the economy were at full employment. 
B) measures the federal budget deficit/surplus as if the economy were in recession. 
C) measures the federal budget deficit/surplus as if the economy were suffering from high inflation. 
D) is used when structural unemployment is at a peak. 
A) measures the federal budget deficit/surplus as if the economy were at full employment. 
B) measures the federal budget deficit/surplus as if the economy were in recession. 
C) measures the federal budget deficit/surplus as if the economy were suffering from high inflation. 
D) is used when structural unemployment is at a peak.

Question 17

The budget deficits of the 1980s and early 1990s differ from others in the post-World War II era in that they were

Accepted Answer

A) a result of the Fed rather than a change in fiscal policy. 
B) temporary rather than structural, and pose no threat to the economy. 
C) not contracted to fight a war or end a recession. 
D) contracted as part of a program to plan the economy. 
A) a result of the Fed rather than a change in fiscal policy. 
B) temporary rather than structural, and pose no threat to the economy. 
C) not contracted to fight a war or end a recession. 
D) contracted as part of a program to plan the economy.

Question 18

How sensitive is the structural deficit to the state of the economy?

Accepted Answer

A) It is insensitive to the state of the economy. 
B) The structural deficit changes cyclically with the economy. 
C) Changes in the structural deficit trigger opposite swings in the economy. 
D) The structural deficit changes countercyclically with the economy. 
A) It is insensitive to the state of the economy. 
B) The structural deficit changes cyclically with the economy. 
C) Changes in the structural deficit trigger opposite swings in the economy. 
D) The structural deficit changes countercyclically with the economy.

Question 19

For which of the following time periods did the U.S.have a budget surplus?

Accepted Answer

A) 1990-1993 
B) 1998-2001 
C) 2003-2006 
D) The U.S.did not have a surplus in any of these time periods. 
A) 1990-1993 
B) 1998-2001 
C) 2003-2006 
D) The U.S.did not have a surplus in any of these time periods.

Question 20

From 2004 to 2008, the federal budget deficit, on an official fiscal-year basis was

Accepted Answer

A) large and growing larger. 
B) "negative," that is, the budget was in surplus. 
C) declining. 
D) increased by the rising Social Security deficit. 
A) large and growing larger. 
B) "negative," that is, the budget was in surplus. 
C) declining. 
D) increased by the rising Social Security deficit.

Exam 33: Budget Deficits in the Short and Long Run

Under a balanced budget policy, a sharp rise in GDP will cause

Monetizing deficits has lead to serious inflation in

The primary conclusion of using inflation accounting is that inflation

When (if at all) are budget deficits inflationary?

Compared to the size of GDP in 2014, the net national debt was approximately

The national debt

When will the difference between the actual deficit and the structural deficit be the smallest?

If the Fed decides to keep interest rates low when there is a large budget deficit, economists conclude that the Fed is

Whether or not deficits create a burden depends on how and why the government incurred the deficits in the first place.Explain.

To maintain a balanced budget during the sag in personal spending in 2008 could cause a

E.Carey Brown, an MIT economist, studied government deficits during the Great Depression and found that even though actual deficits were large, the structural deficit changed very little.Which of the following statements is consistent with this finding?

If the U.S.government decided to pay off the national debt by creating money, what would be the most likely effect?

If the national debt is owned by domestic citizens:

Between 2009 and 2013:

Under a balanced budget policy, a sharp decline in GDP will cause

The structural deficit/surplus budget

The budget deficits of the 1980s and early 1990s differ from others in the post-World War II era in that they were

How sensitive is the structural deficit to the state of the economy?

For which of the following time periods did the U.S.have a budget surplus?

From 2004 to 2008, the federal budget deficit, on an official fiscal-year basis was

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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