Question 1

Regarding structural deficits, which of the following assertions is true?

Accepted Answer

A) ​The structural deficit depends on the state of the economy. 
B) ​The structural deficit is basded on actual expenditures and receipts. 
C) ​The structural deficit change only when policy changes. 
D) ​The structural deficit changes when GDP changes. 
A) ​The structural deficit depends on the state of the economy. 
B) ​The structural deficit is basded on actual expenditures and receipts. 
C) ​The structural deficit change only when policy changes. 
D) ​The structural deficit changes when GDP changes.

Question 2

Which of the following is expected to increase aggregate demand in the short run?

Accepted Answer

A) Deficit budget 
B) Surplus budget 
C) Zero based budget 
D) Balanced budget 
A) Deficit budget 
B) Surplus budget 
C) Zero based budget 
D) Balanced budget

Question 3

Figure 16-2
  
-Assume that a contractionary monetary policy has shifted the aggregate demand curve in Figure 16-2 from D₀D₀ to D₁D₁.Fiscal authorities who wish to restore real GDP to the full-employment level will

Accepted Answer

A) run a budget surplus by increasing taxes or cutting government spending. 
B) run a balanced budget to prevent the interest rate from rising and cutting off investment. 
C) run a budget deficit by cutting taxes or increasing government spending. 
D) ignore the change in monetary policy since it has no effect on fiscal policy. 
A) run a budget surplus by increasing taxes or cutting government spending. 
B) run a balanced budget to prevent the interest rate from rising and cutting off investment. 
C) run a budget deficit by cutting taxes or increasing government spending. 
D) ignore the change in monetary policy since it has no effect on fiscal policy.

Question 4

Which of the following statements about the national debt has the most validity?

Accepted Answer

A) Our large national debt can bankrupt the nation. 
B) If only Americans hold the debt, then payments of interest and principal are simply transfers from some Americans to other Americans. 
C) Our large national debt can lead to subjection by the people (especially foreigners) who hold the debt. 
D) The national debt represents a burden to future generations who will have to make huge payments of interest and principal. 
A) Our large national debt can bankrupt the nation. 
B) If only Americans hold the debt, then payments of interest and principal are simply transfers from some Americans to other Americans. 
C) Our large national debt can lead to subjection by the people (especially foreigners) who hold the debt. 
D) The national debt represents a burden to future generations who will have to make huge payments of interest and principal.

Question 5

Budget deficits are inflationary when

Accepted Answer

A) the Federal Reserve contracts the money supply. 
B) the economy has lots of slack and the aggregate supply curve is horizontal. 
C) the economy is at full employment and the aggregate supply curve is vertical. 
D) private citizens buy the bonds to finance the debt. 
A) the Federal Reserve contracts the money supply. 
B) the economy has lots of slack and the aggregate supply curve is horizontal. 
C) the economy is at full employment and the aggregate supply curve is vertical. 
D) private citizens buy the bonds to finance the debt.

Question 6

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

Accepted Answer

A) a budget surplus and expansionary monetary policy 
B) a budget deficit and expansionary monetary policy 
C) a budget deficit and contractionary monetary policy 
D) a budget surplus and contractionary monetary policy 
A) a budget surplus and expansionary monetary policy 
B) a budget deficit and expansionary monetary policy 
C) a budget deficit and contractionary monetary policy 
D) a budget surplus and contractionary monetary policy

Question 7

The official fiscal year budget deficits disappeared from 1998 to 2001.

Accepted Answer

A) True 
 B)False

Question 8

Between the years of 2001 and 2003, what happened to the structural deficit?

Accepted Answer

A) It declined rapidly. 
B) It fell steadily. 
C) It increased steadily. 
D) It remained fairly constant. 
A) It declined rapidly. 
B) It fell steadily. 
C) It increased steadily. 
D) It remained fairly constant.

Question 9

Since the debt is measured in dollars, the presence of inflation serves to understate the true level of indebtedness.

Accepted Answer

A) True 
 B)False

Question 10

In 2010, the debt-to-GDP ratio increased to roughly the same ratio as the 1990s.

Accepted Answer

A) True 
 B)False

Question 11

The government should not attempt to balance the budget if

Accepted Answer

A) the economy is in a recessionary gap. 
B) actual GDP is below full-employment GDP. 
C) unemployment is rising. 
D) All of the above are correct. 
A) the economy is in a recessionary gap. 
B) actual GDP is below full-employment GDP. 
C) unemployment is rising. 
D) All of the above are correct.

Question 12

Why might the Fed decide to monetize the deficit?

Accepted Answer

A) to keep inflation low 
B) to reduce the structural deficit 
C) to reduce the budget deficit 
D) to keep interest rates low 
A) to keep inflation low 
B) to reduce the structural deficit 
C) to reduce the budget deficit 
D) to keep interest rates low

Question 13

Crowding in can be defined as

Accepted Answer

A) an increase in the budget deficit increases demand so that investment increases. 
B) tax incentives on investment encourage capital formation, an increase in aggregate supply. 
C) consumption rises in a recovery, which increases demand for investment. 
D) the budget deficit falls enough to lower interest rates to stimulate investment. 
A) an increase in the budget deficit increases demand so that investment increases. 
B) tax incentives on investment encourage capital formation, an increase in aggregate supply. 
C) consumption rises in a recovery, which increases demand for investment. 
D) the budget deficit falls enough to lower interest rates to stimulate investment.

Question 14

Is the national debt a burden to future generations?

Accepted Answer

A) No, as long as foreigners own a significant share of the national debt. 
B) No, as long as the national debt is owned purely by U.S.citizens. 
C) Yes, debt is always a burden to future generations. 
D) Yes, unless foreigners increase their share of the national debt. 
A) No, as long as foreigners own a significant share of the national debt. 
B) No, as long as the national debt is owned purely by U.S.citizens. 
C) Yes, debt is always a burden to future generations. 
D) Yes, unless foreigners increase their share of the national debt.

Question 15

Debt is to deficit as

Accepted Answer

A) money is to income. 
B) flow is to stock. 
C) rent is to dividend. 
D) property is to wealth. 
A) money is to income. 
B) flow is to stock. 
C) rent is to dividend. 
D) property is to wealth.

Question 16

Deficit is to debt as

Accepted Answer

A) responsible is to irresponsible. 
B) increase is to decrease. 
C) flow is to stock. 
D) important is to unimportant. 
A) responsible is to irresponsible. 
B) increase is to decrease. 
C) flow is to stock. 
D) important is to unimportant.

Question 17

In 2010 and 2011, President Obama advocated deficit reduction through decreased spending while Republicans in Congress advocated increased taxation to achieve the same goal.

Accepted Answer

A) True 
 B)False

Question 18

If the economy is in an inflationary gap, which of the following is the least appropriate policy mix?

Accepted Answer

A) a budget surplus and expansionary monetary policy 
B) a budget deficit and expansionary monetary policy 
C) a budget deficit and contractionary monetary policy 
D) a budget surplus and contractionary monetary policy 
A) a budget surplus and expansionary monetary policy 
B) a budget deficit and expansionary monetary policy 
C) a budget deficit and contractionary monetary policy 
D) a budget surplus and contractionary monetary policy

Question 19

Both Social Security expenditures and the payroll tax receipts that finance them are treated as off-budget items.

Accepted Answer

A) True 
 B)False

Question 20

List three bogus arguments about the "burden of the debt," and point out the errors in each of the arguments.

Accepted Answer

Argument 1: The debt will burden future

Exam 33: Budget Deficits in the Short and Long Run

Regarding structural deficits, which of the following assertions is true?

Which of the following is expected to increase aggregate demand in the short run?

Figure 16-2 -Assume that a contractionary monetary policy has shifted the aggregate demand curve in Figure 16-2 from D₀D₀ to D₁D₁.Fiscal authorities who wish to restore real GDP to the full-employment level will

Which of the following statements about the national debt has the most validity?

Budget deficits are inflationary when

Analysis indicates that the economy is in a recessionary gap.Which of the following is the least appropriate policy mix in this situation?

The official fiscal year budget deficits disappeared from 1998 to 2001.

Between the years of 2001 and 2003, what happened to the structural deficit?

Since the debt is measured in dollars, the presence of inflation serves to understate the true level of indebtedness.

In 2010, the debt-to-GDP ratio increased to roughly the same ratio as the 1990s.

The government should not attempt to balance the budget if

Why might the Fed decide to monetize the deficit?

Crowding in can be defined as

Is the national debt a burden to future generations?

Debt is to deficit as

Deficit is to debt as

In 2010 and 2011, President Obama advocated deficit reduction through decreased spending while Republicans in Congress advocated increased taxation to achieve the same goal.

If the economy is in an inflationary gap, which of the following is the least appropriate policy mix?

Both Social Security expenditures and the payroll tax receipts that finance them are treated as off-budget items.

List three bogus arguments about the "burden of the debt," and point out the errors in each of the arguments.

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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