Question 1

The argument that budget deficits are inflationary is

Accepted Answer

A) always correct. 
B) correct only when the deficit is monetized. 
C) correct only when the aggregate supply curve is horizontal. 
D) correct only when the aggregate supply curve is upward sloping. 
A) always correct. 
B) correct only when the deficit is monetized. 
C) correct only when the aggregate supply curve is horizontal. 
D) correct only when the aggregate supply curve is upward sloping.

Question 2

Argentina in 2001 faced a debt problem more serious than the U.S.debt problem because Argentina was obligated to repay its debt in

Accepted Answer

A) U.S.dollars. 
B) their own currencies. 
C) a relatively short period of time. 
D) large installments. 
A) U.S.dollars. 
B) their own currencies. 
C) a relatively short period of time. 
D) large installments.

Question 3

If deficit spending causes an increase in economic activity, it may "crowd in" some potential investment spending.

Accepted Answer

A) True 
 B)False

Question 4

It is most likely that the federal government will never actually pay off the national debt.

Accepted Answer

A) True 
 B)False

Question 5

Describe the particular policy mix that accounts for the favorable economic conditions of the late 1990s.Be sure to specify the fiscal and monetary policies pursued during this period.

Accepted Answer

Through a combination of government spen

Question 6

Analysis indicates that the economy is in a recessionary gap.Which of the following is the most 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

If you wanted to measure changes in fiscal policy intentions, you should use the

Accepted Answer

A) capital budget. 
B) actual deficit. 
C) inflation-accounted deficit. 
D) structural deficit. 
A) capital budget. 
B) actual deficit. 
C) inflation-accounted deficit. 
D) structural deficit.

Question 8

Crowding out occurs when

Accepted Answer

A) increased taxes force higher levels of national saving. 
B) deficit spending by the government forces private investment spending to contract. 
C) local businesses cannot get government contracts because of the higher bids of large corporations. 
D) foreign investors are willing to pay higher prices for U.S.bonds than American citizens will pay. 
A) increased taxes force higher levels of national saving. 
B) deficit spending by the government forces private investment spending to contract. 
C) local businesses cannot get government contracts because of the higher bids of large corporations. 
D) foreign investors are willing to pay higher prices for U.S.bonds than American citizens will pay.

Question 9

To correct the budget deficit for inflation, we should

Accepted Answer

A) multiply the budget deficit by the price deflator for GDP. 
B) subtract interest payments from tax revenues. 
C) divide the budget deficit by nominal GDP. 
D) divide the budget deficit by the consumer price index. 
A) multiply the budget deficit by the price deflator for GDP. 
B) subtract interest payments from tax revenues. 
C) divide the budget deficit by nominal GDP. 
D) divide the budget deficit by the consumer price index.

Question 10

Because of the recessions in 1983 and 1991, the structural deficit was far larger than the actual deficit in those years.

Accepted Answer

A) True 
 B)False

Question 11

A budget deficit will be most inflationary if the aggregate

Accepted Answer

A) demand curve is very steep. 
B) demand curve is very flat. 
C) supply curve is very flat. 
D) supply curve is very steep. 
A) demand curve is very steep. 
B) demand curve is very flat. 
C) supply curve is very flat. 
D) supply curve is very steep.

Question 12

If in fiscal year 2015, the federal government receives $2.2 trillion in revenues and spends $3.5 trillion for goods and services, the national debt will

Accepted Answer

A) increase by $2.2 trillion. 
B) increase by $1.3 trillion. 
C) decrease by $1.3 trillion. 
D) decrease by $2.2 trillion. 
A) increase by $2.2 trillion. 
B) increase by $1.3 trillion. 
C) decrease by $1.3 trillion. 
D) decrease by $2.2 trillion.

Question 13

The structural deficit can be used to estimate the thrust of current fiscal policy.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not true with regard to the burden of the U.S.national debt?

Accepted Answer

A) The debt does burden future generations to the extent that it is sold to foreigners. 
B) Budget deficits are not appropriate for stabilization purposes under any circumstances. 
C) The debt will reduce the nation's capital stock if incurred during a fully employed economy. 
D) The large deficits of the 1980s and early 2000 were particularly worrisome because they were not attributable to recessions. 
A) The debt does burden future generations to the extent that it is sold to foreigners. 
B) Budget deficits are not appropriate for stabilization purposes under any circumstances. 
C) The debt will reduce the nation's capital stock if incurred during a fully employed economy. 
D) The large deficits of the 1980s and early 2000 were particularly worrisome because they were not attributable to recessions.

Question 15

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

Accepted Answer

A) in an inflationary gap 
B) at full employment 
C) at potential real GDP 
D) in a recession 
A) in an inflationary gap 
B) at full employment 
C) at potential real GDP 
D) in a recession

Question 16

In 2009, the U.S.had a budget deficit of approximately

Accepted Answer

A) $161 billion. 
B) $459 billion. 
C) $800 billion. 
D) $1.4 trillion. 
A) $161 billion. 
B) $459 billion. 
C) $800 billion. 
D) $1.4 trillion.

Question 17

Analogies between public and private debt are usually misleading.

Accepted Answer

A) True 
 B)False

Question 18

In comparing the changes in actual budget surplus and the structural surplus between 1993 and 1999, it is clear that the

Accepted Answer

A) actual surplus rose less than the structural surplus. 
B) actual surplus and the structural surplus rose about the same. 
C) actual surplus rose much more than the structural surplus. 
D) tax increases of 1993 decreased the structural surplus more than they decreased the actual surplus. 
A) actual surplus rose less than the structural surplus. 
B) actual surplus and the structural surplus rose about the same. 
C) actual surplus rose much more than the structural surplus. 
D) tax increases of 1993 decreased the structural surplus more than they decreased the actual surplus.

Question 19

If a balanced budget were required in 2008, the government would have been required to cut spending and increase taxes.

Accepted Answer

A) True 
 B)False

Question 20

The U.S.national debt at the end of fiscal year 2014 was almost

Accepted Answer

A) $13.5 trillion. 
B) $9.0 trillion. 
C) $18 trillion. 
D) $1.3 trillion. 
A) $13.5 trillion. 
B) $9.0 trillion. 
C) $18 trillion. 
D) $1.3 trillion.

Exam 33: Budget Deficits in the Short and Long Run

The argument that budget deficits are inflationary is

Argentina in 2001 faced a debt problem more serious than the U.S.debt problem because Argentina was obligated to repay its debt in

If deficit spending causes an increase in economic activity, it may "crowd in" some potential investment spending.

It is most likely that the federal government will never actually pay off the national debt.

Describe the particular policy mix that accounts for the favorable economic conditions of the late 1990s.Be sure to specify the fiscal and monetary policies pursued during this period.

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

If you wanted to measure changes in fiscal policy intentions, you should use the

Crowding out occurs when

To correct the budget deficit for inflation, we should

Because of the recessions in 1983 and 1991, the structural deficit was far larger than the actual deficit in those years.

A budget deficit will be most inflationary if the aggregate

If in fiscal year 2015, the federal government receives $2.2 trillion in revenues and spends $3.5 trillion for goods and services, the national debt will

The structural deficit can be used to estimate the thrust of current fiscal policy.

Which of the following is not true with regard to the burden of the U.S.national debt?

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

In 2009, the U.S.had a budget deficit of approximately

Analogies between public and private debt are usually misleading.

In comparing the changes in actual budget surplus and the structural surplus between 1993 and 1999, it is clear that the

If a balanced budget were required in 2008, the government would have been required to cut spending and increase taxes.

The U.S.national debt at the end of fiscal year 2014 was almost

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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