Question 1

Public debt is held as

Accepted Answer

A) corporate bonds and common stocks of the largest companies. 
B) Federal Reserve Notes. 
C) U.S. Notes. 
D) Treasury Bills, Treasury Notes, Treasury Bonds, and U.S. Savings Bonds. 
A) corporate bonds and common stocks of the largest companies. 
B) Federal Reserve Notes. 
C) U.S. Notes. 
D) Treasury Bills, Treasury Notes, Treasury Bonds, and U.S. Savings Bonds. D

Question 2

When government spending exceeds tax revenues during a specific time period, this is known as a

Accepted Answer

A) government budget deficit. 
B) government budget surplus. 
C) balanced budget. 
D) public debt. 
A) government budget deficit. 
B) government budget surplus. 
C) balanced budget. 
D) public debt. A

Question 3

Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?

Accepted Answer

A) The amount has not varied much over time. 
B) The amount has varied a lot over time. 
C) The amount has steadily increased over time. 
D) The amount has steadily decreased over time. 
A) The amount has not varied much over time. 
B) The amount has varied a lot over time. 
C) The amount has steadily increased over time. 
D) The amount has steadily decreased over time. A

Question 4

Since 2001, the U.S. government budget deficit

Accepted Answer

A) has been approximately equal to 10% of U.S. GDP. 
B) as a percentage of U.S. GDP has increased steadily each year. 
C) as a percentage of U.S. GDP has decreased steadily each year. 
D) none of the above. 
A) has been approximately equal to 10% of U.S. GDP. 
B) as a percentage of U.S. GDP has increased steadily each year. 
C) as a percentage of U.S. GDP has decreased steadily each year. 
D) none of the above.

Question 5

The two ways in which deficit spending can impose a burden on future generations are

Accepted Answer

A) by requiring future generations to face higher taxes and to work with a lower accumulated stock of capital goods. 
B) by requiring future generations to face lower government spending and to utilize a smaller stock of human capital. 
C) by substituting private goods for public goods and thereby shifting resources to foreign residents. 
D) by substituting private goods for public goods and thereby benefiting only large businesses. 
A) by requiring future generations to face higher taxes and to work with a lower accumulated stock of capital goods. 
B) by requiring future generations to face lower government spending and to utilize a smaller stock of human capital. 
C) by substituting private goods for public goods and thereby shifting resources to foreign residents. 
D) by substituting private goods for public goods and thereby benefiting only large businesses.

Question 6

To compare the net public debt of various countries, the debt has to be compared to

Accepted Answer

A) the country's trade deficit. 
B) the country's current budget deficit or surplus. 
C) the country's real GDP. 
D) the country's national defense expenditure. 
A) the country's trade deficit. 
B) the country's current budget deficit or surplus. 
C) the country's real GDP. 
D) the country's national defense expenditure.

Question 7

Which of the following is TRUE about how trade deficits and government budget deficits are related?

Accepted Answer

A) The trade deficit leads to a reduction in investment that leads to a government budget deficit. 
B) The trade deficit leads to a decline in imports relative to exports that leads to a government budget deficit. 
C) The government budget deficit leads to higher interest rates that will lead to a trade deficit. 
D) The government budget deficit leads to lower interest rates that will lead to a lower trade deficit. 
A) The trade deficit leads to a reduction in investment that leads to a government budget deficit. 
B) The trade deficit leads to a decline in imports relative to exports that leads to a government budget deficit. 
C) The government budget deficit leads to higher interest rates that will lead to a trade deficit. 
D) The government budget deficit leads to lower interest rates that will lead to a lower trade deficit.

Question 8

Stocks change ________ whereas flows relate to ________.

Accepted Answer

A) within a given period of time; changes between points in time 
B) only at the end of each year; amounts at a given point in time 
C) between points in time; changes within a given time period 
D) and that causes flows to change; changes that have no impact on stocks 
A) within a given period of time; changes between points in time 
B) only at the end of each year; amounts at a given point in time 
C) between points in time; changes within a given time period 
D) and that causes flows to change; changes that have no impact on stocks

Question 9

Explain how deficit spending could be a burden to future generations.

Accepted Answer

Deficit spending can lead to two negativ

Question 10

One mechanism through which increasing public debt may impact the economy is that the resulting

Accepted Answer

A) increased competition for funds increases interest rates and causes a reduction in investment. 
B) increased competition for funds decreases interest rates and causes an increase in investment. 
C) decreased competition for funds decreases interest rates and causes a reduction in investment. 
D) decreased competition for funds decreases interest rates and causes an increase in investment. 
A) increased competition for funds increases interest rates and causes a reduction in investment. 
B) increased competition for funds decreases interest rates and causes an increase in investment. 
C) decreased competition for funds decreases interest rates and causes a reduction in investment. 
D) decreased competition for funds decreases interest rates and causes an increase in investment.

Question 11

If the government borrows to purchase goods and services, today's consumption of government goods and services will be paid for by

Accepted Answer

A) today's taxpayers. 
B) government employees. 
C) future taxpayers. 
D) today's taxpayers and tomorrow's taxpayers in even shares. 
A) today's taxpayers. 
B) government employees. 
C) future taxpayers. 
D) today's taxpayers and tomorrow's taxpayers in even shares.

Question 12

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

Accepted Answer

A) The government's deficit spending will increase equilibrium real Gross Domestic Product (GDP). 
B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP). 
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP)above the full-employment level. 
D) Equilibrium real Gross Domestic Product (GDP)will increase beyond the full-employment level and there will also be an inflationary effect. 
A) The government's deficit spending will increase equilibrium real Gross Domestic Product (GDP). 
B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP). 
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP)above the full-employment level. 
D) Equilibrium real Gross Domestic Product (GDP)will increase beyond the full-employment level and there will also be an inflationary effect.

Question 13

All of the following are possible explanations for the increase in U.S. government budget deficits as a percentage of GDP since the early 2001 EXCEPT

Accepted Answer

A) increases in tax revenues. 
B) increases in payments for entitlements. 
C) increases in government spending. 
D) decreases in tax rates. 
A) increases in tax revenues. 
B) increases in payments for entitlements. 
C) increases in government spending. 
D) decreases in tax rates.

Question 14

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

Accepted Answer

A) Government deficit spending will increase equilibrium real Gross Domestic Product (GDP). 
B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP). 
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP)above the full-employment level. 
D) Higher government deficits will raise equilibrium Gross Domestic Product (GDP)above the full-employment level and also have an inflationary effect. 
A) Government deficit spending will increase equilibrium real Gross Domestic Product (GDP). 
B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP). 
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP)above the full-employment level. 
D) Higher government deficits will raise equilibrium Gross Domestic Product (GDP)above the full-employment level and also have an inflationary effect.

Question 15

The largest expenditure component of the federal budget is spending on

Accepted Answer

A) the military. 
B) entitlement programs. 
C) environmental protection programs. 
D) foreign aid. 
A) the military. 
B) entitlement programs. 
C) environmental protection programs. 
D) foreign aid.

Question 16

Which of the following statements about the public debt is TRUE?

Accepted Answer

A) It is a stock variable. 
B) It is equal to the budget deficit. 
C) It decreases when the government runs a budget deficit. 
D) all of the above 
A) It is a stock variable. 
B) It is equal to the budget deficit. 
C) It decreases when the government runs a budget deficit. 
D) all of the above

Question 17

Suppose the economy is initially operating at full employment. A fiscal policy action that results in an increase in the size of the budget deficit will cause which of the following in the long run?

Accepted Answer

A) an increase in real GDP. 
B) have no effect on both the level and composition of real GDP. 
C) a reduction in the price level. 
D) change the composition of real GDP. 
A) an increase in real GDP. 
B) have no effect on both the level and composition of real GDP. 
C) a reduction in the price level. 
D) change the composition of real GDP.

Question 18

Some economists believe that deficit spending can impose a burden on future generations. Which of the following does NOT explain the burden?

Accepted Answer

A) Investment will be crowded out by an increase in current consumption. 
B) Deficit spending that is allocated to purchases leads to long-term increases in real GDP. 
C) Future generations will have a smaller capital stock that will reduce their wealth. 
D) Future generations will have to be taxed at a higher rate. 
A) Investment will be crowded out by an increase in current consumption. 
B) Deficit spending that is allocated to purchases leads to long-term increases in real GDP. 
C) Future generations will have a smaller capital stock that will reduce their wealth. 
D) Future generations will have to be taxed at a higher rate.

Question 19

According to the text, approximately what percentage of U.S. net public debt is held by foreign residents?

Accepted Answer

A) 20% 
B) 50% 
C) 800% 
D) 90% 
A) 20% 
B) 50% 
C) 800% 
D) 90%

Question 20

Which of the following statements is TRUE about the public debt and future generations?

Accepted Answer

A) Future generations will always be worse off because they will have to pay off the public debt. 
B) Increased consumption today will lead to increases in the capital stock in the future. 
C) Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents. 
D) The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves. 
A) Future generations will always be worse off because they will have to pay off the public debt. 
B) Increased consumption today will lead to increases in the capital stock in the future. 
C) Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents. 
D) The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves.

Public debt is held as

When government spending exceeds tax revenues during a specific time period, this is known as a

Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?

Since 2001, the U.S. government budget deficit

The two ways in which deficit spending can impose a burden on future generations are

To compare the net public debt of various countries, the debt has to be compared to

Which of the following is TRUE about how trade deficits and government budget deficits are related?

Stocks change whereas flows relate to .

Explain how deficit spending could be a burden to future generations.

One mechanism through which increasing public debt may impact the economy is that the resulting

If the government borrows to purchase goods and services, today's consumption of government goods and services will be paid for by

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

All of the following are possible explanations for the increase in U.S. government budget deficits as a percentage of GDP since the early 2001 EXCEPT

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

The largest expenditure component of the federal budget is spending on

Which of the following statements about the public debt is TRUE?

Suppose the economy is initially operating at full employment. A fiscal policy action that results in an increase in the size of the budget deficit will cause which of the following in the long run?

Some economists believe that deficit spending can impose a burden on future generations. Which of the following does NOT explain the burden?

According to the text, approximately what percentage of U.S. net public debt is held by foreign residents?

Which of the following statements is TRUE about the public debt and future generations?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Exam 13: Deficit Spending and the Public Debt

Public debt is held as

When government spending exceeds tax revenues during a specific time period, this is known as a

Which of the following is the best statement about how the amount of the net public debt that a typical individual owes to the holders of the debt has varied in the recent past?

Since 2001, the U.S. government budget deficit

The two ways in which deficit spending can impose a burden on future generations are

To compare the net public debt of various countries, the debt has to be compared to

Which of the following is TRUE about how trade deficits and government budget deficits are related?

Stocks change ________ whereas flows relate to ________.

Explain how deficit spending could be a burden to future generations.

One mechanism through which increasing public debt may impact the economy is that the resulting

If the government borrows to purchase goods and services, today's consumption of government goods and services will be paid for by

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

All of the following are possible explanations for the increase in U.S. government budget deficits as a percentage of GDP since the early 2001 EXCEPT

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?

The largest expenditure component of the federal budget is spending on

Which of the following statements about the public debt is TRUE?

Suppose the economy is initially operating at full employment. A fiscal policy action that results in an increase in the size of the budget deficit will cause which of the following in the long run?

Some economists believe that deficit spending can impose a burden on future generations. Which of the following does NOT explain the burden?

According to the text, approximately what percentage of U.S. net public debt is held by foreign residents?

Which of the following statements is TRUE about the public debt and future generations?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Money Banking and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

Stocks change whereas flows relate to .