Question 1

How does the federal government finance a budget deficit?

Accepted Answer

A) It redeems its IOUs. 
B) It purchases U.S. Treasury bonds. 
C) It cuts spending on entitlement programs. 
D) It borrows funds by selling Treasury bonds. 
A) It redeems its IOUs. 
B) It purchases U.S. Treasury bonds. 
C) It cuts spending on entitlement programs. 
D) It borrows funds by selling Treasury bonds.

Question 2

If the public debt increased by the same amount each year during the past three years, then

Accepted Answer

A) the U.S. government must have operated with the same budget surpluses during the past three years. 
B) the U.S. government must have experienced budget surpluses that increased by the same amount each of the past three years. 
C) the U.S. Treasury must have issued securities to fund a flow of government spending that exceeded a flow of tax revenues by the same amount during each of the past three years. 
D) during each of the past three years, the U.S. Treasury must have bought back the same amount of securities that had previously been issued to cover deficits experienced more than three years ago. 
A) the U.S. government must have operated with the same budget surpluses during the past three years. 
B) the U.S. government must have experienced budget surpluses that increased by the same amount each of the past three years. 
C) the U.S. Treasury must have issued securities to fund a flow of government spending that exceeded a flow of tax revenues by the same amount during each of the past three years. 
D) during each of the past three years, the U.S. Treasury must have bought back the same amount of securities that had previously been issued to cover deficits experienced more than three years ago.

Question 3

Which of the following is TRUE when a budget deficit exists?

Accepted Answer

A) Government expenditures exceed tax revenues. 
B) Tax revenues exceed government expenditures. 
C) A trade surplus exists. 
D) Dissaving exists. 
A) Government expenditures exceed tax revenues. 
B) Tax revenues exceed government expenditures. 
C) A trade surplus exists. 
D) Dissaving exists.

Question 4

If the net public debt declined last year, then which of the following most likely occurred during that year?

Accepted Answer

A) The government's budget was balanced. 
B) The government experienced a budget surplus. 
C) The government experienced a budget deficit. 
D) The share of foreign holdings of the government's debt increased. 
A) The government's budget was balanced. 
B) The government experienced a budget surplus. 
C) The government experienced a budget deficit. 
D) The share of foreign holdings of the government's debt increased.

Question 5

Today, U.S. government spending on entitlements represents ________ of the total federal budget.

Accepted Answer

A) about 10 percent 
B) less than 25 percent 
C) nearly 60 percent 
D) nearly 90 percent 
A) about 10 percent 
B) less than 25 percent 
C) nearly 60 percent 
D) nearly 90 percent

Question 6

The share of net public debt owed to foreign residents today is close to

Accepted Answer

A) 100 percent. 
B) 80 percent. 
C) 50 percent. 
D) 10 percent. 
A) 100 percent. 
B) 80 percent. 
C) 50 percent. 
D) 10 percent.

Question 7

If no foreign residents owned any of the U.S. public debt, then it would be true that

Accepted Answer

A) there would be no distributional consequences associates with he public debt. 
B) U.S. residents would essentially owe the public debt to themselves. 
C) there would be no interest payments on the public debt. 
D) the public debt would naturally disappear over time. 
A) there would be no distributional consequences associates with he public debt. 
B) U.S. residents would essentially owe the public debt to themselves. 
C) there would be no interest payments on the public debt. 
D) the public debt would naturally disappear over time.

Question 8

The public debt can be thought of as

Accepted Answer

A) the total amount consumers owe on their credit cards. 
B) the total amount in taxes consumers pay to the government. 
C) accumulated budget deficits and surpluses. 
D) the total amount the government spends for goods and services. 
A) the total amount consumers owe on their credit cards. 
B) the total amount in taxes consumers pay to the government. 
C) accumulated budget deficits and surpluses. 
D) the total amount the government spends for goods and services.

Question 9

Which of the following is NOT an example of a flow variable?

Accepted Answer

A) planned investment 
B) capital stock 
C) The federal deficit 
D) inventory investment 
A) planned investment 
B) capital stock 
C) The federal deficit 
D) inventory investment

Question 10

Which government program would be considered an "entitlement" program?

Accepted Answer

A) national defense 
B) subsidies for mass transportation 
C) law enforcement in major U.S. cities 
D) Social Security 
A) national defense 
B) subsidies for mass transportation 
C) law enforcement in major U.S. cities 
D) Social Security

Question 11

In the long run, a higher government budget deficit causes

Accepted Answer

A) a decrease in both private spending and equilibrium real GDP. 
B) an increase in both private spending and equilibrium real GDP. 
C) a decrease in private spending while equilibrium real GDP remains unchanged. 
D) no change in private spending but a decrease in equilibrium real GDP. 
A) a decrease in both private spending and equilibrium real GDP. 
B) an increase in both private spending and equilibrium real GDP. 
C) a decrease in private spending while equilibrium real GDP remains unchanged. 
D) no change in private spending but a decrease in equilibrium real GDP.

Question 12

Which of the following is TRUE of the U.S. trade balance and the federal government budget?

Accepted Answer

A) In most years since the 1970s, both have been in surplus. 
B) In most years since the 1970s, both have been in deficit. 
C) Both exhibited greater variability before the 1970s than they have since. 
D) The federal government budget deficit was more variable before the 1970s, but the trade deficit has been more variable since. 
A) In most years since the 1970s, both have been in surplus. 
B) In most years since the 1970s, both have been in deficit. 
C) Both exhibited greater variability before the 1970s than they have since. 
D) The federal government budget deficit was more variable before the 1970s, but the trade deficit has been more variable since.

Question 13

Among economists, it is generally believed that

Accepted Answer

A) the federal budget deficit will be eliminated within 10 years. 
B) the public debt will be paid off within 10 years. 
C) entitlement spending will continue to decline. 
D) the federal government will find it difficult to cut entitlement programs. 
A) the federal budget deficit will be eliminated within 10 years. 
B) the public debt will be paid off within 10 years. 
C) entitlement spending will continue to decline. 
D) the federal government will find it difficult to cut entitlement programs.

Question 14

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run?

Accepted Answer

A) a recessionary gap. 
B) an increase the price level and a reduction in real GDP. 
C) an increase in the price level with no change in real GDP. 
D)  an increase in real GDP and an increase in the price level. 
A) a recessionary gap. 
B) an increase the price level and a reduction in real GDP. 
C) an increase in the price level with no change in real GDP. 
D)  an increase in real GDP and an increase in the price level.

Question 15

In the long run, higher government budget deficits will

Accepted Answer

A) lead to a redistribution of real GDP from privately produced goods and services to government produced goods and services. 
B) lead to a redistribution of real GDP from government produced goods and services to privately produced goods and services. 
C) cause the price level to go down on government goods but not on private goods. 
D) lead to a reduction in the amount of goods and services produced by the government and private sector. 
A) lead to a redistribution of real GDP from privately produced goods and services to government produced goods and services. 
B) lead to a redistribution of real GDP from government produced goods and services to privately produced goods and services. 
C) cause the price level to go down on government goods but not on private goods. 
D) lead to a reduction in the amount of goods and services produced by the government and private sector.

Question 16

The largest component of U.S. federal spending that contributes to the U.S. government budget deficit is

Accepted Answer

A) entitlements. 
B) military spending. 
C) interest expenses. 
D) salaries of government employees. 
A) entitlements. 
B) military spending. 
C) interest expenses. 
D) salaries of government employees.

Question 17

In which decade did the United States begin experiencing large trade deficits?

Accepted Answer

A) 1960s 
B) 1970s 
C) 1990s 
D) 2000s 
A) 1960s 
B) 1970s 
C) 1990s 
D) 2000s

Question 18

Which of the following is NOT an entitlement?

Accepted Answer

A) Medicaid 
B) Social Security 
C) federal government salaries 
D) Medicare 
A) Medicaid 
B) Social Security 
C) federal government salaries 
D) Medicare

Question 19

If the government spends less than what it receives in taxes during a given interval, then the result is

Accepted Answer

A) a balanced budget. 
B) an entitlement. 
C) unrealized public debt. 
D) a government budget surplus. 
A) a balanced budget. 
B) an entitlement. 
C) unrealized public debt. 
D) a government budget surplus.

Question 20

Which of the following is TRUE of the portion of the net public debt held by foreign residents?

Accepted Answer

A) It will definitely be a benefit to current and future generations of U.S residents, because foreign residents have shown a willingness to lend to the U.S. government in exchange for rates of return significantly lower than they can receive elsewhere in the world. 
B) It will definitely be a burden on current and future generations of U.S. residents who will have to pay interest on this portion of the debt, thereby transferring a portion of future U.S. incomes abroad. 
C) It will be a burden on future generations of U.S. residents only if funds that the U.S. government obtains from borrowing are expended on projects with rates of return lower than the rates of interest that the government pays foreign residents. 
D) It will be a benefit to future generations of U.S. residents only if funds that the U.S. government obtains from borrowing are expended on projects with rates of return lower than the rates of interest that the government pays foreign residents 
A) It will definitely be a benefit to current and future generations of U.S residents, because foreign residents have shown a willingness to lend to the U.S. government in exchange for rates of return significantly lower than they can receive elsewhere in the world. 
B) It will definitely be a burden on current and future generations of U.S. residents who will have to pay interest on this portion of the debt, thereby transferring a portion of future U.S. incomes abroad. 
C) It will be a burden on future generations of U.S. residents only if funds that the U.S. government obtains from borrowing are expended on projects with rates of return lower than the rates of interest that the government pays foreign residents. 
D) It will be a benefit to future generations of U.S. residents only if funds that the U.S. government obtains from borrowing are expended on projects with rates of return lower than the rates of interest that the government pays foreign residents

How does the federal government finance a budget deficit?

If the public debt increased by the same amount each year during the past three years, then

Which of the following is TRUE when a budget deficit exists?

If the net public debt declined last year, then which of the following most likely occurred during that year?

Today, U.S. government spending on entitlements represents ________ of the total federal budget.

The share of net public debt owed to foreign residents today is close to

If no foreign residents owned any of the U.S. public debt, then it would be true that

The public debt can be thought of as

Which of the following is NOT an example of a flow variable?

Which government program would be considered an "entitlement" program?

In the long run, a higher government budget deficit causes

Which of the following is TRUE of the U.S. trade balance and the federal government budget?

Among economists, it is generally believed that

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run?

In the long run, higher government budget deficits will

The largest component of U.S. federal spending that contributes to the U.S. government budget deficit is

In which decade did the United States begin experiencing large trade deficits?

Which of the following is NOT an entitlement?

If the government spends less than what it receives in taxes during a given interval, then the result is

Which of the following is TRUE of the portion of the net public debt held by foreign residents?

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

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Exam 13: Deficit Spending and the Public Debt

How does the federal government finance a budget deficit?

If the public debt increased by the same amount each year during the past three years, then

Which of the following is TRUE when a budget deficit exists?

If the net public debt declined last year, then which of the following most likely occurred during that year?

Today, U.S. government spending on entitlements represents ________ of the total federal budget.

The share of net public debt owed to foreign residents today is close to

If no foreign residents owned any of the U.S. public debt, then it would be true that

The public debt can be thought of as

Which of the following is NOT an example of a flow variable?

Which government program would be considered an "entitlement" program?

In the long run, a higher government budget deficit causes

Which of the following is TRUE of the U.S. trade balance and the federal government budget?

Among economists, it is generally believed that

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run?

In the long run, higher government budget deficits will

The largest component of U.S. federal spending that contributes to the U.S. government budget deficit is

In which decade did the United States begin experiencing large trade deficits?

Which of the following is NOT an entitlement?

If the government spends less than what it receives in taxes during a given interval, then the result is

Which of the following is TRUE of the portion of the net public debt held by foreign residents?

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