Question 1

Suppose that the government of Summerfield spends $2 trillion in 2015 and receives tax revenues of $1.5 trillion. Which of the following is TRUE?

Accepted Answer

A) Summerfield has a budget surplus of $0.5 trillion. 
B) Summerfield has a budget deficit of $0.5 trillion. 
C) Summerfield has a trade deficit of $0.5 trillion. 
D) Summerfield has a trade surplus of $0.5 trillion. 
A) Summerfield has a budget surplus of $0.5 trillion. 
B) Summerfield has a budget deficit of $0.5 trillion. 
C) Summerfield has a trade deficit of $0.5 trillion. 
D) Summerfield has a trade surplus of $0.5 trillion.

Question 2

If the government has a spending flow that exceeds the revenues it collects, the government will run a ________ that year.

Accepted Answer

A) debt 
B) deficit 
C) debt and a deficit 
D) surplus 
A) debt 
B) deficit 
C) debt and a deficit 
D) surplus

Question 3

If the economy is experiencing an inflationary gap in the short run, an increase in the budget surplus

Accepted Answer

A) will reduce the size of the inflationary gap. 
B) will increase the size of the inflationary gap. 
C) will cause an increase in inflation and increase aggregate supply. 
D) will increase aggregate demand and will increase the price level. 
A) will reduce the size of the inflationary gap. 
B) will increase the size of the inflationary gap. 
C) will cause an increase in inflation and increase aggregate supply. 
D) will increase aggregate demand and will increase the price level.

Question 4

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

Accepted Answer

A) a balanced budget. 
B) the gross public debt. 
C) the net public debt. 
D) a government budget deficit. 
A) a balanced budget. 
B) the gross public debt. 
C) the net public debt. 
D) a government budget deficit.

Question 5

The total value of all outstanding federal government securities is

Accepted Answer

A) a flow variable. 
B) the budget deficit. 
C) total personal wealth. 
D) none of the above. 
A) a flow variable. 
B) the budget deficit. 
C) total personal wealth. 
D) none of the above.

Question 6

Which of the following statements is CORRECT?

Accepted Answer

A) Since the mid-1940s, expenditures on national defense have increased considerably as a percentage of total federal government spending. 
B) Since the mid-1940s, expenditures on income security and health programs have increased considerably as a percentage of total federal government spending. 
C) Taken together, expenditures on national defense and on income security and health programs now account for less than half of all federal government spending. 
D) Expenditures on national defense now account for more than twice as much federal government spending as expenditures on income security and health programs. 
A) Since the mid-1940s, expenditures on national defense have increased considerably as a percentage of total federal government spending. 
B) Since the mid-1940s, expenditures on income security and health programs have increased considerably as a percentage of total federal government spending. 
C) Taken together, expenditures on national defense and on income security and health programs now account for less than half of all federal government spending. 
D) Expenditures on national defense now account for more than twice as much federal government spending as expenditures on income security and health programs.

Question 7

When government spending is equal to the 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.

Question 8

Explain how deficit spending can benefit future generations.

Accepted Answer

If the rate of return on borro

Question 9

Legislated federal government payments that anyone who qualifies can receive are called

Accepted Answer

A) controllable expenditures. 
B) a fiscal stabilizer. 
C) balanced expenditures. 
D) entitlements. 
A) controllable expenditures. 
B) a fiscal stabilizer. 
C) balanced expenditures. 
D) entitlements.

Question 10

The gross public debt is the

Accepted Answer

A) amount of U.S. paper currency and coins in circulation. 
B) difference between current government expenditures and tax revenues. 
C) ratio of past deficits to past surpluses. 
D) total of all accumulated deficits and surpluses. 
A) amount of U.S. paper currency and coins in circulation. 
B) difference between current government expenditures and tax revenues. 
C) ratio of past deficits to past surpluses. 
D) total of all accumulated deficits and surpluses.

Question 11

As a possible approach to eliminating the government budget deficit, increasing taxes for everyone would

Accepted Answer

A) mean only a small increase in taxes. 
B) lead to an inflationary gap. 
C) transfer more goods and services to the government sector. 
D) lead to a large increase in taxes for every worker. 
A) mean only a small increase in taxes. 
B) lead to an inflationary gap. 
C) transfer more goods and services to the government sector. 
D) lead to a large increase in taxes for every worker.

Question 12

Net public debt is

Accepted Answer

A) the excess of annual government spending over annual tax revenues. 
B) the excess of annual tax revenues over annual government spending. 
C) the portion of government debt held by private individuals and firms. 
D) the sum owed by the public to keep the Social Security system afloat. 
A) the excess of annual government spending over annual tax revenues. 
B) the excess of annual tax revenues over annual government spending. 
C) the portion of government debt held by private individuals and firms. 
D) the sum owed by the public to keep the Social Security system afloat.

Question 13

Other things being equal, what is the effect of deficit spending on credit markets?

Accepted Answer

A) Both the demand for credit and the supply of credit will increase. 
B) Both the demand for credit and the supply of credit will decrease. 
C) The demand for credit increases while the supply of credit remains constant. 
D) The supply of credit will increase while the demand for credit remains the same. 
A) Both the demand for credit and the supply of credit will increase. 
B) Both the demand for credit and the supply of credit will decrease. 
C) The demand for credit increases while the supply of credit remains constant. 
D) The supply of credit will increase while the demand for credit remains the same.

Question 14

Borrowing to finance the increases in government expenditures

Accepted Answer

A) reduces current private investment expenditures. 
B) increases interest rates. 
C) reduces growth in the nation's private capital stock. 
D) all of the above. 
A) reduces current private investment expenditures. 
B) increases interest rates. 
C) reduces growth in the nation's private capital stock. 
D) all of the above.

Question 15

Which of the following is a stock variable?

Accepted Answer

A) public debt 
B) wealth 
C) money supply 
D) all of the above 
A) public debt 
B) wealth 
C) money supply 
D) all of the above

Question 16

Suppose that the federal government had a budget deficit of $80 billion in year 1 and $10 billion in year 2, but it had budget surpluses of $140 billion in year 3 and $20 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have

Accepted Answer

A) decreased by $70 billion. 
B) increased by $250 billion. 
C) increased by $70 billion. 
D) decreased by $62.5 billion. 
A) decreased by $70 billion. 
B) increased by $250 billion. 
C) increased by $70 billion. 
D) decreased by $62.5 billion.

Question 17

The public debt is

Accepted Answer

A) an excess of government spending over government revenues during a given time period. 
B) a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C) the total value of all outstanding federal government securities. 
D) all federal government debt irrespective of who owns it. 
A) an excess of government spending over government revenues during a given time period. 
B) a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C) the total value of all outstanding federal government securities. 
D) all federal government debt irrespective of who owns it.

Question 18

The difference between the gross public debt and the net public debt is that the

Accepted Answer

A) gross public debt includes entitlements while the net public debt does not. 
B) gross public debt is based on budget deficit while the net public debt is not based on budget deficits. 
C) gross public debt includes government interagency borrowing while the net public debt does not. 
D) the gross public debt is expressed as a percentage of GDP while the net public debt is not. 
A) gross public debt includes entitlements while the net public debt does not. 
B) gross public debt is based on budget deficit while the net public debt is not based on budget deficits. 
C) gross public debt includes government interagency borrowing while the net public debt does not. 
D) the gross public debt is expressed as a percentage of GDP while the net public debt is not.

Question 19

A trade surplus occurs when

Accepted Answer

A) the value of imports is greater than the value of exports. 
B) government spending is less than total tax revenue. 
C) consumption is greater than disposable income. 
D) none of the above. 
A) the value of imports is greater than the value of exports. 
B) government spending is less than total tax revenue. 
C) consumption is greater than disposable income. 
D) none of the above.

Question 20

If the net public debt expanded last year, then which of the following most likely occurred during the 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 government's tax collections exceeded its spending. 
A) The government's budget was balanced. 
B) The government experienced a budget surplus. 
C) The government experienced a budget deficit. 
D) The government's tax collections exceeded its spending.

Suppose that the government of Summerfield spends $2 trillion in 2015 and receives tax revenues of $1.5 trillion. Which of the following is TRUE?

If the government has a spending flow that exceeds the revenues it collects, the government will run a ________ that year.

If the economy is experiencing an inflationary gap in the short run, an increase in the budget surplus

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

The total value of all outstanding federal government securities is

Which of the following statements is CORRECT?

When government spending is equal to the tax revenues during a specific time period, this is known as a

Explain how deficit spending can benefit future generations.

Legislated federal government payments that anyone who qualifies can receive are called

The gross public debt is the

As a possible approach to eliminating the government budget deficit, increasing taxes for everyone would

Net public debt is

Other things being equal, what is the effect of deficit spending on credit markets?

Borrowing to finance the increases in government expenditures

Which of the following is a stock variable?

The public debt is

The difference between the gross public debt and the net public debt is that the

A trade surplus occurs when

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

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

Suppose that the government of Summerfield spends $2 trillion in 2015 and receives tax revenues of $1.5 trillion. Which of the following is TRUE?

If the government has a spending flow that exceeds the revenues it collects, the government will run a ________ that year.

If the economy is experiencing an inflationary gap in the short run, an increase in the budget surplus

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

The total value of all outstanding federal government securities is

Which of the following statements is CORRECT?

When government spending is equal to the tax revenues during a specific time period, this is known as a

Explain how deficit spending can benefit future generations.

Legislated federal government payments that anyone who qualifies can receive are called

The gross public debt is the

As a possible approach to eliminating the government budget deficit, increasing taxes for everyone would

Net public debt is

Other things being equal, what is the effect of deficit spending on credit markets?

Borrowing to finance the increases in government expenditures

Which of the following is a stock variable?

The public debt is

The difference between the gross public debt and the net public debt is that the

A trade surplus occurs when

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

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