Question 1

The difference between net public debt and gross public debt is

Accepted Answer

A) all government interagency borrowing. 
B) the interest paid annually on the public debt. 
C) the amount owed to individuals and firms outside the United States. 
D) the current year's budget deficit from the amount of public debt at the start of the year. 
A) all government interagency borrowing. 
B) the interest paid annually on the public debt. 
C) the amount owed to individuals and firms outside the United States. 
D) the current year's budget deficit from the amount of public debt at the start of the year.

Question 2

What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment?
 Be sure to discuss the effects in the short-run and in the long-run.

Accepted Answer

In the short run, a budget deficit will

Question 3

A government budget surplus is

Accepted Answer

A) a situation in which the supply of goods in the economy is greater than the demand for goods. 
B) a situation in which the amount spent by the government is greater than the amount collected in taxes. 
C) the public debt. 
D) an excess of revenues over government spending. 
A) a situation in which the supply of goods in the economy is greater than the demand for goods. 
B) a situation in which the amount spent by the government is greater than the amount collected in taxes. 
C) the public debt. 
D) an excess of revenues over government spending.

Question 4

Net public debt is

Accepted Answer

A) all federal public debt irrespective of who owns it. 
B) gross public debt minus all government interagency borrowing. 
C) all public debt minus all money owed on the federal income tax. 
D) all public debt plus all government interagency borrowing. 
A) all federal public debt irrespective of who owns it. 
B) gross public debt minus all government interagency borrowing. 
C) all public debt minus all money owed on the federal income tax. 
D) all public debt plus all government interagency borrowing.

Question 5

Media reports often suggest that the increasing public debt is a burden on future generations. What they mean is that

Accepted Answer

A) it reduces the current level of investment. 
B) it makes predicting future unemployment levels unpredictable. 
C) it causes deflation. 
D) it reduces both nominal and real interest rates. 
A) it reduces the current level of investment. 
B) it makes predicting future unemployment levels unpredictable. 
C) it causes deflation. 
D) it reduces both nominal and real interest rates.

Question 6

The amount of funds the Social Security system has loaned the federal government is

Accepted Answer

A) included in the net public debt. 
B) added to the gross public debt to calculate the net public debt. 
C) not included in the gross public debt. 
D) excluded from the net public debt. 
A) included in the net public debt. 
B) added to the gross public debt to calculate the net public debt. 
C) not included in the gross public debt. 
D) excluded from the net public debt.

Question 7

To evaluate relative changes in the net public debt, we must

Accepted Answer

A) look at the absolute amount owed by the government. 
B) compare it to the nation's real GDP. 
C) look at the annual percentage change in the public debt. 
D) compare it to the debts of all developed countries. 
A) look at the absolute amount owed by the government. 
B) compare it to the nation's real GDP. 
C) look at the annual percentage change in the public debt. 
D) compare it to the debts of all developed countries.

Question 8

Which of the following correctly describes a way in which deficit spending can impose a burden on future generations?
I. Failure to allocate deficit spending to uses that boost future real Gross Domestic Product (GDP)will require taxing future generations at a higher rate to repay the resulting higher public debt.
II. Government deficits that lead to higher employment and real Gross Domestic Product (GDP)in the future will generate increased income taxes for future governments, which will respond by spending the higher tax revenues, creating higher future government budget deficits.
III. Other things being equal, deficit spending fuels increased consumption of goods and services by the current generation that crowds out capital investment, thereby leaving future generations with a smaller stock of capital than otherwise would have existed.

Accepted Answer

A) I only 
B) II only 
C) I and III only 
D) II and III only 
A) I only 
B) II only 
C) I and III only 
D) II and III only

Question 9

Gross 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 budget deficits plus budget surpluses over the past five years. 
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 budget deficits plus budget surpluses over the past five years. 
D) all federal government debt irrespective of who owns it.

Question 10

One of the long-run effects of higher government budget deficits is

Accepted Answer

A) a redistribution of real Gross Domestic Product (GDP)away from government-provided goods and toward more privately provided goods. 
B) an increase in the government's share of the nation's economic activity. 
C) growth in the economy's private sector at the same time the government sector shrinks. 
D) a fall in the equilibrium price level. 
A) a redistribution of real Gross Domestic Product (GDP)away from government-provided goods and toward more privately provided goods. 
B) an increase in the government's share of the nation's economic activity. 
C) growth in the economy's private sector at the same time the government sector shrinks. 
D) a fall in the equilibrium price level.

Question 11

-Suppose that initially there is no public debt. Using the above table, the public debt over this four year period would have

Accepted Answer

A) increased by $215. 
B) decreased by $100. 
C) increased by $1,375. 
D) decreased by $1,590. 
A) increased by $215. 
B) decreased by $100. 
C) increased by $1,375. 
D) decreased by $1,590.

Question 12

Net public debt is the

Accepted Answer

A) difference between tax revenues and government expenditures each year. 
B) sum of accumulated government deficits and surpluses held by individuals and businesses and foreign institutions. 
C) sum of accumulated government deficits and surpluses held by U.S. government agencies. 
D) sum of accumulated government deficits and surpluses held by large money center banks. 
A) difference between tax revenues and government expenditures each year. 
B) sum of accumulated government deficits and surpluses held by individuals and businesses and foreign institutions. 
C) sum of accumulated government deficits and surpluses held by U.S. government agencies. 
D) sum of accumulated government deficits and surpluses held by large money center banks.

Question 13

Which of the following will NOT cause the public debt to change?

Accepted Answer

A) collection by the government of $200 billion more in taxes than it spends 
B) government budget deficit 
C) government budget surplus 
D) balanced budget 
A) collection by the government of $200 billion more in taxes than it spends 
B) government budget deficit 
C) government budget surplus 
D) balanced budget

Question 14

Since the late 1980s, the share of the net public debt owed to foreign interests has

Accepted Answer

A) remained constant. 
B) decreased. 
C) increased. 
D) gone up and then down, finally settling at around 10 percent. 
A) remained constant. 
B) decreased. 
C) increased. 
D) gone up and then down, finally settling at around 10 percent.

Question 15

Which of the following is TRUE of the relationship between U.S. trade deficits and federal government budget deficits?

Accepted Answer

A) Increases in the budget deficit tend to be associated with increases in the trade deficit. 
B) Increases in the budget deficit tend to be associated with reductions in the trade deficit. 
C) Increases in the budget deficit are always associated with increases in the trade deficit. 
D) Increases in the budget deficit are always associated with reductions in the trade deficit. 
A) Increases in the budget deficit tend to be associated with increases in the trade deficit. 
B) Increases in the budget deficit tend to be associated with reductions in the trade deficit. 
C) Increases in the budget deficit are always associated with increases in the trade deficit. 
D) Increases in the budget deficit are always associated with reductions in the trade deficit.

Question 16

When government spending is less than 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 17

Other things being equal, during a period when the federal government issues more Treasury securities to borrow funds

Accepted Answer

A) the flow of government expenditures during that period must exceed the flow of tax revenues. 
B) the flow of government expenditures during that period must exceed the stock of tax collections. 
C) the stock of government deficit spending during that period must exceed the flow of tax revenues. 
D) the stock of government deficit spending during that period must exceed the stock of tax collections. 
A) the flow of government expenditures during that period must exceed the flow of tax revenues. 
B) the flow of government expenditures during that period must exceed the stock of tax collections. 
C) the stock of government deficit spending during that period must exceed the flow of tax revenues. 
D) the stock of government deficit spending during that period must exceed the stock of tax collections.

Question 18

Which of the following statements is FALSE?

Accepted Answer

A) The federal budget deficit in 2004 was about 4 percent of the GDP. 
B) A budget deficit of $25 billion in a given year increases the public debt by $25 billion. 
C) The public debt of $25 billion is the accumulated debt of all U.S. individuals, firms, and institutions. 
D) During the past five years, the U.S. public debt has been increasing. 
A) The federal budget deficit in 2004 was about 4 percent of the GDP. 
B) A budget deficit of $25 billion in a given year increases the public debt by $25 billion. 
C) The public debt of $25 billion is the accumulated debt of all U.S. individuals, firms, and institutions. 
D) During the past five years, the U.S. public debt has been increasing.

Question 19

When analyzing the effects of the government budget deficit

Accepted Answer

A) no distinction must be made between an economy where full employment exists and one where substantial unemployment exists. 
B) it is important to examine the effects of the reported capital budget and the reported operating budget separately. 
C) there should be a comparison of the effect of the deficit to the effects of higher taxes needed to eliminate it. 
D) the baseline budget should be used since it is the most accurate. 
A) no distinction must be made between an economy where full employment exists and one where substantial unemployment exists. 
B) it is important to examine the effects of the reported capital budget and the reported operating budget separately. 
C) there should be a comparison of the effect of the deficit to the effects of higher taxes needed to eliminate it. 
D) the baseline budget should be used since it is the most accurate.

Question 20

The fastest-growing part of the federal budget is

Accepted Answer

A) national defense. 
B) payments for services rendered. 
C) entitlements. 
D) government salaries. 
A) national defense. 
B) payments for services rendered. 
C) entitlements. 
D) government salaries.

The difference between net public debt and gross public debt is

What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment? Be sure to discuss the effects in the short-run and in the long-run.

A government budget surplus is

Net public debt is

Media reports often suggest that the increasing public debt is a burden on future generations. What they mean is that

The amount of funds the Social Security system has loaned the federal government is

To evaluate relative changes in the net public debt, we must

Gross public debt is

One of the long-run effects of higher government budget deficits is

-Suppose that initially there is no public debt. Using the above table, the public debt over this four year period would have

Net public debt is the

Which of the following will NOT cause the public debt to change?

Since the late 1980s, the share of the net public debt owed to foreign interests has

Which of the following is TRUE of the relationship between U.S. trade deficits and federal government budget deficits?

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

Other things being equal, during a period when the federal government issues more Treasury securities to borrow funds

Which of the following statements is FALSE?

When analyzing the effects of the government budget deficit

The fastest-growing part of the federal budget is

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

The difference between net public debt and gross public debt is

What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment? Be sure to discuss the effects in the short-run and in the long-run.

A government budget surplus is

Net public debt is

Media reports often suggest that the increasing public debt is a burden on future generations. What they mean is that

The amount of funds the Social Security system has loaned the federal government is

To evaluate relative changes in the net public debt, we must

Gross public debt is

One of the long-run effects of higher government budget deficits is

-Suppose that initially there is no public debt. Using the above table, the public debt over this four year period would have

Net public debt is the

Which of the following will NOT cause the public debt to change?

Since the late 1980s, the share of the net public debt owed to foreign interests has

Which of the following is TRUE of the relationship between U.S. trade deficits and federal government budget deficits?

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

Other things being equal, during a period when the federal government issues more Treasury securities to borrow funds

Which of the following statements is FALSE?

When analyzing the effects of the government budget deficit

The fastest-growing part of the federal budget is

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