Question 1

Which of the following statements about crowding out is true?

Accepted Answer

A)  It can completely offset the multiplier. 
B)  It is caused by a budget deficit. 
C)  It is not caused by a budget surplus. 
D)  All of the above are true. 
A)  It can completely offset the multiplier. 
B)  It is caused by a budget deficit. 
C)  It is not caused by a budget surplus. 
D)  All of the above are true.

Question 2

Less of the federal debt is owned by federal,state,and local governments than is owned by foreigners.

Accepted Answer

A) True 
 B)False

Question 3

External debt refers to the portion of the national debt owned by private individuals and internal debt refers to that part owned by the public sector.

Accepted Answer

A) True 
 B)False

Question 4

Since 1990,the net interest payment as a percentage of GDP has:

Accepted Answer

A)  declined. 
B)  doubled. 
C)  tripled. 
D)  quadrupled. 
A)  declined. 
B)  doubled. 
C)  tripled. 
D)  quadrupled.

Question 5

Among the major industrial economies,which of the following had the lowest national debt as a percent of GDP?

Accepted Answer

A)  Canada 
B)  Australia 
C)  United States 
D)  Italy 
A)  Canada 
B)  Australia 
C)  United States 
D)  Italy

Question 6

"Crowding in" refers to federal government deficits:

Accepted Answer

A)  used for public infrastructure which will offset any decline in business investment. 
B)  which reduce private business and consumption spending. 
C)  which reduce future rates of economic growth. 
D)  all of the above. 
A)  used for public infrastructure which will offset any decline in business investment. 
B)  which reduce private business and consumption spending. 
C)  which reduce future rates of economic growth. 
D)  all of the above.

Question 7

The sum of past federal deficits is reflected in the federal:

Accepted Answer

A)  cyclical debt. 
B)  Congressional debt. 
C)  national debt. 
D)  GDP debt. 
A)  cyclical debt. 
B)  Congressional debt. 
C)  national debt. 
D)  GDP debt.

Question 8

Which of the following is false?

Accepted Answer

A)  The national debt's size decreased steadily after World War II. 
B)  The national debt increases in size whenever the federal government has a surplus budget. 
C)  The size of the national debt currently is about the same size as it was during World War II. 
D)  All of the above are false. 
E)  All of the above are true. 
A)  The national debt's size decreased steadily after World War II. 
B)  The national debt increases in size whenever the federal government has a surplus budget. 
C)  The size of the national debt currently is about the same size as it was during World War II. 
D)  All of the above are false. 
E)  All of the above are true.

Question 9

The crowding-out effect can be:

Accepted Answer

A)  zero. 
B)  partial. 
C)  complete. 
D)  any of the above. 
A)  zero. 
B)  partial. 
C)  complete. 
D)  any of the above.

Question 10

The national debt is the:

Accepted Answer

A)  difference between a nation's exports and imports of goods and services. 
B)  sum of the personal debt of all citizens in the United States. 
C)  indebtedness of the federal government in the form of outstanding interest-earning government security. 
D)  sum of the net personal debts of Americans to foreigners. 
A)  difference between a nation's exports and imports of goods and services. 
B)  sum of the personal debt of all citizens in the United States. 
C)  indebtedness of the federal government in the form of outstanding interest-earning government security. 
D)  sum of the net personal debts of Americans to foreigners.

Question 11

With regard to the national debt,to whom does the federal government owe money?

Accepted Answer

A)  Taxpayers. 
B)  Federal government workers. 
C)  The Federal Reserve System. 
D)  Investors who buy U.S. Treasury bills, bonds, and notes. 
A)  Taxpayers. 
B)  Federal government workers. 
C)  The Federal Reserve System. 
D)  Investors who buy U.S. Treasury bills, bonds, and notes.

Question 12

The federal budget deficit has been over 30 percent of GDP since the early 1980s.

Accepted Answer

A) True 
 B)False

Question 13

The debt ceiling places a legal limit on the size of the national debt.

Accepted Answer

A) True 
 B)False

Question 14

If the crowding-out effect is strong,how will the potency of discretionary fiscal policy be affected?

Accepted Answer

A)  It will make fiscal policy more potent. 
B)  It will make fiscal policy less potent. 
C)  The potency of fiscal policy will be unaffected. 
D)  The potency of expansionary fiscal policy will be reduced. 
A)  It will make fiscal policy more potent. 
B)  It will make fiscal policy less potent. 
C)  The potency of fiscal policy will be unaffected. 
D)  The potency of expansionary fiscal policy will be reduced.

Question 15

Currently,the U.S.national debt is more than $20 trillion.

Accepted Answer

A) True 
 B)False

Question 16

If the fiscal year begins without a budget and Congress fails to pass continuing resolution,then:

Accepted Answer

A)  the president has the right to raise the debt ceiling. 
B)  federal agencies operate on the basis of the previous year's budget. 
C)  the interest rate paid on the national debt automatically increases. 
D)  the federal government shuts down. 
A)  the president has the right to raise the debt ceiling. 
B)  federal agencies operate on the basis of the previous year's budget. 
C)  the interest rate paid on the national debt automatically increases. 
D)  the federal government shuts down.

Question 17

Increased government borrowing stimulates private borrowing because of its effect on interest rates.

Accepted Answer

A) True 
 B)False

Question 18

Bonds owned by financial institutions represent ownership of the national debt by the private sector.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following owns the largest proportion of the national debt?

Accepted Answer

A)  Foreigners. 
B)  Federal, state, and local governments and the Federal Reserve. 
C)  Private individuals, banks, and corporations. 
D)  None of the above. 
A)  Foreigners. 
B)  Federal, state, and local governments and the Federal Reserve. 
C)  Private individuals, banks, and corporations. 
D)  None of the above.

Question 20

Which of the following is true if all the national debt were owned internally?

Accepted Answer

A)  The federal government would not need to refinance the national debt. 
B)  The federal government would not need to worry about raising taxes to pay interest on the national debt. 
C)  We would still be concerned about the effect on the distribution of income from interest payments on the national debt. 
D)  All of the above are true. 
A)  The federal government would not need to refinance the national debt. 
B)  The federal government would not need to worry about raising taxes to pay interest on the national debt. 
C)  We would still be concerned about the effect on the distribution of income from interest payments on the national debt. 
D)  All of the above are true.

Exam 17: Federal Deficits,Surpluses,and the National Debt

Which of the following statements about crowding out is true?

Less of the federal debt is owned by federal,state,and local governments than is owned by foreigners.

External debt refers to the portion of the national debt owned by private individuals and internal debt refers to that part owned by the public sector.

Since 1990,the net interest payment as a percentage of GDP has:

Among the major industrial economies,which of the following had the lowest national debt as a percent of GDP?

"Crowding in" refers to federal government deficits:

The sum of past federal deficits is reflected in the federal:

Which of the following is false?

The crowding-out effect can be:

The national debt is the:

With regard to the national debt,to whom does the federal government owe money?

The federal budget deficit has been over 30 percent of GDP since the early 1980s.

The debt ceiling places a legal limit on the size of the national debt.

If the crowding-out effect is strong,how will the potency of discretionary fiscal policy be affected?

Currently,the U.S.national debt is more than $20 trillion.

If the fiscal year begins without a budget and Congress fails to pass continuing resolution,then:

Increased government borrowing stimulates private borrowing because of its effect on interest rates.

Bonds owned by financial institutions represent ownership of the national debt by the private sector.

Which of the following owns the largest proportion of the national debt?

Which of the following is true if all the national debt were owned internally?

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters