Question 1

Which of the following groups analyzes federal budgets proposals?

Accepted Answer

A)  The Council of Economic Advisors. 
B)  The Office of Management and Budget. 
C)  The Congressional Budget Office. 
D)  The House and Senate Budget Committees. 
A)  The Council of Economic Advisors. 
B)  The Office of Management and Budget. 
C)  The Congressional Budget Office. 
D)  The House and Senate Budget Committees.

Question 2

The entire national debt is owed to U.S.citizens.

Accepted Answer

A) True 
 B)False

Question 3

The national debt is best described as the:

Accepted Answer

A)  amount by which this year's federal spending exceeds its taxes. 
B)  value of all U. S. Treasury bonds owned by foreigners. 
C)  sum of all federal budget deficits, past and present. 
D)  percentage of GDP needed to finance a country's investment. 
A)  amount by which this year's federal spending exceeds its taxes. 
B)  value of all U. S. Treasury bonds owned by foreigners. 
C)  sum of all federal budget deficits, past and present. 
D)  percentage of GDP needed to finance a country's investment.

Question 4

Are we passing the national debt burden on to our children?

Accepted Answer

One side of this argument is that the de

Question 5

Currently,how much of the U.S.national debt was owed to foreigners?

Accepted Answer

A)  About 25 percent. 
B)  About 20 percent. 
C)  About 30 percent. 
D)  About 60 percent. 
A)  About 25 percent. 
B)  About 20 percent. 
C)  About 30 percent. 
D)  About 60 percent.

Question 6

Internal ownership of the debt refers to the portion of the national debt owned by government agencies.

Accepted Answer

A) True 
 B)False

Question 7

The sum of past federal budget deficits is the:

Accepted Answer

A)  GDP debt. 
B)  trade debt plus GDP. 
C)  national debt. 
D)  Congressional debt. 
A)  GDP debt. 
B)  trade debt plus GDP. 
C)  national debt. 
D)  Congressional debt.

Question 8

What is the difference between the federal budget deficit and the national debt?

Accepted Answer

A)  The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses. 
B)  The budget deficit is the cumulative effect of all prior national debts. 
C)  The national debt includes all outstanding bonds, while the budget deficit excludes bonds held by government agencies. 
D)  This is a trick question because there is no difference between the budget deficit and the national debt. 
A)  The budget deficit is the amount by which expenditures exceed revenues in a particular year, while the national debt is the cumulative effect of all past budget deficits and surpluses. 
B)  The budget deficit is the cumulative effect of all prior national debts. 
C)  The national debt includes all outstanding bonds, while the budget deficit excludes bonds held by government agencies. 
D)  This is a trick question because there is no difference between the budget deficit and the national debt.

Question 9

The crowding-out effect refers to:

Accepted Answer

A)  higher interest rates and reduced private spending that results from financing federal budget deficits. 
B)  higher future taxes accompanying budget deficits to reduce private consumption. 
C)  the inflation rate to rise when the unemployment rate is low. 
D)  increases in private savings to reduce interest rates and, thereby, crowd-out government 
A)  higher interest rates and reduced private spending that results from financing federal budget deficits. 
B)  higher future taxes accompanying budget deficits to reduce private consumption. 
C)  the inflation rate to rise when the unemployment rate is low. 
D)  increases in private savings to reduce interest rates and, thereby, crowd-out government

Question 10

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government?

Accepted Answer

A)  It increases the reported deficit. 
B)  It reduces the reported deficit. 
C)  It exerts no effect on the reported deficit. 
D)  It increases the deficit during an economic boom but reduces it during a recession. 
A)  It increases the reported deficit. 
B)  It reduces the reported deficit. 
C)  It exerts no effect on the reported deficit. 
D)  It increases the deficit during an economic boom but reduces it during a recession.

Question 11

An increase in fiscal deficit spending financed by borrowing will not affect the national debt but decrease interest rates.

Accepted Answer

A) True 
 B)False

Question 12

Crowding out occurs when the federal government:

Accepted Answer

A)  raises taxes to finance a budget deficit. 
B)  refinances maturing U.S. Treasury bonds. 
C)  borrows by selling bonds to finance a deficit. 
D)  uses a budget surplus to pay off part of the national debt. 
A)  raises taxes to finance a budget deficit. 
B)  refinances maturing U.S. Treasury bonds. 
C)  borrows by selling bonds to finance a deficit. 
D)  uses a budget surplus to pay off part of the national debt.

Question 13

Supply-side economists argue that less government spending:

Accepted Answer

A)  will contract the productive side of the economy. 
B)  will result in more crowding out. 
C)  causes higher rates of unemployment and inflation. 
D)  would cause interest rates to increase dramatically. 
E)  would make more investment capital available at lower rates of interest to the private sector. 
A)  will contract the productive side of the economy. 
B)  will result in more crowding out. 
C)  causes higher rates of unemployment and inflation. 
D)  would cause interest rates to increase dramatically. 
E)  would make more investment capital available at lower rates of interest to the private sector.

Question 14

When we speak of the national debt,we refer to the federal government debt only.

Accepted Answer

A) True 
 B)False

Question 15

When crowding out occurs,higher government spending results in higher interest rates,which in turn results in:

Accepted Answer

A)  higher inflation. 
B)  less consumption and investment. 
C)  a larger debt ceiling. 
D)  more tax revenues. 
A)  higher inflation. 
B)  less consumption and investment. 
C)  a larger debt ceiling. 
D)  more tax revenues.

Question 16

Currently,the national debt is approximately:

Accepted Answer

A)  50 percent of GDP. 
B)  60 percent of GDP. 
C)  90 percent of GDP. 
D)  120 percent of GDP. 
A)  50 percent of GDP. 
B)  60 percent of GDP. 
C)  90 percent of GDP. 
D)  120 percent of GDP.

Question 17

"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 18

The huge national debt of the United States is likely to lead to bankruptcy of the national government.

Accepted Answer

A) True 
 B)False

Question 19

The U.S.Treasury is responsible for preparing and submitting the initial budget recommendation to the president.

Accepted Answer

A) True 
 B)False

Question 20

A concern about crowding out caused by increased government borrowing is that:

Accepted Answer

A)  interest rates on private borrowing fall. 
B)  lower rates of economic growth can result from a decline in business investment spending. 
C)  the federal government may default on its loans. 
D)  foreign lenders find it less attractive to help finance federal deficits. 
A)  interest rates on private borrowing fall. 
B)  lower rates of economic growth can result from a decline in business investment spending. 
C)  the federal government may default on its loans. 
D)  foreign lenders find it less attractive to help finance federal deficits.

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

Which of the following groups analyzes federal budgets proposals?

The entire national debt is owed to U.S.citizens.

The national debt is best described as the:

Are we passing the national debt burden on to our children?

Currently,how much of the U.S.national debt was owed to foreigners?

Internal ownership of the debt refers to the portion of the national debt owned by government agencies.

The sum of past federal budget deficits is the:

What is the difference between the federal budget deficit and the national debt?

The crowding-out effect refers to:

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government?

An increase in fiscal deficit spending financed by borrowing will not affect the national debt but decrease interest rates.

Crowding out occurs when the federal government:

Supply-side economists argue that less government spending:

When we speak of the national debt,we refer to the federal government debt only.

When crowding out occurs,higher government spending results in higher interest rates,which in turn results in:

Currently,the national debt is approximately:

"Crowding in" refers to federal government deficits:

The huge national debt of the United States is likely to lead to bankruptcy of the national government.

The U.S.Treasury is responsible for preparing and submitting the initial budget recommendation to the president.

A concern about crowding out caused by increased government borrowing is that:

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

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