Question 1

If the federal government were to run a budget deficit,this would:

Accepted Answer

A)  increase the size of the national debt. 
B)  reduce the size of the national debt. 
C)  leave the size of the national debt unchanged. 
D)  increase the national debt only if the government also expands the supply of money. 
A)  increase the size of the national debt. 
B)  reduce the size of the national debt. 
C)  leave the size of the national debt unchanged. 
D)  increase the national debt only if the government also expands the supply of money.

Question 2

The federal budget process begins when federal agencies submit their budget requests to the:

Accepted Answer

A)  Treasury Department. 
B)  Council of Economic Advisors (CE
A) . 
C)  Office of Management and Budget (OM
B) . 
D)  Congressional Budget Office (CBO). 
A)  Treasury Department. 
B)  Council of Economic Advisors (CE
A) . 
C)  Office of Management and Budget (OM
B) . 
D)  Congressional Budget Office (CBO).

Question 3

How does the national debt as a percentage of GDP in the United States compared to Sweden?

Accepted Answer

A)  U.S. national debt ratio is smaller. 
B)  U.S. national debt ratio is larger. 
C)  U.S. national debt ratio is about the same. 
D)  U.S. national debt ratio is substantially smaller. 
A)  U.S. national debt ratio is smaller. 
B)  U.S. national debt ratio is larger. 
C)  U.S. national debt ratio is about the same. 
D)  U.S. national debt ratio is substantially smaller.

Question 4

Which of the following is a valid concern about federal budget deficits?

Accepted Answer

A)  The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit. 
B)  Growth of the national debt will eventually lead to the bankruptcy of the government. 
C)  When the debt comes due, future generations may be unable to pay it off. 
D)  If the increases in the national debt reduce private expenditures on capital formation, aggregate demand is reduced. 
A)  The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit. 
B)  Growth of the national debt will eventually lead to the bankruptcy of the government. 
C)  When the debt comes due, future generations may be unable to pay it off. 
D)  If the increases in the national debt reduce private expenditures on capital formation, aggregate demand is reduced.

Question 5

Most of the U.S.national debt is owed to ____.Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

Accepted Answer

A)  foreigners, foreigners 
B)  other U.S. citizens, bondholders 
C)  foreigners, those needing government services 
D)  other U.S. citizens, those needing government services 
A)  foreigners, foreigners 
B)  other U.S. citizens, bondholders 
C)  foreigners, those needing government services 
D)  other U.S. citizens, those needing government services

Question 6

When measured as a percentage of GDP,the U.S.national debt reached its highest levels as a result of:

Accepted Answer

A)  World War II. 
B)  The Vietnam War. 
C)  The Reagan defense buildup and tax cut. 
D)  The Obama economic recovery program. 
A)  World War II. 
B)  The Vietnam War. 
C)  The Reagan defense buildup and tax cut. 
D)  The Obama economic recovery program.

Question 7

Which of the following countries has the largest national debt as a percentage of GDP?

Accepted Answer

A)  Greece. 
B)  Japan. 
C)  United States. 
D)  Canada. 
E)  Italy. 
A)  Greece. 
B)  Japan. 
C)  United States. 
D)  Canada. 
E)  Italy.

Question 8

Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the economy,because higher interest rates will discourage consumption and investment.This argument is known as the:

Accepted Answer

A)  deficit-substitution effect. 
B)  multiplier effect. 
C)  burden-of-debt effect. 
D)  crowding-out effect. 
A)  deficit-substitution effect. 
B)  multiplier effect. 
C)  burden-of-debt effect. 
D)  crowding-out effect.

Question 9

The percentage of the national debt held by foreigners is approximately 25 percent.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is true?

Accepted Answer

A)  A budget deficit will have no impact on the national debt. 
B)  A budget deficit will increase the national debt. 
C)  A balanced budget will increase the national debt. 
D)  A budget surplus will increase the national debt. 
A)  A budget deficit will have no impact on the national debt. 
B)  A budget deficit will increase the national debt. 
C)  A balanced budget will increase the national debt. 
D)  A budget surplus will increase the national debt.

Question 11

As the investment demand curve becomes steeper,the crowding-out effect will become smaller.

Accepted Answer

A) True 
 B)False

Question 12

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

Accepted Answer

A) True 
 B)False

Question 13

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy:

Accepted Answer

A)  eventually it will become difficult for the country to borrow in global credit markets. 
B)  the country will have to pay higher real interest rates in order to induce investors to purchase its bonds. 
C)  at some point, the country will be more or less forced to bring spending into line with revenues in order to maintain the confidence of investors. 
D)  all of the above are correct. 
A)  eventually it will become difficult for the country to borrow in global credit markets. 
B)  the country will have to pay higher real interest rates in order to induce investors to purchase its bonds. 
C)  at some point, the country will be more or less forced to bring spending into line with revenues in order to maintain the confidence of investors. 
D)  all of the above are correct.

Question 14

Supply-siders argue that:

Accepted Answer

A)  reductions in government spending cut infrastructure investment which hurts private sector investment. 
B)  increases in government spending increase infrastructure investment which helps private sector investment. 
C)  increases in government spending causes private sector investment to fall because the government pushes up interest rates. 
D)  reductions in government spending cause private sector investment to fall because the government pushes up interest rates by borrowing. 
E)  increases in government spending causes consumption spending to fall because the government purchases push up interest rates. 
A)  reductions in government spending cut infrastructure investment which hurts private sector investment. 
B)  increases in government spending increase infrastructure investment which helps private sector investment. 
C)  increases in government spending causes private sector investment to fall because the government pushes up interest rates. 
D)  reductions in government spending cause private sector investment to fall because the government pushes up interest rates by borrowing. 
E)  increases in government spending causes consumption spending to fall because the government purchases push up interest rates.

Question 15

The national debt is unlikely to cause national bankruptcy because the:

Accepted Answer

A)  national debt can be refinanced by issuing new bonds. 
B)  interest on the public debt equals GDP. 
C)  national debt cannot be shifted to future generations for repayment. 
D)  federal government cannot refinance the outstanding national debt. 
A)  national debt can be refinanced by issuing new bonds. 
B)  interest on the public debt equals GDP. 
C)  national debt cannot be shifted to future generations for repayment. 
D)  federal government cannot refinance the outstanding national debt.

Question 16

Each year,the president must submit a budget proposal to Congress by:

Accepted Answer

A)  January. 
B)  April. 
C)  July. 
D)  October. 
A)  January. 
B)  April. 
C)  July. 
D)  October.

Question 17

To finance a federal budget deficit,the U.S.Treasury borrows by selling:

Accepted Answer

A)  Treasury bills. 
B)  Treasury notes. 
C)  Treasury bonds. 
D)  All of the above. 
A)  Treasury bills. 
B)  Treasury notes. 
C)  Treasury bonds. 
D)  All of the above.

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

If the federal government were to run a budget deficit,this would:

The federal budget process begins when federal agencies submit their budget requests to the:

How does the national debt as a percentage of GDP in the United States compared to Sweden?

Which of the following is a valid concern about federal budget deficits?

Most of the U.S.national debt is owed to ____.Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

When measured as a percentage of GDP,the U.S.national debt reached its highest levels as a result of:

Which of the following countries has the largest national debt as a percentage of GDP?

Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the economy,because higher interest rates will discourage consumption and investment.This argument is known as the:

The percentage of the national debt held by foreigners is approximately 25 percent.

Which of the following is true?

As the investment demand curve becomes steeper,the crowding-out effect will become smaller.

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy:

Supply-siders argue that:

The national debt is unlikely to cause national bankruptcy because the:

Each year,the president must submit a budget proposal to Congress by:

To finance a federal budget deficit,the U.S.Treasury borrows by selling:

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

Most of the U.S.national debt is owed to .Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of .