Question 1

All of the following are possible explanations for the increase in U.S. government budget deficits as a percentage of GDP since the early 2001 EXCEPT

Accepted Answer

A)  increases in tax revenues. 
B)  increases in payments for entitlements. 
C)  increases in government spending. 
D)  decreases in tax rates. 
A)  increases in tax revenues. 
B)  increases in payments for entitlements. 
C)  increases in government spending. 
D)  decreases in tax rates.

Question 2

Which government program would be considered an "entitlement" program?

Accepted Answer

A)  national defense 
B)  subsidies for mass transportation 
C)  law enforcement in major U.S. cities 
D)  Social Security 
A)  national defense 
B)  subsidies for mass transportation 
C)  law enforcement in major U.S. cities 
D)  Social Security

Question 3

When was the last year the United States had a budget surplus?

Accepted Answer

A)  2009 
B)  1984 
C)  1993 
D)  2001 
A)  2009 
B)  1984 
C)  1993 
D)  2001

Question 4

Suppose the economy is initially experiencing a recessionary gap. A reduction in the size of the budget deficit will cause which of the following in the short run?

Accepted Answer

A)  a reduction in the size of the recessionary gap and increase in real GDP. 
B)  an increase in the size of the recessionary gap and decrease in real GDP. 
C)  an increase in inflation and increase in aggregate supply. 
D)  an inflationary gap. 
A)  a reduction in the size of the recessionary gap and increase in real GDP. 
B)  an increase in the size of the recessionary gap and decrease in real GDP. 
C)  an increase in inflation and increase in aggregate supply. 
D)  an inflationary gap.

Question 5

When government revenues exceed government outlays in a particular year, this is called

Accepted Answer

A)  a budget surplus. 
B)  a budget deficit. 
C)  the national debt. 
D)  fiscal policy. 
A)  a budget surplus. 
B)  a budget deficit. 
C)  the national debt. 
D)  fiscal policy.

Question 6

Government spending that changes automatically without action by Congress is

Accepted Answer

A)  a noncontrollable expenditure. 
B)  national defense. 
C)  payments to contractors for routing services performed. 
D)  discretionary payments. 
A)  a noncontrollable expenditure. 
B)  national defense. 
C)  payments to contractors for routing services performed. 
D)  discretionary payments.

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 the differences between the public debt and the government budget deficit.

Accepted Answer

The public debt is a stock measured at a

Question 9

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 10

In the current year, a nation's government spending equals $1.5 trillion and its revenues are $1.9 trillion. Which of the following is true?

Accepted Answer

A)  The nation's national debt equals $0.4 trillion. 
B)  This nation has a current year budget surplus of $0.4 trillion. 
C)  This nation is currently running a budget deficit of $0.4 trillion. 
D)  The nation has a current year trade surplus of $0.4 trillion. 
A)  The nation's national debt equals $0.4 trillion. 
B)  This nation has a current year budget surplus of $0.4 trillion. 
C)  This nation is currently running a budget deficit of $0.4 trillion. 
D)  The nation has a current year trade surplus of $0.4 trillion.

Question 11

Since 1940, the U.S. government has experienced

Accepted Answer

A)  about the same number of years with budget deficits as with budget surpluses. 
B)  twice as many annual budget surpluses as annual budget deficits. 
C)  only one year with a budget surplus. 
D)  many more budget deficits than budget surpluses. 
A)  about the same number of years with budget deficits as with budget surpluses. 
B)  twice as many annual budget surpluses as annual budget deficits. 
C)  only one year with a budget surplus. 
D)  many more budget deficits than budget surpluses.

Question 12

The largest expenditure component of the federal budget is spending on

Accepted Answer

A)  the military. 
B)  entitlement programs. 
C)  environmental protection programs. 
D)  foreign aid. 
A)  the military. 
B)  entitlement programs. 
C)  environmental protection programs. 
D)  foreign aid.

Question 13

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 14

Between the years 1998 and 2001, the U.S. government experienced

Accepted Answer

A)  budget surpluses. 
B)  balanced budgets. 
C)  budget deficits. 
D)  contractionary budget cycles. 
A)  budget surpluses. 
B)  balanced budgets. 
C)  budget deficits. 
D)  contractionary budget cycles.

Question 15

The public debt can be thought of as

Accepted Answer

A)  the total amount consumers owe on their credit cards. 
B)  the total amount in taxes consumers pay to the government. 
C)  accumulated budget deficits and surpluses. 
D)  the total amount the government spends for goods and services. 
A)  the total amount consumers owe on their credit cards. 
B)  the total amount in taxes consumers pay to the government. 
C)  accumulated budget deficits and surpluses. 
D)  the total amount the government spends for goods and services.

Question 16

Expressing the U.S. federal budget deficit as a percentage of Gross Domestic Product (GDP)

Accepted Answer

A)  results in inflation-adjusted revenue and expenditure numbers. 
B)  helps us understand the size of the deficit relative to the size of the economy. 
C)  was useful through the 1980s, but is no longer helpful because both the deficit and real Gross Domestic Product (GDP) have grown so large. 
D)  is only useful if the budget deficit is rising at an annual rate of more than 4 percent. 
A)  results in inflation-adjusted revenue and expenditure numbers. 
B)  helps us understand the size of the deficit relative to the size of the economy. 
C)  was useful through the 1980s, but is no longer helpful because both the deficit and real Gross Domestic Product (GDP) have grown so large. 
D)  is only useful if the budget deficit is rising at an annual rate of more than 4 percent.

Question 17

Which is the fastest growing component of the federal government budget?

Accepted Answer

A)  Spending on the military and the war on terrorism 
B)  Spending to improve the nation's schools 
C)  Spending to improve and expand the nation's infrastructure 
D)  Spending on entitlements 
A)  Spending on the military and the war on terrorism 
B)  Spending to improve the nation's schools 
C)  Spending to improve and expand the nation's infrastructure 
D)  Spending on entitlements

Question 18

The largest component of U.S. federal spending that contributes to the U.S. government budget deficit is

Accepted Answer

A)  entitlements. 
B)  military spending. 
C)  interest expenses. 
D)  salaries of government employees. 
A)  entitlements. 
B)  military spending. 
C)  interest expenses. 
D)  salaries of government employees.

Question 19

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 20

Other things being equal, what is the effect of deficit spending on interest rates?

Accepted Answer

A)  Interest rates decline. 
B)  Interest rates rise. 
C)  Interest rates hold constant because the demand for credit decreases. 
D)  There is no impact unless the Federal Reserve decides to alter the money supply. 
A)  Interest rates decline. 
B)  Interest rates rise. 
C)  Interest rates hold constant because the demand for credit decreases. 
D)  There is no impact unless the Federal Reserve decides to alter the money supply.

Exam 14: Deficit Spending and the Public Debt

All of the following are possible explanations for the increase in U.S. government budget deficits as a percentage of GDP since the early 2001 EXCEPT

Which government program would be considered an "entitlement" program?

When was the last year the United States had a budget surplus?

Suppose the economy is initially experiencing a recessionary gap. A reduction in the size of the budget deficit will cause which of the following in the short run?

When government revenues exceed government outlays in a particular year, this is called

Government spending that changes automatically without action by Congress is

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

Explain the differences between the public debt and the government budget deficit.

In the current year, a nation's government spending equals $1.5 trillion and its revenues are $1.9 trillion. Which of the following is true?

Since 1940, the U.S. government has experienced

The largest expenditure component of the federal budget is spending on

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

Between the years 1998 and 2001, the U.S. government experienced

The public debt can be thought of as

Expressing the U.S. federal budget deficit as a percentage of Gross Domestic Product (GDP)

Which is the fastest growing component of the federal government budget?

The largest component of U.S. federal spending that contributes to the U.S. government budget deficit is

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

Other things being equal, what is the effect of deficit spending on interest rates?

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

Measuring the Economys Performance

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

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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