Question 1

The deficits of the 1980s can be regarded as structural.

Accepted Answer

A) True 
 B)False  True

Question 2

Because of the differing account conventions,there is a great deal of arbitrariness in a number that purports to be

Accepted Answer

A) the deficit. 
B) the surplus. 
C) the debt. 
D) all of the above. 
A) the deficit. 
B) the surplus. 
C) the debt. 
D) all of the above. D

Question 3

When the government borrows in the market,it

Accepted Answer

A) does not have to pay interest. 
B) is not required to pay back the entire principle. 
C) can get indefinite extensions on the loan. 
D) does all of the above. 
E) does none of the above. 
A) does not have to pay interest. 
B) is not required to pay back the entire principle. 
C) can get indefinite extensions on the loan. 
D) does all of the above. 
E) does none of the above. E

Question 4

The level of economic activity in a given year will cause the budget deficit to vary.

Accepted Answer

A) True 
 B)False

Question 5

The portion of a government's indebtedness owed to foreigners is

Accepted Answer

A) external debt. 
B) internal debt. 
C) not recoverable. 
D) net debt. 
A) external debt. 
B) internal debt. 
C) not recoverable. 
D) net debt.

Question 6

At a given point in time,if all past deficits and surpluses were added,we would get the

Accepted Answer

A) Ricardian model. 
B) debt. 
C) crowding?out model. 
D) total amount of excess burden. 
A) Ricardian model. 
B) debt. 
C) crowding?out model. 
D) total amount of excess burden.

Question 7

The purpose of functional finance is to

Accepted Answer

A) decrease deficits through monetary policy. 
B) use fiscal policy to keep aggregate demand at the desired level,regardless of the impact on deficits. 
C) tax corporate income first at the corporate level,and then again when it is distributed to shareholders. 
D) use monetary policy to keep deficits stable over time. 
A) decrease deficits through monetary policy. 
B) use fiscal policy to keep aggregate demand at the desired level,regardless of the impact on deficits. 
C) tax corporate income first at the corporate level,and then again when it is distributed to shareholders. 
D) use monetary policy to keep deficits stable over time.

Question 8

The burden of the debt can be viewed as

Accepted Answer

A) a moral question. 
B) a political question. 
C) a financial question. 
D) all of the above. 
A) a moral question. 
B) a political question. 
C) a financial question. 
D) all of the above.

Question 9

During the period from 1999 - 2008,federal budget deficits

Accepted Answer

A) were never calculated. 
B) fell dramatically. 
C) increased as a percentage of GDP. 
D) can be regarded as structural. 
A) were never calculated. 
B) fell dramatically. 
C) increased as a percentage of GDP. 
D) can be regarded as structural.

Question 10

Inflation

Accepted Answer

A) increases the real value of the debt. 
B) has no impact on the debt. 
C) decreases the real value of the debt. 
D) is always factored into any calculations of deficits or surpluses. 
A) increases the real value of the debt. 
B) has no impact on the debt. 
C) decreases the real value of the debt. 
D) is always factored into any calculations of deficits or surpluses.

Question 11

If raising taxes or borrowing are your only two choices of financing current expenditures,which would you choose,and why,if you were in charge of setting policy?

Accepted Answer

Both systems have drawbacks.Increasing t

Question 12

-Refer to Figure 20.3.Suppose the equation that equates excess burden to the tax rate can be written as EB = t2,where EB is excess burden and t is the tax rate.
(A)Suppose the tax rate t is initially 12 percent.How much excess burden is generated?
(B)If the tax rate doubles to 24 percent,what happens to excess burden?

Accepted Answer

(A)When the tax rate is 12 per

Question 13

According to a model of intergenerational equity,if future generations are expected to be better off than the current generation,transfers should

Accepted Answer

A) go from the richer generation to the poorer generation. 
B) not be done at all. 
C) go from the poorer generation to the richer generation. 
D) be weighted by increases in the inflation rate. 
A) go from the richer generation to the poorer generation. 
B) not be done at all. 
C) go from the poorer generation to the richer generation. 
D) be weighted by increases in the inflation rate.

Question 14

When a model takes into account the fact that several different generations may coexist simultaneously,this is known as a(n)

Accepted Answer

A) neoclassical model. 
B) life-cycle model. 
C) overlapping generation model. 
D) crowding?out model. 
A) neoclassical model. 
B) life-cycle model. 
C) overlapping generation model. 
D) crowding?out model.

Question 15

Lerner's view on debt financing is

Accepted Answer

A) Future generations bear a burden of external debt. 
B) Burden of debt can be transferred across generations. 
C) Internal debt creates no burden for the future generations. 
D) Government debt crowds-out the available funds for private sector. 
A) Future generations bear a burden of external debt. 
B) Burden of debt can be transferred across generations. 
C) Internal debt creates no burden for the future generations. 
D) Government debt crowds-out the available funds for private sector.

Question 16

In the year 2008,nearly half of all privately held federal debt was held by foreign investors.

Accepted Answer

A) True 
 B)False

Question 17

High real interest rates

Accepted Answer

A) increase the demand for the domestic currency by foreigners. 
B) cause decreased job opportunity. 
C) cause worker productivity to decrease. 
D) crowd out interest-sensitive expenditures. 
A) increase the demand for the domestic currency by foreigners. 
B) cause decreased job opportunity. 
C) cause worker productivity to decrease. 
D) crowd out interest-sensitive expenditures.

Question 18

Before World War II,the United States did not use deficit financing and paid for all goods and services with cash.

Accepted Answer

A) True 
 B)False

Question 19

Ricardian view on debt is that the form of government finance is irrelevant

Accepted Answer

A) True 
 B)False

Question 20

According to the Ricardian view of government deficits,

Accepted Answer

A) any future burden of tax financing should be ignored. 
B) government deficits reduce interest rates. 
C) taxpayers are less capable of saving when debt finance is used rather than tax finance. 
D) the private sector supply of loanable funds will increase in the face of government deficits. 
A) any future burden of tax financing should be ignored. 
B) government deficits reduce interest rates. 
C) taxpayers are less capable of saving when debt finance is used rather than tax finance. 
D) the private sector supply of loanable funds will increase in the face of government deficits.

Exam 20: Deficit Finance

The deficits of the 1980s can be regarded as structural.

Because of the differing account conventions,there is a great deal of arbitrariness in a number that purports to be

When the government borrows in the market,it

The level of economic activity in a given year will cause the budget deficit to vary.

The portion of a government's indebtedness owed to foreigners is

At a given point in time,if all past deficits and surpluses were added,we would get the

The purpose of functional finance is to

The burden of the debt can be viewed as

During the period from 1999 - 2008,federal budget deficits

Inflation

If raising taxes or borrowing are your only two choices of financing current expenditures,which would you choose,and why,if you were in charge of setting policy?

According to a model of intergenerational equity,if future generations are expected to be better off than the current generation,transfers should

When a model takes into account the fact that several different generations may coexist simultaneously,this is known as a(n)

Lerner's view on debt financing is

In the year 2008,nearly half of all privately held federal debt was held by foreign investors.

High real interest rates

Before World War II,the United States did not use deficit financing and paid for all goods and services with cash.

Ricardian view on debt is that the form of government finance is irrelevant

According to the Ricardian view of government deficits,

Introduction

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Public Goods

Externalities

Political Economy

Education

Cost-Benefit Analysis

The Health Care Market

Government and the Market for Health Care

Social Security

Income Redistribution: Conceptual Issues

Expenditure Programs for the Poor

Taxation and Income Distribution

Taxation and Efficiency

Efficient and Equitable Taxation

The Personal Income Tax

Personal Taxation and Behavior

The Corporation Tax

Fundamental Tax Reform: Taxes on Consumption and Wealth

Public Finance in a Federal System

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