Question 1

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

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain A

Question 2

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. C

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)  all of these answer options are correct. 
E)  none of these answer options are correct. 
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)  all of these answer options are correct. 
E)  none of these answer options are correct. E

Question 4

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 5

We have learned from this chapter that the real value of the debt is eroded by inflation and may be overestimated because of it and other factors.Do you feel that the debt will be a major concern during your working lifetime and retirement?

Accepted Answer

Although answers will vary,the debt will

Question 6

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 7

The burden of the debt does not depend on whether debt finance crowds out private investment.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 8

From an efficiency standpoint,one must compare the excess burdens of tax and debt finance.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

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

The United States has not had a surplus in the last 30 years.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 11

Surpluses will help future generations more than deficits will hurt future generations due to inflation and taxes.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 12

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

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 13

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 these answer options are correct. 
A)  the deficit. 
B)  the surplus. 
C)  the debt. 
D)  all of these answer options are correct.

Question 14

Most economists - both liberals and conservatives - believe a balanced budget amendment is an ill-conceived idea.

Accepted Answer

A)  True 
B)  False 
C)  Uncertain 
A)  True 
B)  False 
C)  Uncertain

Question 15

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 these answer options are correct. 
A)  a moral question. 
B)  a political question. 
C)  a financial question. 
D)  all of these answer options are correct.

Question 16

By the end of 2011,the federal debt was about

Accepted Answer

A)  $20 billion. 
B)  $80.6 billion. 
C)  $1 trillion. 
D)  $10.1 trillion. 
A)  $20 billion. 
B)  $80.6 billion. 
C)  $1 trillion. 
D)  $10.1 trillion.

Question 17

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 18

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.

Question 19

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 20

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.

Exam 20: Deficit Finance

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

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

When the government borrows in the market,it

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?

We have learned from this chapter that the real value of the debt is eroded by inflation and may be overestimated because of it and other factors.Do you feel that the debt will be a major concern during your working lifetime and retirement?

Inflation

The burden of the debt does not depend on whether debt finance crowds out private investment.

From an efficiency standpoint,one must compare the excess burdens of tax and debt finance.

During the period from 1999 - 2008,federal budget deficits

The United States has not had a surplus in the last 30 years.

Surpluses will help future generations more than deficits will hurt future generations due to inflation and taxes.

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

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

Most economists - both liberals and conservatives - believe a balanced budget amendment is an ill-conceived idea.

The burden of the debt can be viewed as

By the end of 2011,the federal debt was about

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

According to the Ricardian view of government deficits,

High real interest rates

Lerner's view on debt financing is

Introduction

Tools of Positive Analysis

Tools of Normative Analysis

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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