Question 1

Biannual budgets have replaced the annual budget process for the federal government.

Accepted Answer

A) True 
 B)False  False

Question 2

The federal government spends more for national defense than for anything else.

Accepted Answer

A) True 
 B)False  False

Question 3

Approximately __________ of the budget falls into expenditure categories that are not determined by existing law.

Accepted Answer

A) one-fourth 
B) one-third 
C) half 
D) two-thirds 
E) three-quarters 
A) one-fourth 
B) one-third 
C) half 
D) two-thirds 
E) three-quarters A

Question 4

The Budget Enforcement Act of 1990

Accepted Answer

A) was a package of spending cuts and tax increases designed to reduce the deficit 
B) was a deficit reduction plan proposed by President Clinton 
C) succeeded in balancing the budget within two years 
D) identified defense and international programs as the only two areas of potential spending cuts 
E) gave the President the authority to make unilateral spending cuts to balance the budget 
A) was a package of spending cuts and tax increases designed to reduce the deficit 
B) was a deficit reduction plan proposed by President Clinton 
C) succeeded in balancing the budget within two years 
D) identified defense and international programs as the only two areas of potential spending cuts 
E) gave the President the authority to make unilateral spending cuts to balance the budget

Question 5

It took more than 200 years for the federal debt to reach $1 trillion.

Accepted Answer

A) True 
 B)False

Question 6

If the fraction of U.S.government securities held by foreigners increases,

Accepted Answer

A) current consumption by U.S.citizens must fall 
B) current consumption by U.S.citizens can rise 
C) current consumption increases by U.S.citizens will be offset by equivalent decreases in future consumption when the debt is refinanced 
D) current consumption decreases by U.S.citizens will be offset by equivalent increases in future consumption when the debt is refinanced 
E) the debt will be less of a burden on our children 
A) current consumption by U.S.citizens must fall 
B) current consumption by U.S.citizens can rise 
C) current consumption increases by U.S.citizens will be offset by equivalent decreases in future consumption when the debt is refinanced 
D) current consumption decreases by U.S.citizens will be offset by equivalent increases in future consumption when the debt is refinanced 
E) the debt will be less of a burden on our children

Question 7

According to the functional finance budget philosophy,

Accepted Answer

A) deficits should never be used to stimulate the economy 
B) automatic stabilizers should be eliminated 
C) the government budget should be whatever is necessary to have the economy operate at potential GDP 
D) each government spending program should be financed on the basis of its function 
E) the federal budget should be balanced in the long run 
A) deficits should never be used to stimulate the economy 
B) automatic stabilizers should be eliminated 
C) the government budget should be whatever is necessary to have the economy operate at potential GDP 
D) each government spending program should be financed on the basis of its function 
E) the federal budget should be balanced in the long run

Question 8

Increased government borrowing to cover a budget deficit causes

Accepted Answer

A) a higher interest rate and depreciation of the U.S.dollar 
B) a higher interest rate and appreciation of the U.S.dollar 
C) a lower interest rate and depreciation of the U.S.dollar 
D) a lower interest rate and appreciation of the U.S.dollar 
E) no change in the interest rate and depreciation of the U.S.dollar 
A) a higher interest rate and depreciation of the U.S.dollar 
B) a higher interest rate and appreciation of the U.S.dollar 
C) a lower interest rate and depreciation of the U.S.dollar 
D) a lower interest rate and appreciation of the U.S.dollar 
E) no change in the interest rate and depreciation of the U.S.dollar

Question 9

If the functional finance approach to federal budgeting is used,the federal government's budget deficit should be zero.

Accepted Answer

A) True 
 B)False

Question 10

The difference between the federal budget deficit and the national debt is that the

Accepted Answer

A) deficit is a stock and the debt is a flow 
B) deficit is a flow and the debt is a stock 
C) debt includes interest payments and the deficit does not 
D) deficit can be positive but the debt cannot 
E) debt can be negative but the deficit cannot 
A) deficit is a stock and the debt is a flow 
B) deficit is a flow and the debt is a stock 
C) debt includes interest payments and the deficit does not 
D) deficit can be positive but the debt cannot 
E) debt can be negative but the deficit cannot

Question 11

Which of the following has been advanced as a legitimate reason for federal budget deficits?

Accepted Answer

A) Both c and d are legitimate reasons for government budget deficits. 
B) All of the following. 
C) Deficits help reduce the size and duration of recessions through the automatic stabilizers. 
D) Deficits have been used to finance capital projects. 
E) If the government had to fund all of its programs with tax revenues,the programs wouldn't get funded. 
A) Both c and d are legitimate reasons for government budget deficits. 
B) All of the following. 
C) Deficits help reduce the size and duration of recessions through the automatic stabilizers. 
D) Deficits have been used to finance capital projects. 
E) If the government had to fund all of its programs with tax revenues,the programs wouldn't get funded.

Question 12

Increasing U.S.trade deficits result in

Accepted Answer

A) both c and d 
B) all of the following 
C) reduced purchases of U.S.government bonds by people in other countries 
D) accumulation of dollars overseas 
E) increased U.S.investment abroad 
A) both c and d 
B) all of the following 
C) reduced purchases of U.S.government bonds by people in other countries 
D) accumulation of dollars overseas 
E) increased U.S.investment abroad

Question 13

Deficits that arise from discretionary fiscal policy lead to

Accepted Answer

A) increased private demand for money,which is offset by the sale of more government securities 
B) decreased private demand for money,which is offset by the sale of more government securities and higher interest rates 
C) increases in the number of government securities sold to the public and higher interest rates 
D) decreases in the number of government securities sold to the public and higher interest rates 
E) increases in the public's demand for money and increases in the number of government securities sold to the public,leading to lower interest rates 
A) increased private demand for money,which is offset by the sale of more government securities 
B) decreased private demand for money,which is offset by the sale of more government securities and higher interest rates 
C) increases in the number of government securities sold to the public and higher interest rates 
D) decreases in the number of government securities sold to the public and higher interest rates 
E) increases in the public's demand for money and increases in the number of government securities sold to the public,leading to lower interest rates

Question 14

If the automatic stabilizers are creating budget deficits,the economy must be experiencing falling output.

Accepted Answer

A) True 
 B)False

Question 15

Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes are increased by $200.(It is important to note that income tax rates do not change.)Which of the following is true?

Accepted Answer

A) Whether the budget deficit increases or decreases will depend on the value of the MPC. 
B) The budget deficit will increase by $200. 
C) The budget deficit will increase by $400. 
D) The budget deficit will decrease as the economy expands. 
E) There will be no change in the budget deficit. 
A) Whether the budget deficit increases or decreases will depend on the value of the MPC. 
B) The budget deficit will increase by $200. 
C) The budget deficit will increase by $400. 
D) The budget deficit will decrease as the economy expands. 
E) There will be no change in the budget deficit.

Question 16

Which of the following statements about the tax cut enacted in 1981 during the Reagan administration is correct?

Accepted Answer

A) The tax cut caused the recession of 1982. 
B) The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time. 
C) The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982. 
D) The tax cut was opposed by the "supply side" economists in President Reagan's administration. 
E) The tax cut was favored by Congress but opposed by the President and passed over his veto. 
A) The tax cut caused the recession of 1982. 
B) The tax cut and the recession of 1982 combined to produce one of the largest peace-time deficits ever experienced up to that time. 
C) The tax cut stimulated a large increase in economic activity and led directly to the balanced budget of 1982. 
D) The tax cut was opposed by the "supply side" economists in President Reagan's administration. 
E) The tax cut was favored by Congress but opposed by the President and passed over his veto.

Question 17

Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.

Accepted Answer

A) True 
 B)False

Question 18

If U.S.interest rates are higher than world rates,we would expect the U.S.dollar to appreciate.

Accepted Answer

A) True 
 B)False

Question 19

If the government runs a cyclically balanced budget,its revenue will equal its expenditure

Accepted Answer

A) each year 
B) at each phase of the business cycle 
C) over the course of the business cycle 
D) only during expansions 
E) only during recessions 
A) each year 
B) at each phase of the business cycle 
C) over the course of the business cycle 
D) only during expansions 
E) only during recessions

Question 20

The Employment Act of 1946

Accepted Answer

A) created the Council of Economic Advisers 
B) established the Office of Management and Budget 
C) centralized budgetary authority by establishing budget committees in the House and Senate 
D) established the goal of a balanced budget 
E) weakened the role of Congress in the budgetary process 
A) created the Council of Economic Advisers 
B) established the Office of Management and Budget 
C) centralized budgetary authority by establishing budget committees in the House and Senate 
D) established the goal of a balanced budget 
E) weakened the role of Congress in the budgetary process

Exam 13: Federal Budgets and Public Policy

Biannual budgets have replaced the annual budget process for the federal government.

The federal government spends more for national defense than for anything else.

Approximately __________ of the budget falls into expenditure categories that are not determined by existing law.

The Budget Enforcement Act of 1990

It took more than 200 years for the federal debt to reach $1 trillion.

If the fraction of U.S.government securities held by foreigners increases,

According to the functional finance budget philosophy,

Increased government borrowing to cover a budget deficit causes

If the functional finance approach to federal budgeting is used,the federal government's budget deficit should be zero.

The difference between the federal budget deficit and the national debt is that the

Which of the following has been advanced as a legitimate reason for federal budget deficits?

Increasing U.S.trade deficits result in

Deficits that arise from discretionary fiscal policy lead to

If the automatic stabilizers are creating budget deficits,the economy must be experiencing falling output.

Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes are increased by $200.(It is important to note that income tax rates do not change.)Which of the following is true?

Which of the following statements about the tax cut enacted in 1981 during the Reagan administration is correct?

Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.

If U.S.interest rates are higher than world rates,we would expect the U.S.dollar to appreciate.

If the government runs a cyclically balanced budget,its revenue will equal its expenditure

The Employment Act of 1946

The Art and Science of Economic Analysis

Economic Tools and Economics Systems

Economic Decision Makers

Demand, supply, and Markets

Introduction to Macroeconomics

Tracking the Useconomy

Unemployment and Inflation

Productivity and Growth

Aaggregate Expenditure and Aggregate Demand

Baggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

Externalities and the Environment

International Finance

Economic Development

understanding Graphs

National Income Accounts

The Algebra of Demand-Side Equilibrium

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