Question 1

Until 1980,the national debt was mostly the result of

Accepted Answer

A) wartime borrowing 
B) inflation 
C) bad monetary policy 
D) wasteful Congressional spending 
E) Social Security obligations 
A) wartime borrowing 
B) inflation 
C) bad monetary policy 
D) wasteful Congressional spending 
E) Social Security obligations

Question 2

Actual federal budgets are not an accurate measure of discretionary fiscal policy because

Accepted Answer

A) it is difficult to measure government spending accurately 
B) people cheat on their income taxes 
C) even without changes in fiscal policy,budget deficits increase during expansions 
D) even without changes in fiscal policy,budget deficits increase during recessions 
E) earlier administrations may have contributed to current budget deficits 
A) it is difficult to measure government spending accurately 
B) people cheat on their income taxes 
C) even without changes in fiscal policy,budget deficits increase during expansions 
D) even without changes in fiscal policy,budget deficits increase during recessions 
E) earlier administrations may have contributed to current budget deficits

Question 3

Between the years 2042 and 2052,

Accepted Answer

A) the Social Security Trust Fund will be so large that payroll taxes can be eliminated 
B) the Social Security Trust Fund will be empty 
C) Social Security will have an operating surplus of about $1 trillion per year 
D) the baby boom generation will be gone and Social Security's problems will be eliminated 
E) the Social Security Trust Fund will be larger than the national debt 
A) the Social Security Trust Fund will be so large that payroll taxes can be eliminated 
B) the Social Security Trust Fund will be empty 
C) Social Security will have an operating surplus of about $1 trillion per year 
D) the baby boom generation will be gone and Social Security's problems will be eliminated 
E) the Social Security Trust Fund will be larger than the national debt

Question 4

Which of the following best describes the philosophy of functional finance?

Accepted Answer

A) The federal budget should be balanced each year. 
B) A federal budget deficit should be permitted only during a business expansion. 
C) A federal budget deficit should be permitted only during a recession. 
D) Policy makers should focus on keeping the unemployment rate at the natural rate,even if this means budget deficits. 
E) Policy makers should be less concerned about budget deficits and more concerned with increasing the natural rate of unemployment. 
A) The federal budget should be balanced each year. 
B) A federal budget deficit should be permitted only during a business expansion. 
C) A federal budget deficit should be permitted only during a recession. 
D) Policy makers should focus on keeping the unemployment rate at the natural rate,even if this means budget deficits. 
E) Policy makers should be less concerned about budget deficits and more concerned with increasing the natural rate of unemployment.

Question 5

The U.S.Social Security program

Accepted Answer

A) is a redistribution program that collects taxes from current workers to provide pensions for current retirees 
B) is a redistribution program that collects taxes from retired individuals with high incomes and uses them to provide pensions for individuals with low incomes 
C) is a pay-as-you-go program in which workers' contributions are invested to provide them with income at retirement 
D) is funded by earnings on its investment portfolio 
E) is funded through money creation by the Federal Reserve 
A) is a redistribution program that collects taxes from current workers to provide pensions for current retirees 
B) is a redistribution program that collects taxes from retired individuals with high incomes and uses them to provide pensions for individuals with low incomes 
C) is a pay-as-you-go program in which workers' contributions are invested to provide them with income at retirement 
D) is funded by earnings on its investment portfolio 
E) is funded through money creation by the Federal Reserve

Question 6

Discretionary expansionary fiscal policy may lead to

Accepted Answer

A) all of the following except d 
B) decreased unemployment 
C) inflation 
D) lower interest rates 
E) crowding out 
A) all of the following except d 
B) decreased unemployment 
C) inflation 
D) lower interest rates 
E) crowding out

Question 7

Problems with the federal government budget process include

Accepted Answer

A) Congressional adoption of a budget outline that allows the President too much discretion in spending decisions 
B) a streamlined Congressional committee structure that speeds the process and reduces uncertainty about funding 
C) continuing resolutions that allow agencies to continue operating despite being abolished by Congress 
D) most of the expenditures are for entitlement programs 
E) a brief budget process that does not allow Congress to study whether the budget is an appropriate tool for activist fiscal policy 
A) Congressional adoption of a budget outline that allows the President too much discretion in spending decisions 
B) a streamlined Congressional committee structure that speeds the process and reduces uncertainty about funding 
C) continuing resolutions that allow agencies to continue operating despite being abolished by Congress 
D) most of the expenditures are for entitlement programs 
E) a brief budget process that does not allow Congress to study whether the budget is an appropriate tool for activist fiscal policy

Question 8

The federal budget has been in deficit in all but 9 years since 1960.

Accepted Answer

A) True 
 B)False

Question 9

The functional finance philosophy is based on the idea that balancing the federal budget is less important than using it to promote an economy operating to its potential.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not a problem with the U.S.federal budget process?

Accepted Answer

A) the congressional committee framework 
B) the lengthy budget process 
C) the failure to meet deadlines 
D) the lack of detail in the budget 
E) the portion of the budget over which Congress and the President have little control 
A) the congressional committee framework 
B) the lengthy budget process 
C) the failure to meet deadlines 
D) the lack of detail in the budget 
E) the portion of the budget over which Congress and the President have little control

Question 11

All of the following are possible implications of federal budget deficits except one.Which is the exception?

Accepted Answer

A) crowding out 
B) increased interest rates 
C) inflation 
D) increased trade deficits 
E) depreciation of the dollar 
A) crowding out 
B) increased interest rates 
C) inflation 
D) increased trade deficits 
E) depreciation of the dollar

Question 12

When automatic stabilizers are the cause of higher deficits,we would expect to observe that

Accepted Answer

A) the economy has been contracting 
B) the economy has been growing 
C) interest rates must be rising 
D) interest rates must be falling 
E) net exports have been decreasing 
A) the economy has been contracting 
B) the economy has been growing 
C) interest rates must be rising 
D) interest rates must be falling 
E) net exports have been decreasing

Question 13

If the government increased defense spending by $1 million and laid off enough Justice Department employees to decrease the Department of Justice budget by $1 million,we would expect the net effect to be

Accepted Answer

A) an increase in the budget deficit and in transfer payments 
B) an increase in the budget deficit and in net taxes 
C) an increase in the budget deficit and in government spending 
D) no change in the budget deficit because there is no net change in government spending 
E) no change in the budget deficit because neither defense spending nor the Department of Justice is included in government spending 
A) an increase in the budget deficit and in transfer payments 
B) an increase in the budget deficit and in net taxes 
C) an increase in the budget deficit and in government spending 
D) no change in the budget deficit because there is no net change in government spending 
E) no change in the budget deficit because neither defense spending nor the Department of Justice is included in government spending

Question 14

As of 2012 the U.S.national debt was

Accepted Answer

A) about $1 million 
B) about $1 billion 
C) $1 trillion 
D) $3 trillion 
E) about $15 trillion 
A) about $1 million 
B) about $1 billion 
C) $1 trillion 
D) $3 trillion 
E) about $15 trillion

Question 15

The national debt is dramatically larger than the federal government budget deficit.

Accepted Answer

A) True 
 B)False

Question 16

John Maynard Keynes is best known for advocating

Accepted Answer

A) a policy of annually balancing the budget 
B) deficit spending by the federal government during recessions 
C) the fixed-growth-rate monetary rule 
D) adoption of the biennial budget process 
E) an active monetary policy to prevent inflation 
A) a policy of annually balancing the budget 
B) deficit spending by the federal government during recessions 
C) the fixed-growth-rate monetary rule 
D) adoption of the biennial budget process 
E) an active monetary policy to prevent inflation

Question 17

Only about one-fourth of the federal budget involves expenditure categories determined by existing obligations and laws (e.g.,interest on the national debt,Social Security,and Medicare).

Accepted Answer

A) True 
 B)False

Question 18

A possible budget reform is

Accepted Answer

A) a quadrennial budget 
B) breaking down the budget into increasingly small budget lines 
C) appointing agency heads with different priorities than those of elected representatives 
D) creating a capital budget 
E) eliminating the operating budget 
A) a quadrennial budget 
B) breaking down the budget into increasingly small budget lines 
C) appointing agency heads with different priorities than those of elected representatives 
D) creating a capital budget 
E) eliminating the operating budget

Question 19

Problems with the budget process include the fact that

Accepted Answer

A) all of the following 
B) frequently missed timetables result in continuing resolutions replacing budgets 
C) budgets are frequently overly detailed 
D) much of federal spending is uncontrollable 
E) overlapping budget authorities exist across committees 
A) all of the following 
B) frequently missed timetables result in continuing resolutions replacing budgets 
C) budgets are frequently overly detailed 
D) much of federal spending is uncontrollable 
E) overlapping budget authorities exist across committees

Question 20

Which of the following is not true about the U.S.twin deficits?

Accepted Answer

A) The U.S.is now the world's leading creditor 
B) The U.S.borrows huge sums from abroad 
C) Some critics blame U.S.fiscal policy for the switch from a creditor to a debtor nation 
D) Japan and China are big buyers of U.S.Treasury securities 
E) A debtor country becomes more beholden to those countries that supply credit 
A) The U.S.is now the world's leading creditor 
B) The U.S.borrows huge sums from abroad 
C) Some critics blame U.S.fiscal policy for the switch from a creditor to a debtor nation 
D) Japan and China are big buyers of U.S.Treasury securities 
E) A debtor country becomes more beholden to those countries that supply credit

Exam 13: Federal Budgets and Public Policy

Until 1980,the national debt was mostly the result of

Actual federal budgets are not an accurate measure of discretionary fiscal policy because

Between the years 2042 and 2052,

Which of the following best describes the philosophy of functional finance?

The U.S.Social Security program

Discretionary expansionary fiscal policy may lead to

Problems with the federal government budget process include

The federal budget has been in deficit in all but 9 years since 1960.

The functional finance philosophy is based on the idea that balancing the federal budget is less important than using it to promote an economy operating to its potential.

Which of the following is not a problem with the U.S.federal budget process?

All of the following are possible implications of federal budget deficits except one.Which is the exception?

When automatic stabilizers are the cause of higher deficits,we would expect to observe that

If the government increased defense spending by $1 million and laid off enough Justice Department employees to decrease the Department of Justice budget by $1 million,we would expect the net effect to be

As of 2012 the U.S.national debt was

The national debt is dramatically larger than the federal government budget deficit.

John Maynard Keynes is best known for advocating

Only about one-fourth of the federal budget involves expenditure categories determined by existing obligations and laws (e.g.,interest on the national debt,Social Security,and Medicare).

A possible budget reform is

Problems with the budget process include the fact that

Which of the following is not true about the U.S.twin deficits?

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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