Question 1

The crowding in of private investment is associated with

Accepted Answer

A) increased investment opportunities resulting from a withdrawal of foreign investors 
B) increased investment opportunities resulting from a decline in interest rates 
C) a reduction in the level of government spending 
D) a reduction in corporate income taxes 
E) more favorable business expectations resulting from an increase in aggregate demand induced by increased government borrowing 
A) increased investment opportunities resulting from a withdrawal of foreign investors 
B) increased investment opportunities resulting from a decline in interest rates 
C) a reduction in the level of government spending 
D) a reduction in corporate income taxes 
E) more favorable business expectations resulting from an increase in aggregate demand induced by increased government borrowing

Question 2

The opportunity cost of deficit spending is likely to be low

Accepted Answer

A) only when it creates new physical capital 
B) only when it creates new human capital 
C) only when it improves existing physical capital 
D) only when it improves existing human capital 
E) when it creates or improves physical or human capital 
A) only when it creates new physical capital 
B) only when it creates new human capital 
C) only when it improves existing physical capital 
D) only when it improves existing human capital 
E) when it creates or improves physical or human capital

Question 3

The national debt is

Accepted Answer

A) a flow variable showing the amount by which the government's spending is greater than its revenues in a given year 
B) a stock variable showing the amount by which the government's spending is greater than its revenues in a given year 
C) a stock variable measuring the net accumulation of past deficits 
D) a flow variable measuring the net accumulation of past deficits 
E) none of the above 
A) a flow variable showing the amount by which the government's spending is greater than its revenues in a given year 
B) a stock variable showing the amount by which the government's spending is greater than its revenues in a given year 
C) a stock variable measuring the net accumulation of past deficits 
D) a flow variable measuring the net accumulation of past deficits 
E) none of the above

Question 4

Which of the following would decrease the size of a federal budget deficit?

Accepted Answer

A) a recession 
B) an increase in defense spending 
C) growth in real GDP 
D) a decrease in taxes 
E) an increase in transfer payments 
A) a recession 
B) an increase in defense spending 
C) growth in real GDP 
D) a decrease in taxes 
E) an increase in transfer payments

Question 5

Cyclical budget deficits refer to

Accepted Answer

A) the fact that deficits increase during expansions and decrease during contractions 
B) the fact that deficits increase during contractions and decrease during expansions 
C) the size of the deficit after the economy has gone through a complete business cycle 
D) the size of the deficit when the economy is at potential GDP 
E) none of the above 
A) the fact that deficits increase during expansions and decrease during contractions 
B) the fact that deficits increase during contractions and decrease during expansions 
C) the size of the deficit after the economy has gone through a complete business cycle 
D) the size of the deficit when the economy is at potential GDP 
E) none of the above

Question 6

One explanation for persistent federal budget deficits is that officials are not required to

Accepted Answer

A) honor the Constitution 
B) balance the budget 
C) raise taxes 
D) run for reelection 
E) None of the answers is correct 
A) honor the Constitution 
B) balance the budget 
C) raise taxes 
D) run for reelection 
E) None of the answers is correct

Question 7

Approximately what percentage of the U.S.federal budget was used for interest payments (on the national debt)in 2012?

Accepted Answer

A) 5 percent 
B) 10 percent 
C) 14 percent 
D) 25 percent 
E) 40 percent 
A) 5 percent 
B) 10 percent 
C) 14 percent 
D) 25 percent 
E) 40 percent

Question 8

When there are large federal budget deficits,the trade deficit (i.e.,exports minus imports)tends to shrink.

Accepted Answer

A) True 
 B)False

Question 9

During the first 50 years of the Social Security program,

Accepted Answer

A) the Trust Fund has always run annual surpluses 
B) the Trust Fund has always run annual deficits 
C) administrators were always concerned with the "baby boom" problem 
D) whenever tax revenue exceeded program costs,Congress raised benefits,expanded eligibility,or spent the surplus on something else 
E) political support for the program dwindled 
A) the Trust Fund has always run annual surpluses 
B) the Trust Fund has always run annual deficits 
C) administrators were always concerned with the "baby boom" problem 
D) whenever tax revenue exceeded program costs,Congress raised benefits,expanded eligibility,or spent the surplus on something else 
E) political support for the program dwindled

Question 10

Which of the following is true of an increase in a federal government budget surplus?

Accepted Answer

A) When the surplus increases,revenues rise less than expenditures. 
B) The aggregate demand curve shifts rightward as a result of an increasing surplus. 
C) The unemployment rate falls as a result of an increasing surplus. 
D) Such an increase in the surplus might close an expansionary gap. 
E) The natural rate of unemployment increases as a result of an increasing surplus. 
A) When the surplus increases,revenues rise less than expenditures. 
B) The aggregate demand curve shifts rightward as a result of an increasing surplus. 
C) The unemployment rate falls as a result of an increasing surplus. 
D) Such an increase in the surplus might close an expansionary gap. 
E) The natural rate of unemployment increases as a result of an increasing surplus.

Question 11

The federal budget deficit becomes __________ during expansions because __________.

Accepted Answer

A) smaller; transfer payments decrease and tax revenues increase 
B) larger; transfer payments decrease and tax revenues increase 
C) larger; both transfer payments and tax revenues increase 
D) smaller; both transfer payments and tax revenues increase 
E) smaller; both transfer payments and tax revenues decrease 
A) smaller; transfer payments decrease and tax revenues increase 
B) larger; transfer payments decrease and tax revenues increase 
C) larger; both transfer payments and tax revenues increase 
D) smaller; both transfer payments and tax revenues increase 
E) smaller; both transfer payments and tax revenues decrease

Question 12

An annually budgeted budget can only be met if automatic stabilizers are effective.

Accepted Answer

A) True 
 B)False

Question 13

Among the following cases,the opportunity cost of crowding out is the smallest when the government spends $9 billion

Accepted Answer

A) staffing the Internal Revenue Service hotline 
B) printing stationery for new members of Congress 
C) placing photographs of the new President in government and diplomatic offices worldwide 
D) on Social Security benefits 
E) on new interstate highways 
A) staffing the Internal Revenue Service hotline 
B) printing stationery for new members of Congress 
C) placing photographs of the new President in government and diplomatic offices worldwide 
D) on Social Security benefits 
E) on new interstate highways

Question 14

It is possible for the budget deficit to change even if there is no change in discretionary fiscal policy.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following was not part of the legislation passed in 1921 changing the budgetary process?

Accepted Answer

A) presidential involvement in writing the budget 
B) establishment of the Office of Management and Budget 
C) creation of an agency to evaluate budget requests 
D) creation of an agency to help the President formulate budget proposals 
E) creation of the Council of Economic Advisers 
A) presidential involvement in writing the budget 
B) establishment of the Office of Management and Budget 
C) creation of an agency to evaluate budget requests 
D) creation of an agency to help the President formulate budget proposals 
E) creation of the Council of Economic Advisers

Question 16

Which institution was created under the Employment Act of 1946 to assist the President in formulating an appropriate fiscal policy?

Accepted Answer

A) the Council of Economic Advisers 
B) the Board of Governors of the Fed 
C) the Office of Management and Budget 
D) the Fed's Open Market Committee 
E) the Department of Commerce 
A) the Council of Economic Advisers 
B) the Board of Governors of the Fed 
C) the Office of Management and Budget 
D) the Fed's Open Market Committee 
E) the Department of Commerce

Question 17

Almost one-half of federal spending consists of cash and "in kind" payments to individuals.

Accepted Answer

A) True 
 B)False

Question 18

According to the budget philosophy of functional finance,

Accepted Answer

A) the budget should be balanced annually 
B) surpluses should be run during periods of prosperity and deficits should be run during recessions 
C) the government should not worry about whether the budget is balanced but worry instead about reaching the potential output level 
D) the budget should never be in balance,no matter what 
E) the rate of growth in the national debt should equal the rate of growth in the money supply 
A) the budget should be balanced annually 
B) surpluses should be run during periods of prosperity and deficits should be run during recessions 
C) the government should not worry about whether the budget is balanced but worry instead about reaching the potential output level 
D) the budget should never be in balance,no matter what 
E) the rate of growth in the national debt should equal the rate of growth in the money supply

Question 19

The federal government budget is

Accepted Answer

A) a year-end record of how much the government received in income and how much it spent 
B) a plan for government expenditures and revenues for the coming year 
C) always in balance: receipts must equal expenditures 
D) equal to government receipts minus government expenditures 
E) usually planned for the calendar year: January through December 
A) a year-end record of how much the government received in income and how much it spent 
B) a plan for government expenditures and revenues for the coming year 
C) always in balance: receipts must equal expenditures 
D) equal to government receipts minus government expenditures 
E) usually planned for the calendar year: January through December

Question 20

If aggregate output is increasing,

Accepted Answer

A) both b and e 
B) tax revenue decreases 
C) automatic stabilizers will tend to increase the size of the deficit 
D) automatic stabilizers will tend to decrease the size of the deficit 
E) transfer payments increase as fewer people become eligible for public assistance 
A) both b and e 
B) tax revenue decreases 
C) automatic stabilizers will tend to increase the size of the deficit 
D) automatic stabilizers will tend to decrease the size of the deficit 
E) transfer payments increase as fewer people become eligible for public assistance

Exam 13: Federal Budgets and Public Policy

The crowding in of private investment is associated with

The opportunity cost of deficit spending is likely to be low

The national debt is

Which of the following would decrease the size of a federal budget deficit?

Cyclical budget deficits refer to

One explanation for persistent federal budget deficits is that officials are not required to

Approximately what percentage of the U.S.federal budget was used for interest payments (on the national debt)in 2012?

When there are large federal budget deficits,the trade deficit (i.e.,exports minus imports)tends to shrink.

During the first 50 years of the Social Security program,

Which of the following is true of an increase in a federal government budget surplus?

The federal budget deficit becomes __________ during expansions because __________.

An annually budgeted budget can only be met if automatic stabilizers are effective.

Among the following cases,the opportunity cost of crowding out is the smallest when the government spends $9 billion

It is possible for the budget deficit to change even if there is no change in discretionary fiscal policy.

Which of the following was not part of the legislation passed in 1921 changing the budgetary process?

Which institution was created under the Employment Act of 1946 to assist the President in formulating an appropriate fiscal policy?

Almost one-half of federal spending consists of cash and "in kind" payments to individuals.

According to the budget philosophy of functional finance,

The federal government budget is

If aggregate output is increasing,

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

Filters

The federal budget deficit becomes during expansions because .