Question 1

In 2010,Social Security payouts exceeded payins for the first time in history.

Accepted Answer

A) True 
 B)False

Question 2

In order for the government to increase spending,it must increase taxes to finance that spending.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following steps does not belong in a sequence reflecting the impact on international markets of increased borrowing to finance a large government budget deficit?

Accepted Answer

A) The U.S.Treasury sells securities. 
B) The sale of securities drives up interest rates. 
C) Attracted by the high interest rates,foreigners purchase dollars in order to invest in the U.S. 
D) Greater demand for the dollar increases its value in exchange for other currencies. 
E) The rising value of the dollar leads to increased U.S.exports and reduced imports. 
A) The U.S.Treasury sells securities. 
B) The sale of securities drives up interest rates. 
C) Attracted by the high interest rates,foreigners purchase dollars in order to invest in the U.S. 
D) Greater demand for the dollar increases its value in exchange for other currencies. 
E) The rising value of the dollar leads to increased U.S.exports and reduced imports.

Question 4

An annually balanced budget

Accepted Answer

A) is the surest path to economic stability 
B) is required by the U.S.Constitution 
C) dampens cyclical swings by decreasing government spending during expansions and increasing it during recessions 
D) accentuates cyclical swings by increasing government spending during expansions and reducing it during recessions 
E) is a goal that has only been achieved twice in the past 5 years 
A) is the surest path to economic stability 
B) is required by the U.S.Constitution 
C) dampens cyclical swings by decreasing government spending during expansions and increasing it during recessions 
D) accentuates cyclical swings by increasing government spending during expansions and reducing it during recessions 
E) is a goal that has only been achieved twice in the past 5 years

Question 5

The accepted philosophy on U.S.federal deficits prior to the Great Depression was that

Accepted Answer

A) the budget should be balanced cyclically 
B) a budget deficit does not matter as long as the economy is at full employment 
C) the budget should be annually balanced 
D) the budget should never be balanced 
E) deficits do not matter 
A) the budget should be balanced cyclically 
B) a budget deficit does not matter as long as the economy is at full employment 
C) the budget should be annually balanced 
D) the budget should never be balanced 
E) deficits do not matter

Question 6

As a result of an increased deficit associated with discretionary fiscal policy,

Accepted Answer

A) both the interest rate and real output fall 
B) both the interest rate and nominal output rise 
C) the interest rate falls and real output rises 
D) the interest rate rises and real output falls 
E) nominal output rises,real output falls,and the interest rate rises 
A) both the interest rate and real output fall 
B) both the interest rate and nominal output rise 
C) the interest rate falls and real output rises 
D) the interest rate rises and real output falls 
E) nominal output rises,real output falls,and the interest rate rises

Question 7

A continuing resolution

Accepted Answer

A) shuts down government agencies in the absence of an approved budget 
B) allows agencies to spend at the rate of the previous year in the absence of an approved budget 
C) enables Congress to override the President's budget 
D) contributes to the efficiency of the federal budget process 
E) is seldom used 
A) shuts down government agencies in the absence of an approved budget 
B) allows agencies to spend at the rate of the previous year in the absence of an approved budget 
C) enables Congress to override the President's budget 
D) contributes to the efficiency of the federal budget process 
E) is seldom used

Question 8

If a federal budget deficit causes crowding out,

Accepted Answer

A) real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because bondholders' saving declines 
B) real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because investment declines 
C) interest rates fall,reducing the burden of the debt 
D) interest rates fall,bringing the current deficit back down 
E) interest rates fall,so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit 
A) real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because bondholders' saving declines 
B) real GDP does not increase by as much as the government purchases of goods and services multiplier would predict because investment declines 
C) interest rates fall,reducing the burden of the debt 
D) interest rates fall,bringing the current deficit back down 
E) interest rates fall,so that decreases in investment and government purchases of goods and services exactly offset the expansionary effect of the deficit

Question 9

If government increased Social Security benefits and decreased the salaries of government workers by the same amount,we would expect the immediate effect to be

Accepted Answer

A) an increase in the budget deficit and in government purchases of goods and services 
B) an increase in the budget deficit but no change in government purchases of goods and services 
C) an increase in the budget deficit and a decrease in government purchases of goods and services 
D) no change in the budget deficit because there has been no change in government purchases of goods and services 
E) no change in the budget deficit because government purchases of goods and services have decreased by the same amount as transfer payments have increased 
A) an increase in the budget deficit and in government purchases of goods and services 
B) an increase in the budget deficit but no change in government purchases of goods and services 
C) an increase in the budget deficit and a decrease in government purchases of goods and services 
D) no change in the budget deficit because there has been no change in government purchases of goods and services 
E) no change in the budget deficit because government purchases of goods and services have decreased by the same amount as transfer payments have increased

Question 10

One proposal for improving the budget process is to

Accepted Answer

A) switch to a two-year or biennial budget 
B) remove the Council of Economic Advisers from the process 
C) require more detail in the various line items of the budget 
D) provide for automatic annual increases in all budget categories 
E) eliminate the role of Congressional committees in the process 
A) switch to a two-year or biennial budget 
B) remove the Council of Economic Advisers from the process 
C) require more detail in the various line items of the budget 
D) provide for automatic annual increases in all budget categories 
E) eliminate the role of Congressional committees in the process

Question 11

When crowding out occurs,

Accepted Answer

A) private spending replaces public spending 
B) the dollar typically weakens in foreign exchange markets 
C) public spending replaces private spending 
D) it offsets any gains created from the lower interest rates 
E) none of the above 
A) private spending replaces public spending 
B) the dollar typically weakens in foreign exchange markets 
C) public spending replaces private spending 
D) it offsets any gains created from the lower interest rates 
E) none of the above

Question 12

Crowding in is more likely to occur,as a consequence of federal deficits,when

Accepted Answer

A) the economy is overheated 
B) interest rates increase significantly 
C) a contractionary gap exists 
D) the deficits lower expectations about economic growth 
E) an expansionary gap exists 
A) the economy is overheated 
B) interest rates increase significantly 
C) a contractionary gap exists 
D) the deficits lower expectations about economic growth 
E) an expansionary gap exists

Question 13

If a budget is cyclically balanced,the government should run a surplus when the economy experiences an expansionary gap.

Accepted Answer

A) True 
 B)False

Question 14

Large budget __________ have come from a combination of tax __________ and spending __________.

Accepted Answer

A) surpluses,cuts,increases 
B) surpluses,increases,increases 
C) deficits,increases,increases 
D) deficits,cuts,cuts 
E) deficits,cuts,increases 
A) surpluses,cuts,increases 
B) surpluses,increases,increases 
C) deficits,increases,increases 
D) deficits,cuts,cuts 
E) deficits,cuts,increases

Question 15

The U.S.federal budget is determined exclusively by Congress.

Accepted Answer

A) True 
 B)False

Question 16

A disadvantage of having an annually balanced budget is that government spending would have to

Accepted Answer

A) increase in recessions and decrease during expansions 
B) decline during a recession to offset the increase in tax revenues 
C) rise during a recession to match the increase in tax revenues 
D) rise during an expansion to offset the decline in tax revenues 
E) decline in a recession to match the decrease in tax revenues 
A) increase in recessions and decrease during expansions 
B) decline during a recession to offset the increase in tax revenues 
C) rise during a recession to match the increase in tax revenues 
D) rise during an expansion to offset the decline in tax revenues 
E) decline in a recession to match the decrease in tax revenues

Question 17

Crowding out refers to the government's increased demand for credit,which

Accepted Answer

A) displaces some private sector consumption by decreasing the price level 
B) displaces some private sector borrowing by decreasing the interest rate 
C) displaces some private sector borrowing by increasing the interest rate 
D) hires labor away from the private sector 
E) means longer lines at government agencies 
A) displaces some private sector consumption by decreasing the price level 
B) displaces some private sector borrowing by decreasing the interest rate 
C) displaces some private sector borrowing by increasing the interest rate 
D) hires labor away from the private sector 
E) means longer lines at government agencies

Question 18

In 1981,policy makers in the Reagan administration predicted a balanced budget for the 1980s because

Accepted Answer

A) the budget included a decrease in defense expenditures 
B) the budget included an increase in the tax rate 
C) the budget included an increase in unspecified government spending 
D) growth in GDP was expected to be large enough to lead to an increase in tax revenues despite the tax cut 
E) growth in GDP was expected to be small enough to require less government spending 
A) the budget included a decrease in defense expenditures 
B) the budget included an increase in the tax rate 
C) the budget included an increase in unspecified government spending 
D) growth in GDP was expected to be large enough to lead to an increase in tax revenues despite the tax cut 
E) growth in GDP was expected to be small enough to require less government spending

Question 19

If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security,the burden on future generations is slight.

Accepted Answer

A) True 
 B)False

Question 20

In the United States since the Great Depression,the federal government has

Accepted Answer

A) run budget deficits only in periods of recession 
B) run a budget deficit in almost every year 
C) practiced a policy of annually balancing the budget 
D) run budget deficits only in wartime 
E) run a surplus in most years 
A) run budget deficits only in periods of recession 
B) run a budget deficit in almost every year 
C) practiced a policy of annually balancing the budget 
D) run budget deficits only in wartime 
E) run a surplus in most years

Exam 13: Federal Budgets and Public Policy

In 2010,Social Security payouts exceeded payins for the first time in history.

In order for the government to increase spending,it must increase taxes to finance that spending.

Which of the following steps does not belong in a sequence reflecting the impact on international markets of increased borrowing to finance a large government budget deficit?

An annually balanced budget

The accepted philosophy on U.S.federal deficits prior to the Great Depression was that

As a result of an increased deficit associated with discretionary fiscal policy,

A continuing resolution

If a federal budget deficit causes crowding out,

If government increased Social Security benefits and decreased the salaries of government workers by the same amount,we would expect the immediate effect to be

One proposal for improving the budget process is to

When crowding out occurs,

Crowding in is more likely to occur,as a consequence of federal deficits,when

If a budget is cyclically balanced,the government should run a surplus when the economy experiences an expansionary gap.

Large budget __________ have come from a combination of tax __________ and spending __________.

The U.S.federal budget is determined exclusively by Congress.

A disadvantage of having an annually balanced budget is that government spending would have to

Crowding out refers to the government's increased demand for credit,which

In 1981,policy makers in the Reagan administration predicted a balanced budget for the 1980s because

If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security,the burden on future generations is slight.

In the United States since the Great Depression,the federal government has

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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Large budget have come from a combination of tax and spending __.