Question 1

The difference between the gross public debt and the net public debt is

Accepted Answer

A)  the sum of all previously accumulated government budget deficits and surpluses. 
B)  the sum of all previously issued U.S. government securities that have been purchased by foreign residents. 
C)  all private-sector borrowing from private sources. 
D)  borrowing of government agencies from other government agencies within the nation. 
A)  the sum of all previously accumulated government budget deficits and surpluses. 
B)  the sum of all previously issued U.S. government securities that have been purchased by foreign residents. 
C)  all private-sector borrowing from private sources. 
D)  borrowing of government agencies from other government agencies within the nation.

Question 2

While the budget deficit represents a ________, the public debt represents a ________.

Accepted Answer

A)  flow; flow 
B)  flow; stock 
C)  stock; stock 
D)  stock; flow 
A)  flow; flow 
B)  flow; stock 
C)  stock; stock 
D)  stock; flow

Question 3

Historical evidence seems to indicate that

Accepted Answer

A)  budget and trade deficits generally move in the same direction. 
B)  budget and trade deficits generally move in the opposite direction. 
C)  there is no consistent relationship between trade and budget deficits. 
D)  trade and budget deficits decrease when the president is a Republican, and increase when the president is a Democrat. 
A)  budget and trade deficits generally move in the same direction. 
B)  budget and trade deficits generally move in the opposite direction. 
C)  there is no consistent relationship between trade and budget deficits. 
D)  trade and budget deficits decrease when the president is a Republican, and increase when the president is a Democrat.

Question 4

What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment? Be sure to discuss the effects in the short-run and in the long-run.

Accepted Answer

In the short run, a budget deficit will

Question 5

Which of the following will NOT cause the public debt to change?

Accepted Answer

A)  an amount of tax collection by the government more than it spends 
B)  government budget deficit 
C)  government budget surplus 
D)  balanced budget 
A)  an amount of tax collection by the government more than it spends 
B)  government budget deficit 
C)  government budget surplus 
D)  balanced budget

Question 6

Which of the following is TRUE of the relationship between U.S. trade deficits and federal government budget deficits?

Accepted Answer

A)  Increases in the budget deficit tend to be associated with increases in the trade deficit. 
B)  Increases in the budget deficit tend to be associated with reductions in the trade deficit. 
C)  Increases in the budget deficit are always associated with increases in the trade deficit. 
D)  Increases in the budget deficit are always associated with reductions in the trade deficit. 
A)  Increases in the budget deficit tend to be associated with increases in the trade deficit. 
B)  Increases in the budget deficit tend to be associated with reductions in the trade deficit. 
C)  Increases in the budget deficit are always associated with increases in the trade deficit. 
D)  Increases in the budget deficit are always associated with reductions in the trade deficit.

Question 7

The long-run effect of increasing government budget deficits includes

Accepted Answer

A)  a redistribution of output from privately provided goods to government provided goods. 
B)  no change in equilibrium real GDP. 
C)  an increase in the price level. 
D)  all of the above. 
A)  a redistribution of output from privately provided goods to government provided goods. 
B)  no change in equilibrium real GDP. 
C)  an increase in the price level. 
D)  all of the above.

Question 8

Which of the following statements is FALSE?

Accepted Answer

A)  The federal budget deficit in 2017 was about 3 percent of the GDP. 
B)  A budget deficit of $100 billion in a given year increases the public debt by $100 billion. 
C)  The public debt of $100 billion is the accumulated debt of all U.S. individuals, firms, and institutions. 
D)  During the past five years, the U.S. public debt has been increasing. 
A)  The federal budget deficit in 2017 was about 3 percent of the GDP. 
B)  A budget deficit of $100 billion in a given year increases the public debt by $100 billion. 
C)  The public debt of $100 billion is the accumulated debt of all U.S. individuals, firms, and institutions. 
D)  During the past five years, the U.S. public debt has been increasing.

Question 9

If the net public debt remains unchanged during a given period, but the gross public debt increases, then which of the following statements must be correct?

Accepted Answer

A)  Government interagency borrowing must have increased during the period. 
B)  Government interagency borrowing must have decreased during the period. 
C)  Foreign ownership of U.S. Treasury securities must have risen during the period. 
D)  Foreign ownership of U.S. Treasury securities must have fallen during the period. 
A)  Government interagency borrowing must have increased during the period. 
B)  Government interagency borrowing must have decreased during the period. 
C)  Foreign ownership of U.S. Treasury securities must have risen during the period. 
D)  Foreign ownership of U.S. Treasury securities must have fallen during the period.

Question 10

Which of the following statements is TRUE about the public debt and future generations?

Accepted Answer

A)  Future generations will always be worse off because they will have to pay off the public debt. 
B)  Increased consumption today will lead to increases in the capital stock in the future. 
C)  Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents. 
D)  The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves. 
A)  Future generations will always be worse off because they will have to pay off the public debt. 
B)  Increased consumption today will lead to increases in the capital stock in the future. 
C)  Future generations may be better off if the rate of return on the borrowed funds is higher than the interest rate paid to foreign residents. 
D)  The public debt cannot be held by foreign residents therefore we really owe the debt to ourselves.

Question 11

Net public debt is

Accepted Answer

A)  all federal public debt irrespective of who owns it. 
B)  gross public debt minus all government interagency borrowing. 
C)  all public debt minus all money owed on the federal income tax. 
D)  all public debt plus all government interagency borrowing. 
A)  all federal public debt irrespective of who owns it. 
B)  gross public debt minus all government interagency borrowing. 
C)  all public debt minus all money owed on the federal income tax. 
D)  all public debt plus all government interagency borrowing.

Question 12

The total value of all outstanding federal government securities is

Accepted Answer

A)  a flow variable. 
B)  the budget deficit. 
C)  total personal wealth. 
D)  none of the above. 
A)  a flow variable. 
B)  the budget deficit. 
C)  total personal wealth. 
D)  none of the above.

Question 13

Which of the following is TRUE of the U.S. trade balance and the federal government budget?

Accepted Answer

A)  In most years since the 1970s, both have been in surplus. 
B)  In most years since the 1970s, both have been in deficit. 
C)  Both exhibited greater variability before the 1970s than they have since. 
D)  The federal government budget deficit was more variable before the 1970s, but the trade deficit has been more variable since. 
A)  In most years since the 1970s, both have been in surplus. 
B)  In most years since the 1970s, both have been in deficit. 
C)  Both exhibited greater variability before the 1970s than they have since. 
D)  The federal government budget deficit was more variable before the 1970s, but the trade deficit has been more variable since.

Question 14

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run?

Accepted Answer

A)  a recessionary gap. 
B)  an increase the price level and a reduction in real GDP. 
C)  an increase in the price level with no change in real GDP. 
D)  an increase in real GDP and an increase in the price level. 
A)  a recessionary gap. 
B)  an increase the price level and a reduction in real GDP. 
C)  an increase in the price level with no change in real GDP. 
D)  an increase in real GDP and an increase in the price level.

Question 15

Other things being equal, during a period when the federal government issues more Treasury securities to borrow funds

Accepted Answer

A)  the flow of government expenditures during that period must exceed the flow of tax revenues. 
B)  the flow of government expenditures during that period must exceed the stock of tax collections. 
C)  the stock of government deficit spending during that period must exceed the flow of tax revenues. 
D)  the stock of government deficit spending during that period must exceed the stock of tax collections. 
A)  the flow of government expenditures during that period must exceed the flow of tax revenues. 
B)  the flow of government expenditures during that period must exceed the stock of tax collections. 
C)  the stock of government deficit spending during that period must exceed the flow of tax revenues. 
D)  the stock of government deficit spending during that period must exceed the stock of tax collections.

Question 16

A government balanced budget is

Accepted Answer

A)  an excess of government spending over government revenues during a given time period. 
B)  a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C)  the total value of all outstanding federal government securities. 
D)  all federal government debt irrespective of who owns it. 
A)  an excess of government spending over government revenues during a given time period. 
B)  a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C)  the total value of all outstanding federal government securities. 
D)  all federal government debt irrespective of who owns it.

Question 17

The gross public debt is the

Accepted Answer

A)  amount of U.S. paper currency and coins in circulation. 
B)  difference between current government expenditures and tax revenues. 
C)  ratio of past deficits to past surpluses. 
D)  total of all accumulated deficits and surpluses. 
A)  amount of U.S. paper currency and coins in circulation. 
B)  difference between current government expenditures and tax revenues. 
C)  ratio of past deficits to past surpluses. 
D)  total of all accumulated deficits and surpluses.

Question 18

Gross public debt is

Accepted Answer

A)  an excess of government spending over government revenues during a given time period. 
B)  a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C)  the total value of budget deficits plus budget surpluses over the past five years. 
D)  all federal government debt irrespective of who owns it. 
A)  an excess of government spending over government revenues during a given time period. 
B)  a situation in which the government's spending is exactly equal to the total taxes and other revenues it collects during a given time period. 
C)  the total value of budget deficits plus budget surpluses over the past five years. 
D)  all federal government debt irrespective of who owns it.

Question 19

Which of the following statements is CORRECT?

Accepted Answer

A)  Since the mid-1940s, expenditures on national defense have increased considerably as a percentage of total federal government spending. 
B)  Since the mid-1940s, expenditures on income security and health programs have increased considerably as a percentage of total federal government spending. 
C)  Taken together, expenditures on national defense and on income security and health programs now account for less than half of all federal government spending. 
D)  Expenditures on national defense now account for more than twice as much federal government spending as expenditures on income security and health programs. 
A)  Since the mid-1940s, expenditures on national defense have increased considerably as a percentage of total federal government spending. 
B)  Since the mid-1940s, expenditures on income security and health programs have increased considerably as a percentage of total federal government spending. 
C)  Taken together, expenditures on national defense and on income security and health programs now account for less than half of all federal government spending. 
D)  Expenditures on national defense now account for more than twice as much federal government spending as expenditures on income security and health programs.

Question 20

If the net public debt expanded last year, then which of the following most likely occurred during the year?

Accepted Answer

A)  The government's budget was balanced. 
B)  The government experienced a budget surplus. 
C)  The government experienced a budget deficit. 
D)  The government's tax collections exceeded its spending. 
A)  The government's budget was balanced. 
B)  The government experienced a budget surplus. 
C)  The government experienced a budget deficit. 
D)  The government's tax collections exceeded its spending.

Exam 14: Deficit Spending and the Public Debt

The difference between the gross public debt and the net public debt is

While the budget deficit represents a ________, the public debt represents a ________.

Historical evidence seems to indicate that

What are the macroeconomic consequences of a budget deficit when the economy is operating at full employment? Be sure to discuss the effects in the short-run and in the long-run.

Which of the following will NOT cause the public debt to change?

Which of the following is TRUE of the relationship between U.S. trade deficits and federal government budget deficits?

The long-run effect of increasing government budget deficits includes

Which of the following statements is FALSE?

If the net public debt remains unchanged during a given period, but the gross public debt increases, then which of the following statements must be correct?

Which of the following statements is TRUE about the public debt and future generations?

Net public debt is

The total value of all outstanding federal government securities is

Which of the following is TRUE of the U.S. trade balance and the federal government budget?

Suppose the economy is initially operating at full employment. A reduction in the size of the budget deficit will cause which of the following in the short run?

Other things being equal, during a period when the federal government issues more Treasury securities to borrow funds

A government balanced budget is

The gross public debt is the

Gross public debt is

Which of the following statements is CORRECT?

If the net public debt expanded last year, then which of the following most likely occurred during the year?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

While the budget deficit represents a , the public debt represents a .