Question 1

Compared to most other industrialized countries shown in the text, the national debt as a percentage of GDP in the United States is:

Accepted Answer

A)  substantially larger.
B)  the same.
C)  slightly larger.
D)  substantially smaller.

Question 2

The national debt is unlikely to cause national bankruptcy because the federal government can:

Accepted Answer

A)  raise taxes.
B)  print money.
C)  refinance its debt.
D)  all of these.

Question 3

If the federal government were to run a budget deficit, this would:

Accepted Answer

A)  increase the size of the national debt.
B)  reduce the size of the national debt.
C)  leave the size of the national debt unchanged.
D)  increase the national debt only if the government also expands the supply of money.

Question 4

The United States has a much higher national debt as a percentage of GDP compared to other industrialized nations.

Accepted Answer

A) True 
 B)False

Question 5

One concern over external national debt is that interest and principal payments transfer wealth overseas. The percentage of the national debt held in recent years by foreigners is approximately:

Accepted Answer

A)  5 percent.
B)  10 percent.
C)  20 percent.
D)  30 percent.
E)  50 percent.

Question 6

Which of the following is true ?

Accepted Answer

A)  The size of the national debt currently is about the same size as it was during World War II.
B)  The national debt increases in size whenever the federal government has a surplus budget.
C)  The national debt's size decreased steadily after 1980.
D)  The current U.S. national debt is over $16.0 trillion.

Question 7

Internal ownership of the debt refers to the portion of the national debt owned by government agencies.

Accepted Answer

A) True 
 B)False

Question 8

If the crowding-out effect is strong, how will the potency of discretionary fiscal policy be affected?

Accepted Answer

A)  It will make fiscal policy more potent.
B)  It will make fiscal policy less potent.
C)  The potency of fiscal policy will be unaffected.
D)  The potency of contractionary will be reduced.

Question 9

Which of the following portions of the national debt impose a net interest burden on the federal government?

Accepted Answer

A)  treasury bonds held by government agencies
B)  treasury bonds held by private investors
C)  treasury bonds held by the Federal Reserve system
D)  treasury bonds held in the Social Security Trust Fund

Question 10

Which of the following is true ?

Accepted Answer

A)  A budget deficit will have no impact on the national debt.
B)  A budget deficit will increase the national debt.
C)  A balanced budget will increase the national debt.
D)  A budget surplus will increase the national debt.

Question 11

The crowding-out effect can be:

Accepted Answer

A)  zero.
B)  partial.
C)  complete.
D)  any of these.

Question 12

Each year, the president must submit a budget proposal to Congress by:

Accepted Answer

A)  January.
B)  April.
C)  July.
D)  October.

Question 13

If Congress fails to pass a budget before the fiscal year starts, then federal agencies may continue to operate only if Congress has passed a:

Accepted Answer

A)  balanced budget amendment.
B)  deficit reduction plan.
C)  conference resolution.
D)  continuing resolution.

Question 14

The sum of past federal budget deficits is the:

Accepted Answer

A)  GDP debt.
B)  trade debt plus GDP.
C)  national debt.
D)  Congressional debt.

Question 15

Which of the following is a valid concern about federal budget deficits?

Accepted Answer

A)  The welfare of future generations will be directly related to the per-capita size of the national debt that they inherit.
B)  Growth of the national debt will eventually lead to the bankruptcy of the government.
C)  When the debt comes due, future generations may be unable to pay it off.
D)  If the increases in the national debt reduce private expenditures on capital formation, aggregate demand is reduced.

Question 16

The huge national debt of the United States is likely to lead to bankruptcy of the national government.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true if all the national debt were owned internally?

Accepted Answer

A)  The federal government would not need to refinance the national debt.
B)  The federal government would not need to worry about raising taxes to pay interest on the national debt.
C)  We would still be concerned about the effect on the distribution of income from interest payments on the national debt.
D)  All of these are true.

Question 18

The crowding-out effect refers to:

Accepted Answer

A)  higher interest rates and reduced private spending that results from financing federal budget deficits.
B)  higher future taxes accompanying budget deficits to reduce private consumption.
C)  the inflation rate to rise when the unemployment rate is low.
D)  increases in private savings to reduce interest rates and, thereby, crowd-out government

Question 19

Since 1995, the net interest payment as a percentage of GDP has:

Accepted Answer

A)  declined.
B)  doubled.
C)  tripled.
D)  quadrupled.

Question 20

If the federal government runs a budget _______, then the national debt becomes __________.

Accepted Answer

A)  surplus, larger
B)  deficit, smaller
C)  surplus, smaller
D)  none of the above

Exam 13: Federal Deficits, Surpluses, and the National Debt

Each year, the president must submit a budget proposal to Congress by:

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Which of the following is a valid concern about federal budget deficits?

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If Congress fails to pass a budget before the fiscal year starts, then federal agencies may continue to operate only if Congress has passed a:

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If the federal government runs a budget _______, then the national debt becomes __________.

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Which of the following is true ?

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One concern over external national debt is that interest and principal payments transfer wealth overseas. The percentage of the national debt held in recent years by foreigners is approximately:

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The United States has a much higher national debt as a percentage of GDP compared to other industrialized nations.

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The national debt is unlikely to cause national bankruptcy because the federal government can:

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The huge national debt of the United States is likely to lead to bankruptcy of the national government.

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The crowding-out effect can be:

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The sum of past federal budget deficits is the:

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Internal ownership of the debt refers to the portion of the national debt owned by government agencies.

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Which of the following portions of the national debt impose a net interest burden on the federal government?

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Which of the following is true if all the national debt were owned internally?

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Which of the following is true ?

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If the federal government were to run a budget deficit, this would:

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Since 1995, the net interest payment as a percentage of GDP has:

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Compared to most other industrialized countries shown in the text, the national debt as a percentage of GDP in the United States is:

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The crowding-out effect refers to:

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If the crowding-out effect is strong, how will the potency of discretionary fiscal policy be affected?

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If the federal government runs a budget _, then the national debt becomes ____.

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