Question 1

As a possible approach to eliminating the government budget deficit,increasing taxes on the rich only would

Accepted Answer

A)  lead to a significant increase in tax revenues.
B)  not lead to a significant increase in tax revenues.
C)  lead to a greater number of entitlements.
D)  lead to an increase in real GDP.

Question 2

-Suppose that initially there is no public debt.Using the above table,what is the public debt as a percentage of GDP in Year 4?

Accepted Answer

A)  5.8 percent
B)  7.8 percent
C)  3.6 percent
D)  2.0 percent

Question 3

The fastest-growing part of the federal budget is

Accepted Answer

A)  national defense.
B)  payments for services rendered.
C)  entitlements.
D)  government salaries.

Question 4

If the government's spending exactly equals its revenues during a budget year,that government is

Accepted Answer

A)  running a budget deficit.
B)  experiencing a budget surplus.
C)  balancing its budget.
D)  paying off its public debt.

Question 5

If the economy is experiencing an inflationary gap in the short run,an increase in the budget surplus

Accepted Answer

A)  will reduce the size of the inflationary gap.
B)  will increase the size of the inflationary gap.
C)  will cause an increase in inflation and increase aggregate supply.
D)  will increase aggregate demand and will increase the price level.

Question 6

The fastest growing component of the annual federal budgets since 2000 is

Accepted Answer

A)  the education budget.
B)  entitlement payments.
C)  funding for health research.
D)  funding for NASA.

Question 7

The total value of all outstanding federal government securities is called

Accepted Answer

A)  the budget deficit.
B)  the public debt.
C)  the trade deficit.
D)  crowding out.

Question 8

When the Social Security Administration holds U.S.Treasury Bonds

Accepted Answer

A)  interagency borrowing has occurred and the government owes itself.
B)  there is a balanced budget.
C)  an entitlement has occurred.
D)  the gross public debt has increased.

Question 9

Borrowing to finance the increases in government expenditures

Accepted Answer

A)  reduces current private investment expenditures.
B)  increases interest rates.
C)  reduces growth in the nation's private capital stock.
D)  all of the above

Question 10

A government budget deficit 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.

Question 11

If the government has a spending flow that exceeds the revenues it collects,the government will run a ________ that year.

Accepted Answer

A)  debt
B)  deficit
C)  debt and a deficit
D)  surplus

Question 12

How does the federal government finance a budget deficit?

Accepted Answer

A)  It redeems its IOUs.
B)  It purchases U.S.Treasury bonds.
C)  It cuts spending on entitlement programs.
D)  It borrows funds by selling Treasury bonds.

Question 13

One mechanism through which increasing public debt may impact the economy is that the resulting

Accepted Answer

A)  increased competition for funds increases interest rates and causes a reduction in investment.
B)  increased competition for funds decreases interest rates and causes an increase in investment.
C)  decreased competition for funds decreases interest rates and causes a reduction in investment.
D)  decreased competition for funds decreases interest rates and causes an increase in investment.

Question 14

An entitlement is

Accepted Answer

A)  government spending on things like military salaries.
B)  guaranteed benefits under some government programs.
C)  another word for a government budget surplus.
D)  the payments to the private sector in exchange for goods and services.

Question 15

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

Accepted Answer

A)  net public debt includes interagency borrowing while the gross domestic product debt does not.
B)  net public debt is expressed in real terms while gross public debt is expressed in nominal terms.
C)  gross public debt includes interagency borrowing while net public debt does not.
D)  gross public debt is held by individuals while net public debt is held by the government.

Question 16

Historic data indicate that there is usually a ________ relationship between trade deficits and federal government budget deficits.

Accepted Answer

A)  positive
B)  zero
C)  negative
D)  fluctuating

Question 17

Since 2001,the U.S.government budget deficit

Accepted Answer

A)  has been approximately equal to 10% of U.S.GDP.
B)  as a percentage of U.S.GDP has increased steadily each year.
C)  as a percentage of U.S.GDP has decreased steadily each year.
D)  none of the above.

Question 18

The difference between net public debt and gross public debt is

Accepted Answer

A)  all government interagency borrowing.
B)  the interest paid annually on the public debt.
C)  the amount owed to individuals and firms outside the United States.
D)  the current year's budget deficit from the amount of public debt at the start of the year.

Question 19

Government spending that changes automatically without action by Congress is

Accepted Answer

A)  a noncontrollable expenditure.
B)  national defense.
C)  payments to contractors for routing services performed.
D)  discretionary payments.

Question 20

Between the years 1998 and 2001,the U.S.government experienced

Accepted Answer

A)  budget surpluses.
B)  balanced budgets.
C)  budget deficits.
D)  contractionary budget cycles.

Exam 14: Deficit Spending and the Public Debt

Between the years 1998 and 2001,the U.S.government experienced

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Historic data indicate that there is usually a ________ relationship between trade deficits and federal government budget deficits.

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

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When the Social Security Administration holds U.S.Treasury Bonds

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If the government's spending exactly equals its revenues during a budget year,that government is

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The fastest-growing part of the federal budget is

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Since 2001,the U.S.government budget deficit

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If the government has a spending flow that exceeds the revenues it collects,the government will run a ________ that year.

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The difference between net public debt and gross public debt is

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-Suppose that initially there is no public debt.Using the above table,what is the public debt as a percentage of GDP in Year 4?

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One mechanism through which increasing public debt may impact the economy is that the resulting

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How does the federal government finance a budget deficit?

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A government budget deficit is

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An entitlement is

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If the economy is experiencing an inflationary gap in the short run,an increase in the budget surplus

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Government spending that changes automatically without action by Congress is

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The fastest growing component of the annual federal budgets since 2000 is

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Borrowing to finance the increases in government expenditures

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The total value of all outstanding federal government securities is called

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As a possible approach to eliminating the government budget deficit,increasing taxes on the rich only would

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