Question 1

The burden of the internal portion of the debt is incurred

Accepted Answer

A)  When the debt-financed activity takes place.
B)  Solely by the U.S.government.
C)  When the debt comes due.
D)  None of the choices are correct.

Question 2

Which of the following is true about the U.S.federal government budget for the year 1998?

Accepted Answer

A)  The U.S.Constitution was amended to require a balanced federal budget.
B)  The federal budget deficit was the largest in history.
C)  Federal government receipts were greater than federal government spending for the first time in more than 25 years.
D)  Federal government outlays were greater than federal government receipts for the first time in more than 25 years.

Question 3

What is the cyclical deficit,and when is it appropriate to have such a deficit? Why?

Accepted Answer

The cyclical deficit is the portion of t...

Question 4

If the total budget deficit is $200 billion and the deficit at full employment is $120 billion,then the

Accepted Answer

A)  Cyclical deficit is $120 billion.
B)  Cyclical deficit is $80 billion.
C)  Structural deficit is $320 billion.
D)  Structural deficit is $80 billion.

Question 5

Spending for unemployment compensation and welfare benefits increase automatically

Accepted Answer

A)  When the economy expands.
B)  When the economy goes into recession.
C)  When voters make the decision to increase these items.
D)  Only when the fiscal year begins.

Question 6

The true burden of the internal debt is the opportunity cost of the activities financed by the debt,and the burden occurs when the debt-financed activity takes place.

Accepted Answer

A) True 
 B)False

Question 7

In order to reduce the U.S.debt,

Accepted Answer

A)  The government must use deficit spending.
B)  The government should spend less than it collects in tax revenues.
C)  There will be a transfer of revenue from bondholders to taxpayers.
D)  Foreign governments must lend more money to the U.S. government.

Question 8

Suppose the economy is at a full-employment GDP of $1 trillion and the tax revenue received by the federal government is always one-fifth of GDP.If planned government expenditure is $300 billion,the structural

Accepted Answer

A)  Deficit is zero.
B)  Deficit is $100 billion.
C)  Surplus is $100 billion.
D)  Deficit is $500 billion.

Question 9

In the In the News article in the text titled "Fiscal Policy in the Great Depression," President Hoover's prescription in 1932 was for cutbacks in government spending and higher taxes.He was effectively

Accepted Answer

A)  Targeting the goal of full employment rather than reduction of inflation.
B)  Decreasing the level of AD.
C)  Applying the Keynesian prescription for handling a depression.
D)  Following the classical approach of laissez faire.

Question 10

Automatic stabilizers

Accepted Answer

A)  Are included in discretionary fiscal spending.
B)  Cause spending to decrease during a recession.
C)  Help to moderate the extremes of the business cycle.
D)  Are zero at full employment.

Question 11

The government finances the deficit by borrowing directly from the private sector,the banking system,government agencies,and foreign investors.

Accepted Answer

A) True 
 B)False

Question 12

Selling bonds to finance new government debt leads to an opportunity cost that is

Accepted Answer

A)  Less than when government debt is financed with taxes.
B)  Greater than when government debt is financed with taxes.
C)  The same as financing government debt with taxes.
D)  Dependent on who buys the bonds.

Question 13

The largest single holder of the U.S.national debt after the U.S.government is

Accepted Answer

A)  The foreign sector.
B)  The private sector.
C)  U.S.businesses.
D)  None of the choices are correct.

Question 14

If the economy is in a recession,

Accepted Answer

A)  It is operating inside the production possibilities curve,and the opportunity cost of deficit spending is zero.
B)  Deficit spending will not increase the size of the debt because interest rates will be falling.
C)  The economy suffers from structural unemployment,which can be alleviated by debt refinancing.
D)  Larger deficits will decrease the national debt.

Question 15

The Budget Enforcement Act was an example of a debt ceiling.

Accepted Answer

A) True 
 B)False

Question 16

According to the In the News article in the text titled "Deficit Outlook Darkens,"

Accepted Answer

A)  The national debt will rise due to higher spending and higher taxes.
B)  The national debt will rise due to higher spending and fresh tax cuts.
C)  The national debt will fall regardless of the increase in the deficit.
D)  None of the choices are correct.

Question 17

The "real burden" of the debt is directly related to

Accepted Answer

A)  The idea of opportunity cost.
B)  The difference between internally held debt and externally held debt.
C)  The relationship between the Treasury and the Federal Reserve System.
D)  How transfers redistribute income.

Question 18

Debt accumulation by the U.S.government in the 1980s:

Accepted Answer

A)  Was small compared with earlier periods of history.
B)  Exceeded the debt the country had accumulated over the preceding 200 years.
C)  Was caused by war-related expenditures.
D)  None of the choices are correct.

Question 19

Compare and contrast the burden of internally financed debt to externally financed debt.

Accepted Answer

The debt held by U.S.households and inst...

Question 20

Which of the following statements about the U.S.national debt is not correct?

Accepted Answer

A)  The primary economic costs of the debt are being passed on to future generations.
B)  The primary burden of the debt is incurred when the deficit-financed activity takes place.
C)  The national debt represents both a liability and asset to future generations.
D)  Future generations will bear some of the debt burden when crowding out occurs.

Exam 12: Deficits and Debt

Suppose the economy is at a full-employment GDP of $1 trillion and the tax revenue received by the federal government is always one-fifth of GDP.If planned government expenditure is $300 billion,the structural

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Debt accumulation by the U.S.government in the 1980s:

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The burden of the internal portion of the debt is incurred

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Spending for unemployment compensation and welfare benefits increase automatically

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Which of the following statements about the U.S.national debt is not correct?

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The true burden of the internal debt is the opportunity cost of the activities financed by the debt,and the burden occurs when the debt-financed activity takes place.

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The government finances the deficit by borrowing directly from the private sector,the banking system,government agencies,and foreign investors.

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If the total budget deficit is $200 billion and the deficit at full employment is $120 billion,then the

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Which of the following is true about the U.S.federal government budget for the year 1998?

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The "real burden" of the debt is directly related to

Correct AnswerverifiedShow Answer

In the In the News article in the text titled "Fiscal Policy in the Great Depression," President Hoover's prescription in 1932 was for cutbacks in government spending and higher taxes.He was effectively

Correct AnswerverifiedShow Answer

The Budget Enforcement Act was an example of a debt ceiling.

Correct AnswerverifiedShow Answer

In order to reduce the U.S.debt,

Correct AnswerverifiedShow Answer

What is the cyclical deficit,and when is it appropriate to have such a deficit? Why?

Correct AnswerverifiedThe cyclical deficit is the portion of t...View AnswerShow Answer

According to the In the News article in the text titled "Deficit Outlook Darkens,"

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If the economy is in a recession,

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Automatic stabilizers

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Selling bonds to finance new government debt leads to an opportunity cost that is

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The largest single holder of the U.S.national debt after the U.S.government is

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Compare and contrast the burden of internally financed debt to externally financed debt.

Correct AnswerverifiedThe debt held by U.S.households and inst...View AnswerShow Answer

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The cyclical deficit is the portion of t...
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The debt held by U.S.households and inst...
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