Question 1

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 2

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 3

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 4

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 5

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

Accepted Answer

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

Question 6

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

Accepted Answer

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

Question 7

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 8

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 9

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 10

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 11

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 12

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

Accepted Answer

A) True 
 B)False

Question 13

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 14

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 15

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 16

The crowding-out effect can be:

Accepted Answer

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

Question 17

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 18

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 19

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 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

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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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:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true ?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The sum of past federal budget deficits is the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

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The crowding-out effect can be:

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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?

Correct AnswerverifiedShow Answer

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

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