Question 1

"Crowding out" is the theory that an increase in our federal government's budget deficit will likely:

Accepted Answer

A)   increase the national debt.
B)   increase interest rates.
C)   decrease borrowing by households and businesses
D)   reduce the impact of the spending multiplier implies because of crowding out.
E)   all of the above.

Question 2

Which of the following statements about crowding out is false?

Accepted Answer

A)   It is not caused by a budget surplus.
B)   It is caused by a budget deficit.
C)   It can completely offset the multiplier.
D)   It affects interest rates and not economic growth.

Question 3

The crowding-out effect indicates that an increase in a fiscal deficit financed by borrowing will increase interest rates and thereby crowd out some domestic investment spending.

Accepted Answer

A) True 
 B)False

Question 4

Crowding out refers to the situation in which:

Accepted Answer

A)   borrowing by the federal government raises interest rates and causes firms to invest less.
B)   foreigners sell their bonds and purchase U.S. goods and services.
C)   borrowing by the federal government causes state and local governments to lower their taxes.
D)   increased federal taxes to balance the budget causes interest rates to increase and consumer credit decreases.

Question 5

External debt is that portion of the national debt:

Accepted Answer

A)   held by private investors.
B)   held by the Federal Reserve.
C)   that the United States does not intend to repay.
D)   held by foreigners.

Question 6

The sum of past federal budget deficits increases the:

Accepted Answer

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

Question 7

The idea that a large national debt is "mortgaging the future of our children and grandchildren" is misleading because:

Accepted Answer

A)   it is the Federal Reserve that will be responsible for making interest payments on the debt.
B)   future generations will have to bear the opportunity costs of the resources that are used today.
C)   future generations will not be liable for the interest obligations of the national debt.
D)   future generations will inherit the interest income as well as the interest obligations.

Question 8

In recent years,net interest on the national debt paid by the federal government as a percentage of GDP is equal to approximately:

Accepted Answer

A)   1 percent.
B)   5 to 9 percent.
C)   10 to 14 percent.
D)   15 to 19 percent.
E)   20-25 percent.

Question 9

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)   15 percent.
B)   20 percent.
C)   40 percent.
D)   30 percent.
E)   50 percent.

Question 10

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 11

The national debt is:

Accepted Answer

A)   the difference between a nation's exports and imports of goods and services.
B)   the sum of the personal debt of all citizens in the United States.
C)   the cumulative effect of all past budget deficits and surpluses of the federal government.
D)   equal to the current size of the budget deficit.

Question 12

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 the above.

Question 13

Does government borrowing crowd out private sector spending?

Accepted Answer

Crowding out refers to government defici...

Question 14

Can the U.S.federal government go broke as a result of a large national debt?

Accepted Answer

The U.S.government cannot go broke becau...

Question 15

"Crowding out" refers to federal government deficits financed by:

Accepted Answer

A)   borrowing which increases interest rates and thereby reduces private spending.
B)   increasing taxes which reduces private spending.
C)   the federal government buying foreign debt which reduces the amount of government spending and government programs.
D)   reducing government spending which reduces interest rates.

Question 16

Between 1998 and 2001,the federal budget was:

Accepted Answer

A)   never in surplus.
B)   in surplus about as often as it was in deficit.
C)   in surplus.
D)   never in deficit.

Question 17

Which of the following statements is true?

Accepted Answer

A)   The national debt is the current year's amount by which the government is spending more than it collects as taxes.
B)   Deficits are financed by the government issuing for sale more government securities.
C)   The debt ceiling refers to the amount of debt at which the government is officially declared as being bankrupt.
D)   Internal national debt is the portion of the national debt owed to foreigners.

Question 18

Currently,the Social Security Trust Fund is running a:

Accepted Answer

A)   deficit, which reduces the apparent size of the budget deficit.
B)   surplus, which reduces the apparent size of the budget deficit.
C)   surplus, which increases the apparent size of the budget deficit.
D)   deficit, which increases the apparent size of the budget deficit.

Question 19

The national debt as a percentage of GDP has remained roughly constant since the end of World War II.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is true?

Accepted Answer

A)   The national debt as a percentage of GDP is greater today than during any other period in our nation's history.
B)   A sizeable external national debt will transfer purchasing power away from foreigners to domestic citizens.
C)   Keynesian theory assumes a total crowding out effect associated with deficit spending.
D)   future generation must pay interest to finance the national debt.

Exam 17: Federal Deficits,Surpluses,and the National Debt

The national debt is:

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Between 1998 and 2001,the federal budget was:

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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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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 statements about crowding out is false?

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Currently,the Social Security Trust Fund is running a:

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Crowding out refers to the situation in which:

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Which of the following statements is true?

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"Crowding out" refers to federal government deficits financed by:

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Can the U.S.federal government go broke as a result of a large national debt?

Correct AnswerverifiedThe U.S.government cannot go broke becau...View AnswerShow Answer

The idea that a large national debt is "mortgaging the future of our children and grandchildren" is misleading because:

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The national debt as a percentage of GDP has remained roughly constant since the end of World War II.

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Which of the following statements is true?

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The crowding-out effect indicates that an increase in a fiscal deficit financed by borrowing will increase interest rates and thereby crowd out some domestic investment spending.

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External debt is that portion of the national debt:

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In recent years,net interest on the national debt paid by the federal government as a percentage of GDP is equal to approximately:

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

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The sum of past federal budget deficits increases the:

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Does government borrowing crowd out private sector spending?

Correct AnswerverifiedCrowding out refers to government defici...View AnswerShow Answer

"Crowding out" is the theory that an increase in our federal government's budget deficit will likely:

Correct AnswerverifiedShow Answer

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The U.S.government cannot go broke becau...
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Crowding out refers to government defici...
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