Question 1

In the current year,a nation's government spending equals $1.5 trillion and its revenues are $1.9 trillion.Which of the following is true?

Accepted Answer

A)  The nation's national debt equals $0.4 trillion.
B)  This nation has a current year budget surplus of $0.4 trillion.
C)  This nation is currently running a budget deficit of $0.4 trillion.
D)  The nation has a current year trade surplus of $0.4 trillion.

Question 2

In which decade did the United States begin experiencing large trade deficits?

Accepted Answer

A)  1960s
B)  1970s
C)  1980s
D)  1990s

Question 3

Which of the following statements about the public debt is true?

Accepted Answer

A)  It is a stock variable.
B)  It is equal to the budget deficit.
C)  It decreases when the government runs a budget deficit..
D)  All of the above.

Question 4

Public debt is held as

Accepted Answer

A)  corporate bonds and common stocks of the largest companies.
B)  Federal Reserve Notes.
C)  U.S.Notes.
D)  Treasury Bills,Treasury Notes,Treasury Bonds,and U.S.Savings Bonds.

Question 5

Since the late 1980s,the share of the net public debt owed to foreign interests has

Accepted Answer

A)  remained constant.
B)  decreased.
C)  increased.
D)  gone up and then down,finally settling at around 10 percent.

Question 6

The largest component of U.S.federal spending that contributes to the U.S.government budget deficit is

Accepted Answer

A)  entitlements.
B)  military spending.
C)  interest expenses.
D)  salaries of government employees.

Question 7

-Suppose that initially there is no public debt.Using the above table,what is the public debt as a percentage of GDP in Year 3?

Accepted Answer

A)  1.7 percent
B)  2.0 percent
C)  7.7 percent
D)  5.9 percent

Question 8

Which of the following statements about the budget deficit is true?

Accepted Answer

A)  It is a stock variable.
B)  It is a flow variable.
C)  It is equal to the public debt.
D)  None of the above.

Question 9

Which is the fastest growing component of the federal government budget?

Accepted Answer

A)  Spending on the military and the war on terrorism
B)  Spending to improve the nation's schools
C)  Spending to improve and expand the nation's infrastructure
D)  Spending on entitlements

Question 10

If the net public debt remains unchanged during a given period,but the gross public debt increases,then which of the following statements must be correct?

Accepted Answer

A)  Government interagency borrowing must have increased during the period.
B)  Government interagency borrowing must have decreased during the period.
C)  Foreign ownership of U.S.Treasury securities must have risen during the period.
D)  Foreign ownership of U.S.Treasury securities must have fallen during the period.

Question 11

How does a government budget deficit occur?

Accepted Answer

A)  A government's tax revenues exceed its spending.
B)  A government's spending exceeds its tax revenues.
C)  If a nation carries a public debt,it must be running a deficit every year.
D)  A nation earns more on exports than it spends on imports.

Question 12

Net public debt is

Accepted Answer

A)  all federal public debt irrespective of who owns it.
B)  gross public debt minus all government interagency borrowing.
C)  all public debt minus all money owed on the federal income tax.
D)  all public debt plus all government interagency borrowing.

Question 13

When government spending exceeds government revenues during a given period of time,

Accepted Answer

A)  a budget deficit exists.
B)  a budget surplus exists.
C)  the national debt must be decreasing.
D)  Congress is obliged to raise taxes.

Question 14

Suppose the economy is initially operating at full employment.A reduction in the size of the budget deficit will cause which of the following in the long run?

Accepted Answer

A)  a recessionary gap.
B)  a reduction in real GDP.
C)  an inflationary gap.
D)  none of the above.

Question 15

Net public debt is equal to

Accepted Answer

A)  the gross public debt minus current year tax revenue collection.
B)  the gross public debt minus taxes paid by foreign corporations on their profits made in the United States.
C)  the gross public debt plus all governmental interagency borrowing.
D)  the gross public debt minus all governmental interagency borrowing.

Question 16

In the long run,what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP) ?

Accepted Answer

A)  The government's deficit spending will increase equilibrium real Gross Domestic Product (GDP) .
B)  Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP) .
C)  Higher government deficits will not raise equilibrium Gross Domestic Product (GDP) above the full-employment level.
D)  Equilibrium real Gross Domestic Product (GDP) will increase beyond the full-employment level and there will also be an inflationary effect.

Question 17

Stocks change ________ whereas flows relate to ________.

Accepted Answer

A)  within a given period of time;changes between points in time
B)  only at the end of each year;amounts at a given point in time
C)  between points in time;changes within a given time period
D)  and that causes flows to change;changes that have no impact on stocks

Question 18

What is the difference between the short run and the long run when there is full employment and the government engages in deficit spending?

Accepted Answer

A)  Real GDP will increase in both the short run and the long run.
B)  Real GDP will increase in the long run but not the short run.
C)  Real GDP will increase in the short run but not the long run.
D)  Real GDP will not increase in either the long run or the short run.

Question 19

Which of the following is NOT an entitlement?

Accepted Answer

A)  Medicaid
B)  Social Security
C)  Federal government salaries
D)  Medicare

Question 20

Suppose the economy is initially experiencing a recessionary gap.A reduction in the size of the budget deficit will cause which of the following in the short run?

Accepted Answer

A)  a reduction in the size of the recessionary gap and increase in real GDP.
B)  an increase in the size of the recessionary gap and decrease in real GDP.
C)  an increase in inflation and increase in aggregate supply.
D)  an inflationary gap.

Exam 14: Deficit Spending and the Public Debt

If the net public debt remains unchanged during a given period,but the gross public debt increases,then which of the following statements must be correct?

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When government spending exceeds government revenues during a given period of time,

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In which decade did the United States begin experiencing large trade deficits?

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Suppose the economy is initially experiencing a recessionary gap.A reduction in the size of the budget deficit will cause which of the following in the short run?

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Since the late 1980s,the share of the net public debt owed to foreign interests has

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Which is the fastest growing component of the federal government budget?

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Net public debt is equal to

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In the long run,what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP) ?

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Which of the following is NOT an entitlement?

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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 3?

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The largest component of U.S.federal spending that contributes to the U.S.government budget deficit is

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Stocks change ________ whereas flows relate to ________.

Correct AnswerverifiedShow Answer

In the current year,a nation's government spending equals $1.5 trillion and its revenues are $1.9 trillion.Which of the following is true?

Correct AnswerverifiedShow Answer

Suppose the economy is initially operating at full employment.A reduction in the size of the budget deficit will cause which of the following in the long run?

Correct AnswerverifiedShow Answer

Which of the following statements about the public debt is true?

Correct AnswerverifiedShow Answer

What is the difference between the short run and the long run when there is full employment and the government engages in deficit spending?

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Public debt is held as

Correct AnswerverifiedShow Answer

Net public debt is

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How does a government budget deficit occur?

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Which of the following statements about the budget deficit is true?

Correct AnswerverifiedShow Answer

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Stocks change whereas flows relate to .

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