Question 1

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government when the trust fund experiences a surplus ?

Accepted Answer

A)   It increases the reported deficit.
B)   It reduces the reported deficit.
C)   It exerts no effect on the reported deficit.
D)   It increases the deficit during an economic boom but reduces it during a recession.

Question 2

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve System because:

Accepted Answer

A)   the government will not have to repay the privately held debt.
B)   only the privately held debt creates a net interest liability for the federal government.
C)   the privately held debt does not create a net interest liability for the federal government.
D)   taxes will have to be raised in order to pay the interest on the debt held by the Federal Reserve system.

Question 3

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)   10 percent.
B)   20 percent.
C)   30 percent.
D)   50 percent.

Question 4

Which of the following would be  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)   Budget surpluses would be more likely than budget deficits.

Question 5

Exhibit 17-1: Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016   Country  Surplus (+)  or Deficit (−)  as a percent of GDP  Canada −1.10 Iceland 12.57 Latvia 0.06 Norway 3.99 Spain −4.51 United States −4.94\begin{array} { | l c | } \hline 	ext { Country } & 	ext { Surplus } ( + )  	ext { or Deficit } ( - )  	ext { as a percent of GDP } \	ext { Canada } & - 1.10 \	ext { Iceland } & 12.57 \	ext { Latvia } & 0.06 \	ext { Norway } & 3.99 \	ext { Spain } & - 4.51 \	ext { United States } & - 4.94 \\hline\end{array} Country  Canada  Iceland  Latvia  Norway  Spain  United States ​ Surplus (+)  or Deficit (−)  as a percent of GDP −1.1012.570.063.99−4.51−4.94​​  Given the information in Exhibit 17-1, which of the following statements is correct?

Accepted Answer

A)   Canada was the closest of the countries shown to balancing its budget.
B)   Norway likely had to sell government securities to finance its overspending.
C)   Iceland experienced the largest deficit of the countries shown.
D)   The national debts of Canada, Spain and United States increased in 2016.

Question 6

Which of the following owns the largest proportion of the national debt?

Accepted Answer

A)   foreigners
B)   federal, state, and local governments and the Federal Reserve
C)   private individuals, banks, and corporations
D)   foreign governments

Question 7

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 8

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 9

A concern about crowding out caused by increased government borrowing is that:

Accepted Answer

A)   interest rates on private borrowing fall.
B)   lower rates of economic growth can result from a decline in business investment spending.
C)   the federal government may default on its loans.
D)   foreign lenders find it less attractive to help finance federal deficits.

Question 10

Exhibit 17-1: Global Comparison of Government Surpluses and Deficits as a Percentage of GDP, 2016   Country  Surplus (+)  or Deficit (−)  as a percent of GDP  Canada −1.10 Iceland 12.57 Latvia 0.06 Norway 3.99 Spain −4.51 United States −4.94\begin{array} { | l c | } \hline 	ext { Country } & 	ext { Surplus } ( + )  	ext { or Deficit } ( - )  	ext { as a percent of GDP } \	ext { Canada } & - 1.10 \	ext { Iceland } & 12.57 \	ext { Latvia } & 0.06 \	ext { Norway } & 3.99 \	ext { Spain } & - 4.51 \	ext { United States } & - 4.94 \\hline\end{array} Country  Canada  Iceland  Latvia  Norway  Spain  United States ​ Surplus (+)  or Deficit (−)  as a percent of GDP −1.1012.570.063.99−4.51−4.94​​  Given the information in Exhibit 17-1, which of the countries shown was closest to balancing its budget?

Accepted Answer

A)   Iceland
B)   Latvia
C)   Norway
D)   United States

Question 11

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 beca...

Question 12

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Accepted Answer

A)   the president has the right to raise the debt ceiling.
B)   federal agencies operate on the basis of the previous year's budget.
C)   the interest rate paid on the national debt automatically increases.
D)   the federal government shuts down.

Question 13

Supply-siders feel that high levels of government spending:

Accepted Answer

A)   assist private sector investing by creating infrastructure.
B)   have no impact on private sector investment.
C)   complement private spending.
D)   cause private sector investment to decline because of crowding out.

Question 14

According to the crowding-out view, budget deficits will:

Accepted Answer

A)   reduce interest rates.
B)   increase interest rates and retard private investment.
C)   reduce the investments of foreigners in the United States.
D)   increase the capital stock available to future generations.

Question 15

Crowding out occurs when the federal government:

Accepted Answer

A)   raises taxes to finance a budget deficit.
B)   refinances maturing U.S. Treasury bonds.
C)   borrows by selling bonds to finance a deficit.
D)   uses a budget surplus to pay off part of the national debt.

Question 16

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 in 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 17

The national debt is unlikely to cause national bankruptcy because the:

Accepted Answer

A)   national debt can be refinanced by issuing new bonds.
B)   interest on the public debt equals GDP.
C)   national debt cannot be shifted to future generations for repayment.
D)   federal government cannot refinance the outstanding national debt.

Question 18

If the federal government runs a budget deficit, but the budget deficit as a percent of GDP is less than the growth rate of real output, the:

Accepted Answer

A)   national debt will decrease as a share of GDP.
B)   national debt will remain a constant share of GDP.
C)   national debt will increase as a share of GDP.
D)   size of the national debt (in dollar value)  will decline.

Question 19

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

Accepted Answer

A)   decrease the national debt.
B)   decrease interest rates.
C)   decrease borrowing by households and businesses
D)   increase the impact of the spending multiplier.

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)   deficit, the size of the deficit

Exam 17: Federal Deficits Surpluses and the National Debt

Supply-siders feel that high levels of government spending:

Correct Answer
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According to the crowding-out view, budget deficits will:

Correct Answer
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How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government when the trust fund experiences a surplus ?

Correct Answer
verified

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve System because:

Correct Answer
verified

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

Correct Answer
verified
The U.S. government cannot go broke beca...
View Answer

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

Correct Answer
verified

Which of the following owns the largest proportion of the national debt?

Correct Answer
verified

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:

Correct Answer
verified

The national debt is unlikely to cause national bankruptcy because the:

Correct Answer
verified

The crowding-out effect refers to:

Correct Answer
verified

Which of the following statements is true ?

Correct Answer
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Correct Answer
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A concern about crowding out caused by increased government borrowing is that:

Correct Answer
verified

If the federal government runs a budget deficit, but the budget deficit as a percent of GDP is less than the growth rate of real output, the:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Crowding out occurs when the federal government:

Correct Answer
verified

If the federal government were to run a budget deficit, this would:

Correct Answer
verified

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

Correct Answer
verified

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Correct Answer
verified

Exam 17: Federal Deficits Surpluses and the National Debt

Supply-siders feel that high levels of government spending:

Correct AnswerverifiedShow Answer

According to the crowding-out view, budget deficits will:

Correct AnswerverifiedShow Answer

How does inclusion of the current revenues and expenditures of the Social Security trust fund into the budget calculation affect the reported budget deficit of the federal government when the trust fund experiences a surplus ?

Correct AnswerverifiedShow Answer

It is important to distinguish between the privately held portion of the national debt and the portion held by government agencies and the Federal Reserve System because:

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Which of the following owns the largest proportion of the national debt?

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

The national debt is unlikely to cause national bankruptcy because the:

Correct AnswerverifiedShow Answer

The crowding-out effect refers to:

Correct AnswerverifiedShow Answer

Which of the following statements is true ?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A concern about crowding out caused by increased government borrowing is that:

Correct AnswerverifiedShow Answer

If the federal government runs a budget deficit, but the budget deficit as a percent of GDP is less than the growth rate of real output, the:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Crowding out occurs when the federal government:

Correct AnswerverifiedShow Answer

If the federal government were to run a budget deficit, this would:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The U.S. government cannot go broke beca...
View Answer

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

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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