Question 1

To finance a federal budget deficit,the U.S.Treasury borrows by selling:

Accepted Answer

A)   Treasury bills.
B)   Treasury notes.
C)   Treasury bonds.
D)   All of the above.

Question 2

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 3

Which of the following countries has the largest national debt as a percentage of GDP?

Accepted Answer

A)   Greece.
B)   Japan.
C)   United States.
D)   Canada.
E)   Italy.

Question 4

When measured as a percentage of GDP,the U.S.national debt reached its highest levels as a result of:

Accepted Answer

A)   World War II.
B)   The Vietnam War.
C)   The Reagan defense buildup and tax cut.
D)   The Obama economic recovery program.

Question 5

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 6

As the investment demand curve becomes steeper,the crowding-out effect will become smaller.

Accepted Answer

A) True 
 B)False

Question 7

Supply-siders argue that:

Accepted Answer

A)   reductions in government spending cut infrastructure investment which hurts private sector investment.
B)   increases in government spending increase infrastructure investment which helps private sector investment.
C)   increases in government spending causes private sector investment to fall because the government pushes up interest rates.
D)   reductions in government spending cause private sector investment to fall because the government pushes up interest rates by borrowing.
E)   increases in government spending causes consumption spending to fall because the government purchases push up interest rates.

Question 8

The federal budget process begins when federal agencies submit their budget requests to the:

Accepted Answer

A)   Treasury Department.
B)   Council of Economic Advisors (CE
A)  .
C)   Office of Management and Budget (OM
B)  .
D)   Congressional Budget Office (CBO) .

Question 9

The percentage of the national debt held by foreigners is approximately 25 percent.

Accepted Answer

A) True 
 B)False

Question 10

Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the economy,because higher interest rates will discourage consumption and investment.This argument is known as the:

Accepted Answer

A)   deficit-substitution effect.
B)   multiplier effect.
C)   burden-of-debt effect.
D)   crowding-out effect.

Question 11

Most of the U.S.national debt is owed to ____.Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

Accepted Answer

A)   foreigners, foreigners
B)   other U.S. citizens, bondholders
C)   foreigners, those needing government services
D)   other U.S. citizens, those needing government services

Question 12

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

Accepted Answer

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

Question 13

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 14

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy:

Accepted Answer

A)   eventually it will become difficult for the country to borrow in global credit markets.
B)   the country will have to pay higher real interest rates in order to induce investors to purchase its bonds.
C)   at some point, the country will be more or less forced to bring spending into line with revenues in order to maintain the confidence of investors.
D)   all of the above are correct.

Question 15

How does the national debt as a percentage of GDP in the United States compared to Sweden?

Accepted Answer

A)   U.S. national debt ratio is smaller.
B)   U.S. national debt ratio is larger.
C)   U.S. national debt ratio is about the same.
D)   U.S. national debt ratio is substantially smaller.

Question 16

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 17

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

Accepted Answer

A) True 
 B)False

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

When measured as a percentage of GDP,the U.S.national debt reached its highest levels as a result of:

Correct Answer
verified

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

Correct Answer
verified

The percentage of the national debt held by foreigners is approximately 25 percent.

Correct Answer
verified

The federal budget process begins when federal agencies submit their budget requests to the:

Correct Answer
verified

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

Correct Answer
verified

How does the national debt as a percentage of GDP in the United States compared to Sweden?

Correct Answer
verified

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

Correct Answer
verified

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy:

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following is true?

Correct Answer
verified

Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the economy,because higher interest rates will discourage consumption and investment.This argument is known as the:

Correct Answer
verified

Supply-siders argue that:

Correct Answer
verified

Most of the U.S.national debt is owed to .Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of .

Correct Answer
verified

To finance a federal budget deficit,the U.S.Treasury borrows by selling:

Correct Answer
verified

As the investment demand curve becomes steeper,the crowding-out effect will become smaller.

Correct Answer
verified

Which of the following countries has the largest national debt as a percentage of GDP?

Correct Answer
verified

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

When measured as a percentage of GDP,the U.S.national debt reached its highest levels as a result of:

Correct AnswerverifiedShow Answer

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

Correct AnswerverifiedShow Answer

The percentage of the national debt held by foreigners is approximately 25 percent.

Correct AnswerverifiedShow Answer

The federal budget process begins when federal agencies submit their budget requests to the:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

How does the national debt as a percentage of GDP in the United States compared to Sweden?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

As the size of a nation's outstanding debt gets larger and larger relative to the size of the economy:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true?

Correct AnswerverifiedShow Answer

Critics of Keynesian fiscal policy argue that deficit spending will not stimulate the economy,because higher interest rates will discourage consumption and investment.This argument is known as the:

Correct AnswerverifiedShow Answer

Supply-siders argue that:

Correct AnswerverifiedShow Answer

Most of the U.S.national debt is owed to ____.Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

Correct AnswerverifiedShow Answer

To finance a federal budget deficit,the U.S.Treasury borrows by selling:

Correct AnswerverifiedShow Answer

As the investment demand curve becomes steeper,the crowding-out effect will become smaller.

Correct AnswerverifiedShow Answer

Which of the following countries has the largest national debt as a percentage of GDP?

Correct AnswerverifiedShow Answer

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Most of the U.S.national debt is owed to .Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of .

Correct Answer
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