Question 1

If the net public debt declined last year, then which of the following most likely occurred during that year?

Accepted Answer

A)   The government's budget was balanced.
B)   The government experienced a budget surplus.
C)   The government experienced a budget deficit.
D)   The share of foreign holdings of the government's debt increased.E) All of the above
F) C) and D)

Question 2

In the current year, a nation's government spending equals $100 trillion and its revenues are $130 trillion. Which of the following is TRUE?

Accepted Answer

A)   The nation's national debt equals $30 trillion.
B)   This nation has a current year budget surplus of $30 trillion.
C)   This nation is currently running a budget deficit of $30 trillion.
D)   This nation has a current year budget surplus of $230 trillion.E) B) and C)
F) A) and D)

Question 3

To compare the net public debt of various countries, the debt has to be compared to

Accepted Answer

A)   the country's trade deficit.
B)   the country's current budget deficit or surplus.
C)   the country's real GDP.
D)   the country's national defense expenditure.E) A) and D)
F) B) and C)

Question 4

Noncontrollable expenditures are called "noncontrollable" because

Accepted Answer

A)   they increase at the same rate as the public debt.
B)   they change without congressional action.
C)   only the president can approve these entitlement payments.
D)   the political process determines the size of the payments.E) A) and D)
F) C) and D)

Question 5

In the long run, a higher government budget deficit causes

Accepted Answer

A)   a decrease in both private spending and equilibrium real GDP.
B)   an increase in both private spending and equilibrium real GDP.
C)   a decrease in private spending while equilibrium real GDP remains unchanged.
D)   no change in private spending but a decrease in equilibrium real GDP.E) None of the above
F) A) and B)

Question 6

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

Accepted Answer

A)   Government 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)   Higher government deficits will raise equilibrium Gross Domestic Product (GDP)  above the full-employment level and also have an inflationary effect.E) A) and B)
F) B) and D)

Question 7

If the public debt increased by the same amount each year during the past three years, then

Accepted Answer

A)   the U.S. government must have operated with the same budget surpluses during the past three years.
B)   the U.S. government must have experienced budget surpluses that increased by the same amount each of the past three years.
C)   the U.S. Treasury must have issued securities to fund a flow of government spending that exceeded a flow of tax revenues by the same amount during each of the past three years.
D)   during each of the past three years, the U.S. Treasury must have bought back the same amount of securities that had previously been issued to cover deficits experienced more than three years ago.E) A) and B)
F) None of the above

Question 8

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.E) A) and D)
F) A) and C)

Question 9

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.E) B) and D)
F) B) and C)

Question 10

Which of the following statements is TRUE about the difference between the public debt and the government budget deficit?

Accepted Answer

A)   The public debt always increases while the government budget deficit may increase or decrease.
B)   The public debt for this year will increase or decrease depending upon whether there is a government budget deficit or a government budget surplus.
C)   The public debt is a flow measure and the government budget deficit is not a flow measure.
D)   There is no relationship between the public debt and the government budget deficit since one is a stock measure and the other is a flow measure.E) A) and B)
F) All of the above

Question 11

-Suppose that initially there is no public debt. Using the above table, the public debt over this four-year period would have

Accepted Answer

A)   increased by $215.
B)   decreased by $100.
C)   increased by $1,375.
D)   decreased by $1,590.E) None of the above
F) B) and C)

Question 12

Which of the following is TRUE about how trade deficits and government budget deficits are related?

Accepted Answer

A)   The trade deficit leads to a reduction in investment that leads to a government budget deficit.
B)   The trade deficit leads to a decline in imports relative to exports that leads to a government budget deficit.
C)   The government budget deficit leads to higher interest rates that will lead to a trade deficit.
D)   The government budget deficit leads to lower interest rates that will lead to a lower trade deficit.E) C) and D)
F) B) and D)

Question 13

Which of the following is the best measure of the total amount that the federal government owes to private owners of U.S. Treasury securities?

Accepted Answer

A)   government interagency borrowing
B)   the government budget deficit
C)   the gross public debt
D)   the net public debtE) B) and D)
F) B) and C)

Question 14

To evaluate relative changes in the net public debt, we must

Accepted Answer

A)   look at the absolute amount owed by the government.
B)   compare it to the nation's real GDP.
C)   look at the annual percentage change in the public debt.
D)   compare it to the debts of all developed countries.E) A) and D)
F) C) and D)

Question 15

Since 1940, the U.S. government has experienced

Accepted Answer

A)   about the same number of years with budget deficits as with budget surpluses.
B)   twice as many annual budget surpluses as annual budget deficits.
C)   only one year with a budget surplus.
D)   many more budget deficits than budget surpluses.E) A) and D)
F) A) and B)

Question 16

Which of the following is NOT an example of a flow variable?

Accepted Answer

A)   planned investment
B)   capital stock
C)   The federal deficit
D)   inventory investmentE) B) and D)
F) None of the above

Question 17

Suppose that the federal government had a budget deficit of $80 billion in year 1 and $10 billion in year 2, but it had budget surpluses of $140 billion in year 3 and $20 billion in year 4. Also assume that the government uses any budget surpluses to pay down the public debt. At the end of these four years, the Federal government's public debt would have

Accepted Answer

A)   decreased by $70 billion.
B)   increased by $250 billion.
C)   increased by $70 billion.
D)   decreased by $62.5 billion.E) B) and D)
F) A) and C)

Question 18

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 stocksE) A) and D)
F) B) and C)

Question 19

The difference between gross public debt and net public debt is that

Accepted Answer

A)   net public debt includes interagency borrowing while the gross domestic product debt does not.
B)   net public debt is expressed in real terms while gross public debt is expressed in nominal terms.
C)   gross public debt includes interagency borrowing while net public debt does not.
D)   gross public debt is held by individuals while net public debt is held by the government.E) A) and B)
F) A) and C)

Question 20

A government budget surplus is

Accepted Answer

A)   a situation in which the supply of goods in the economy is greater than the demand for goods.
B)   a situation in which the amount spent by the government is greater than the amount collected in taxes.
C)   the public debt.
D)   an excess of revenues over government spending.E) B) and C)
F) B) and D)

Exam 14: Deficit Spending and the Public Debt

Correct Answer
verified

Which of the following is the best measure of the total amount that the federal government owes to private owners of U.S. Treasury securities?

Correct Answer
verified

-Suppose that initially there is no public debt. Using the above table, the public debt over this four-year period would have

Correct Answer
verified

In the long run, a higher government budget deficit causes

Correct Answer
verified

Noncontrollable expenditures are called "noncontrollable" because

Correct Answer
verified

A government budget surplus is

Correct Answer
verified

Which of the following is TRUE about how trade deficits and government budget deficits are related?

Correct Answer
verified

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

Correct Answer
verified

To evaluate relative changes in the net public debt, we must

Correct Answer
verified

Net public debt is equal to

Correct Answer
verified

The difference between gross public debt and net public debt is that

Correct Answer
verified

In the current year, a nation's government spending equals $100 trillion and its revenues are $130 trillion. Which of the following is TRUE?

Correct Answer
verified

Since 1940, the U.S. government has experienced

Correct Answer
verified

If the net public debt declined last year, then which of the following most likely occurred during that year?

Correct Answer
verified

Which of the following statements is TRUE about the difference between the public debt and the government budget deficit?

Correct Answer
verified

To compare the net public debt of various countries, the debt has to be compared to

Correct Answer
verified

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

Correct Answer
verified

If the public debt increased by the same amount each year during the past three years, then

Correct Answer
verified

Stocks change whereas flows relate to .

Correct Answer
verified

Which of the following is NOT an example of a flow variable?

Correct Answer
verified

Exam 14: Deficit Spending and the Public Debt

Correct AnswerverifiedShow Answer

Which of the following is the best measure of the total amount that the federal government owes to private owners of U.S. Treasury securities?

Correct AnswerverifiedShow Answer

-Suppose that initially there is no public debt. Using the above table, the public debt over this four-year period would have

Correct AnswerverifiedShow Answer

In the long run, a higher government budget deficit causes

Correct AnswerverifiedShow Answer

Noncontrollable expenditures are called "noncontrollable" because

Correct AnswerverifiedShow Answer

A government budget surplus is

Correct AnswerverifiedShow Answer

Which of the following is TRUE about how trade deficits and government budget deficits are related?

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?

Correct AnswerverifiedShow Answer

To evaluate relative changes in the net public debt, we must

Correct AnswerverifiedShow Answer

Net public debt is equal to

Correct AnswerverifiedShow Answer

The difference between gross public debt and net public debt is that

Correct AnswerverifiedShow Answer

In the current year, a nation's government spending equals $100 trillion and its revenues are $130 trillion. Which of the following is TRUE?

Correct AnswerverifiedShow Answer

Since 1940, the U.S. government has experienced

Correct AnswerverifiedShow Answer

If the net public debt declined last year, then which of the following most likely occurred during that year?

Correct AnswerverifiedShow Answer

Which of the following statements is TRUE about the difference between the public debt and the government budget deficit?

Correct AnswerverifiedShow Answer

To compare the net public debt of various countries, the debt has to be compared to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the public debt increased by the same amount each year during the past three years, then

Correct AnswerverifiedShow Answer

Stocks change ________ whereas flows relate to ________.

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of a flow variable?

Correct AnswerverifiedShow Answer

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Stocks change whereas flows relate to .

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