Question 1

The fiscal agent of the U.S.government is the

Accepted Answer

A)  U.S.Treasury.
B)  Federal Reserve System.
C)  Securities and Exchange Commission.
D)  Congress.E) A) and B)
F) None of the above

Question 2

According to Keynes,an unbalanced budget is appropriate in all of the following situations except

Accepted Answer

A)  The economy is below full employment.
B)  Leakages and injections are out of balance.
C)  Macro equilibrium is above full employment.
D)  The economy is at full employment.E) B) and C)
F) A) and C)

Question 3

If there was a federal budget surplus and the government decided to either increase spending or decrease taxes,

Accepted Answer

A)  The budget surplus would get smaller.
B)  The budget surplus would get larger.
C)  The budget surplus would remain unchanged.
D)  None of the choices are correct.E) B) and D)
F) B) and C)

Question 4

By using restrictive fiscal policy during the Great Depression,the government improved the economic situation.
From 1931 to 1933,the structural deficit decreased from $4.5 billion to a $2 billion surplus.This fiscal restraint reduced aggregate demand and deepened the Great Depression.

Accepted Answer

A) True 
 B)False

Question 5

According to Keynes,the goal of macroeconomic policy is not to balance the budget but to achieve equilibrium at full employment.
Keynesian theory highlights the potential of fiscal policy and therefore the budget to solve our macro problems such as equilibrium output that differs from full-employment output.In Keynes's view,a balanced budget would be appropriate only if all other injections and leakages were in balance and the economy was in full-employment equilibrium.

Accepted Answer

A) True 
 B)False

Question 6

Much of each year's federal budget is considered "uncontrollable" because

Accepted Answer

A)  It must be spent for purchases,as opposed to transfer payments.
B)  Most of the current revenues and expenditures are the result of decisions made in prior years.
C)  It is determined by decision makers who do not have the power to change spending and taxes.
D)  None of the choices are correct.E) B) and D)
F) All of the above

Question 7

Which of the following is an automatic stabilizer that reduces tax receipts during a recession?

Accepted Answer

A)  Welfare benefits.
B)  Medicaid.
C)  Corporate and individual income taxes.
D)  Indexed retirement and Social Security benefits.E) A) and B)
F) None of the above

Question 8

The U.S.government incurred a national debt for the first time during

Accepted Answer

A)  World War II.
B)  Ronald Reagan's presidency.
C)  The Revolutionary War.
D)  The Great Depression.E) None of the above
F) A) and C)

Question 9

Which of the following required all new federal government spending initiatives to be offset with increased taxes or cutbacks in other programs?

Accepted Answer

A)  Balanced Budget and Emergency Deficit Control Act of 1985.
B)  Gramm-Rudman-Hollings Act of 1985.
C)  The Budget Enforcement Act of 1990.
D)  The Federal Deficit Act of 1982.E) A) and B)
F) A) and C)

Question 10

Which of the following is an appropriate fiscal policy prescription for the government to follow?

Accepted Answer

A)  Deficit reduction during a recession.
B)  Deficit reduction when there is excess AD.
C)  Deficit expansion in an inflationary gap.
D)  Deficit reduction during a war.E) None of the above
F) B) and C)

Question 11

External debt of the United States refers to

Accepted Answer

A)  The ownership of nongovernment debt by the government.
B)  Combined foreign debt held by sources outside the U.S.government.
C)  The debt of nongovernment organizations.
D)  U.S.government debt held by foreigners.E) A) and C)
F) B) and C)

Question 12

The opportunity cost of the debt is

Accepted Answer

A)  The interest payments on the debt.
B)  Less of an issue if the economy is below full employment since crowding out is less likely to occur.
C)  Not an issue if the debt is financed internally.
D)  The decrease in public sector output because of government borrowing.E) A) and D)
F) None of the above

Question 13

The Budget Enforcement Act was an example of a debt ceiling.
The Budget Enforcement Act (BEA)of 1990 laid out a plan for Congress to close the structural deficit by limiting discretionary spending or raising taxes.The BEA set separate limits on defense spending,discretionary domestic spending,and international spending.It also required that any new spending initiative be offset with increased taxes or cutbacks in other programs-a process called "pay as you go" or simply "paygo."

Accepted Answer

A) True 
 B)False

Question 14

For the convenience of analyzing the part of the deficit that is sensitive to fiscal policy,the actual deficit is divided into which of the following components?

Accepted Answer

A)  Automatic stabilizers and autonomous consumption.
B)  C,I,G,X,and M.
C)  Structural and cyclical deficits.
D)  Frictional and seasonal deficits.E) A) and D)
F) B) and C)

Question 15

The "real burden" of the debt is directly related to

Accepted Answer

A)  The idea of opportunity cost.
B)  The difference between internally held debt and externally held debt.
C)  The relationship between the Treasury and the Federal Reserve System.
D)  How transfers redistribute income.E) None of the above
F) A) and B)

Question 16

An increase in private sector borrowing and spending caused by decreased government borrowing is known as

Accepted Answer

A)  Crowding out.
B)  Crowding in.
C)  Crowding debt.
D)  Debt reduction.E) B) and C)
F) All of the above

Question 17

In order to maintain a balanced budget every year,during a recession the government would have to

Accepted Answer

A)  Decrease the money supply.
B)  Increase the money supply.
C)  Decrease spending or increase taxes or both.
D)  Increase spending or decrease taxes or both.E) B) and D)
F) A) and B)

Question 18

Fiscal restraint is

Accepted Answer

A)  Tax hikes and/or spending cuts intended to reduce aggregate demand.
B)  Changes in taxes and spending intended to increase aggregate supply.
C)  Tax cuts or spending increases meant to reduce aggregate demand.
D)  Not possible because Congress continues to spend too much money.E) B) and C)
F) A) and B)

Question 19

Which of the following is true about the U.S.federal government budget for the year 1998?

Accepted Answer

A)  The U.S.Constitution was amended to require a balanced federal budget.
B)  The federal budget deficit was the largest in history.
C)  Federal government receipts were greater than federal government spending for the first time in more than 25 years.
D)  Federal government outlays were greater than federal government receipts for the first time in more than 25 years.E) A) and B)
F) A) and D)

Question 20

According to the In the News article in the text titled "Deficit Outlook Darkens,"

Accepted Answer

A)  The national debt will rise due to higher spending and higher taxes.
B)  The national debt will rise due to higher spending and fresh tax cuts.
C)  The national debt will fall regardless of the increase in the deficit.
D)  None of the choices are correct.E) All of the above
F) A) and D)

Exam 12: Deficits and Debt

An increase in private sector borrowing and spending caused by decreased government borrowing is known as

Correct Answer
verified

According to the In the News article in the text titled "Deficit Outlook Darkens,"

Correct Answer
verified

Which of the following is an appropriate fiscal policy prescription for the government to follow?

Correct Answer
verified

Much of each year's federal budget is considered "uncontrollable" because

Correct Answer
verified

The opportunity cost of the debt is

Correct Answer
verified

Correct Answer
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The U.S.government incurred a national debt for the first time during

Correct Answer
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Which of the following is true about the U.S.federal government budget for the year 1998?

Correct Answer
verified

In order to maintain a balanced budget every year,during a recession the government would have to

Correct Answer
verified

By using restrictive fiscal policy during the Great Depression,the government improved the economic situation. From 1931 to 1933,the structural deficit decreased from $4.5 billion to a $2 billion surplus.This fiscal restraint reduced aggregate demand and deepened the Great Depression.

Correct Answer
verified

Which of the following required all new federal government spending initiatives to be offset with increased taxes or cutbacks in other programs?

Correct Answer
verified

External debt of the United States refers to

Correct Answer
verified

According to Keynes,an unbalanced budget is appropriate in all of the following situations except

Correct Answer
verified

For the convenience of analyzing the part of the deficit that is sensitive to fiscal policy,the actual deficit is divided into which of the following components?

Correct Answer
verified

The "real burden" of the debt is directly related to

Correct Answer
verified

Fiscal restraint is

Correct Answer
verified

If there was a federal budget surplus and the government decided to either increase spending or decrease taxes,

Correct Answer
verified

The fiscal agent of the U.S.government is the

Correct Answer
verified

Which of the following is an automatic stabilizer that reduces tax receipts during a recession?

Correct Answer
verified

Exam 12: Deficits and Debt

An increase in private sector borrowing and spending caused by decreased government borrowing is known as

Correct AnswerverifiedShow Answer

According to the In the News article in the text titled "Deficit Outlook Darkens,"

Correct AnswerverifiedShow Answer

Which of the following is an appropriate fiscal policy prescription for the government to follow?

Correct AnswerverifiedShow Answer

Much of each year's federal budget is considered "uncontrollable" because

Correct AnswerverifiedShow Answer

The opportunity cost of the debt is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The U.S.government incurred a national debt for the first time during

Correct AnswerverifiedShow Answer

Which of the following is true about the U.S.federal government budget for the year 1998?

Correct AnswerverifiedShow Answer

In order to maintain a balanced budget every year,during a recession the government would have to

Correct AnswerverifiedShow Answer

By using restrictive fiscal policy during the Great Depression,the government improved the economic situation. From 1931 to 1933,the structural deficit decreased from $4.5 billion to a $2 billion surplus.This fiscal restraint reduced aggregate demand and deepened the Great Depression.

Correct AnswerverifiedShow Answer

Which of the following required all new federal government spending initiatives to be offset with increased taxes or cutbacks in other programs?

Correct AnswerverifiedShow Answer

External debt of the United States refers to

Correct AnswerverifiedShow Answer

According to Keynes,an unbalanced budget is appropriate in all of the following situations except

Correct AnswerverifiedShow Answer

For the convenience of analyzing the part of the deficit that is sensitive to fiscal policy,the actual deficit is divided into which of the following components?

Correct AnswerverifiedShow Answer

The "real burden" of the debt is directly related to

Correct AnswerverifiedShow Answer

Fiscal restraint is

Correct AnswerverifiedShow Answer

If there was a federal budget surplus and the government decided to either increase spending or decrease taxes,

Correct AnswerverifiedShow Answer

The fiscal agent of the U.S.government is the

Correct AnswerverifiedShow Answer

Which of the following is an automatic stabilizer that reduces tax receipts during a recession?

Correct AnswerverifiedShow Answer

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