Macroeconomics Chapter 14

In an open​ economy, if the federal government has a budget​ deficit, the trade balance is more likely to be A. a deficit. B. either a deficit or​ surplus; it depends on macroeconomic conditions. C. a surplus. D. balanced.

a

In the presence of a​ short-run recessionary​ gap, government deficit spending can influence both real GDP and employment. A. True B. False

a

As the interest rate or yield on U.S. bonds​ increases, foreigners A. buy more U.S. bonds and fewer U.S. goods and services. B. buy more U.S. bonds and more U.S. goods and services. C. buy fewer U.S. bonds and fewer U.S. goods and services. D. buy fewer U.S. bonds and more U.S. goods and services.

a

If federal budget deficits increase, then a part of that deficit A. will be financed by foreign dollar​ holders, who will buy fewer U.S.​ exports, thus increasing the U.S. trade deficit. B. will be financed by foreign dollar​ holders, who will sell fewer​ imports, thus decreasing the U.S. trade deficit. C. will be financed by domestic bond​ holders, who will buy fewer U.S.​ exports, thus decreasing the U.S. trade deficit. D. will be financed by domestic bond​ holders, who will buy fewer​ imports, thus increasing the U.S. trade deficit.

a

If the rate of return on public investments exceeds the interest rate paid on the bonds issued to finance the​ investments, A. present and future generations will be economically better off. B. future generations will be economically unaffected but the present generation will be economically better off. C. the present generation will be economically better off but future generations will be economically worse off. D. present and future generations will be economically worse off.

a

In​ long-run macroeconomic​ equilibrium, after the economy has fully adjusted to changes in all​ factors, the effect of an increased government budget deficit resulting from higher government spending or lower taxes is A. no change in equilibrium real​ GDP, and a redistribution of real GDP from private spending to public spending. B. increased equilibrium real​ GDP, and a redistribution of real GDP from private spending to public spending. C. increased equilibrium real​ GDP, and a redistribution of real GDP from public spending to private spending. D. decreased equilibrium real​ GDP, and a redistribution of real GDP from private spending to public spending.

a

It may be argued that the effects of a higher public debt... are the same as the effects of a higher deficit because A. a higher deficit creates a higher public debt. B. both lower interest rates. C. both lower current GDP. D. both lower investments by foreign nationals.

a

More than 50 percent of U.S. public debt is owned by foreign residents. A. True B. False

a

Since 1970 the U.S.​ government's budget deficit as a percentage of real GDP has A. averaged approximately​ 3%. B. alternated almost every other year from positive to negative. C. hovered around​ 40%. D. been negative in most years.

a

Since​ 2001, more often than​ not, the U.S. federal government has A. run a budget deficit. B. run a balanced budget. C. decreased its borrowing. D. run a budget surplus.

a

The federal government has its best opportunity to lower its national debt when it has A. a budget surplus. B. a budget deficit. C. a balanced budget. D. All of the above.

a

Which of the following is an example of a flow ​variable? A. The government budget deficit. B. Capital. C. Wealth. D. Housing.

a

Which of the following statements is true regarding the national debt and federal government​ deficits? A. There is a positive relationship between the national debt and a federal government budget deficit. B. There is a positive relationship between the federal government budget surplus and a federal government budget deficit. C. There is a positive relationship between the national debt and a federal government budget surplus. D. There is a positive relationship between the amount of borrowing and a federal government surplus.

a

A natural consequence of the government continually spending more than what it takes in through tax​ receipts, ceteris​ paribus, is that A. net exports take up a larger percentage of the economic activity. B. the government takes up a larger percentage of the economic activity. C. investment takes up a larger percentage of the economic activity. D. consumption takes up a larger percentage of the economic activity.

b

Entitlements in the U.S. are A. rights individuals possess that allow them the freedom to choose what they can purchase. B. ​non-discretionary expenditures that have been legislated by Congress. C. payments that every citizen in the U.S. is entitled to receive. D. a small fraction of the total amount of government expenditures.

b

From an arithmetic point of​ view, a federal budget deficit can be wiped out by simply increasing the amount of taxes collected. A. False B. True

b

Generally a larger US trade deficit is accompanied by a A. a smaller US national debt. B. a larger US federal government budget deficit. C. decreased borrowing by the US government. D. a smaller US federal government budget deficit.

b

Gross public debt A. is net public debt plus interest that the government must pay to those who hold the bonds it has issued to finance past budget deficits. B. is net public debt plus the portion that is held by government agencies. C. is public debt minus the portion that is held by government agencies. D. is net public debt plus the portion of the debt the U.S. government owes to U.S. citizens

b

If foreigners have an excess supply of dollars after trading goods and services they will likely A. sell more U.S. Treasury bonds. B. buy more U.S. Treasury bonds. C. sell more foreign bonds. D. be able to sell more goods and services to the U.S.

b

If the U.S. federal government operates with a budget deficit it must borrow. In order to entice people to lend money to finance this​ deficit, the U.S. government must A. increase the money supply. B. pay a higher rate of interest on the bonds it sells. C. retire previous debt first. D. decrease taxes.

b

If the economy is operating at full employment and the federal government increases its​ borrowing, A. aggregate expenditures and real GDP will rise more rapidly. B. investment will be crowded out. C. the tax burden on future generations will be lessened. D. taxes will be raised immediately.

b

In 2005 national government spending is ​$2.00 trillion and tax collections are ​$2.00 trillion. This​ government, in​ 2005, experienced a Part 2 A. budget deficit. B. balanced budget. C. budget surplus. D. None of the above.

b

Other things​ equal, interest rates will​ ________ whenever there is​ ________ in deficits financed by an increase in borrowing. A. ​fall; an increase B. ​rise; an increase C. ​rise; a decrease D. ​fall; a decrease

b

Since the​ 1940s, more often than​ not, the U.S. federal government has A. had a balanced budget. B. run a budget deficit. C. steadily reduced its borrowing. D. run a budget surplus.

b

Smaller trade deficits tend to accompany larger government budget deficits. A. True B. False

b

Suppose the dollar value of imports to the U.S. exceed the dollar value of exports from the US. This implies that A. U.S. citizens and firms have a surplus of foreign currency. B. foreigners are holding an excess supply of dollars. C. U.S. government spending must increase further. D. foreigners have a shortage of dollars.

b

The federal budget deficit is​ the year-to-year A. short fall in tax revenues relative to government spending. The federal government debt is the accumulation of all past debts. B. short fall in tax revenues relative to government spending. The federal government debt is the accumulation of all past deficits. C. excess of tax revenues relative to government spending. The federal government debt is the accumulation of all past debts. D. surplus in tax revenues relative to government spending. The federal government debt is the accumulation of all past deficits.

b

The total value of all outstanding federal government securities is A. the government budget deficit. B. the public debt. C. a balanced budget. D. the government budget surplus.

b

Which of the following is a reason for this resurgence in federal government budget​ deficits? A. Lower government spending but even lower tax receipts. B. Tax revenue not keeping pace with growth in spending. C. Larger tax revenue with low government spending. D. Higher interest rates.

b

Which of the following is a reason why the public debt may impose a burden on future​ generations? A. Foreign owners of U.S. debt will not spend their income on U.S. products. B. Future taxes may have to be increased to repay the debt. C. Future generations will not have as much income as current generations. D. Current government spending is not used for infrastructure and capital investment.

b

Which of the following statements is true when considering budget deficits and the national​ debt? A. The national debt is a flow variable and a federal budget deficit is a stock variable. B. The national debt is a stock variable and a federal budget deficit is a flow variable. C. Both the national debt and federal budget deficit are flow variables. D. Both the national debt and federal budget deficit are stock variables.

b

A fraction of the funds borrowed by the federal government between 2008 and 2015 were utilized to fund public investments in a number of solar power companies that produced little output and halted operations. These concerns provided no repayments to the government. In what sense might this fraction of deficit spending arguably have imposed a​ "burden" on future​ generations? Part 2 This spending of borrowed funds A. succeeded in contributing to future increases in real​ GDP, so future generations will have to be taxed at a slightly lower rate than otherwise would have been required. B. succeeded in contributing to future increases in real​ GDP, so future generations will have to be taxed at least at a slightly higher rate than otherwise would have been required. C. failed to contribute to future increases in real​ GDP, so future generations will have to be taxed at least at a slightly higher rate than otherwise would have been required. D. failed to contribute to future increases in real​ GDP, so future generations will have to be taxed at a slightly lower rate than otherwise would have been required.

c

If the federal government has a budget deficit it can finance its spending by A. selling corporate bonds. B. selling municipal bonds. C. selling Treasury bonds. D. All the above.

c

Imagine that the net public debt of a​ country's government was currently​ $6 trillion. The debt was entirely held or owned by the citizens of that country. In other​ words, there is no external debt. If the government were to pay off the entire​ $6 trillion of debt today by the use of​ taxes, which of the following statements is true​? A. Individuals and firms owning less of the debt than their share in taxes needed to pay off the debt have realized a decrease in their disposable income. B. Individuals and firms owning more of the debt than their share in taxes needed to pay off the debt have realized an increase in their disposable income. C. Both of these statements are true. D. Neither of these statements is true.

c

In 2005 national government spending is ​$3.00 trillion and tax collections are ​$2.50 trillion. This​ government, in​ 2005, experienced a A. budget surplus. B. balanced budget. C. budget deficit. D. None of the above.

c

In each of the past few​ years, the federal government has regularly borrowed funds to pay for at least​ one-third of expenditures that tax revenues were insufficient to cover. More than 60 percent of all federal expenditures now go for entitlement spending. This fact implies that the government is paying for most of its discretionary expenditures A. by increasing income tax rates. B. by increasing capital gains tax rates. C. by borrowing. D. by increasing corporate tax rates.

c

In the short​ run, if the economy has a recessionary gap​, an increased government budget deficit resulting from higher government spending or lower taxes is most likely to A. increase aggregate demand comma raising prices and creating an inflationary gap. B. have no effect on aggregate demand or real GDP after direct and indirect offsets are counted. C. increase aggregate demand comma which will move the economy toward full employment real GDP. D. decrease aggregate demand comma reducing prices and increasing the recessionary gap.

c

Suppose the federal government wishes to purchase goods and services valued at​ $200 billion today and finances these expenditures by raising taxes. According to some​ economists, this will lead to a lower level of national consumption and a higher level of national savings than if the expenditure had been financed by selling bonds (borrowing). If the economy is operating at full employment and the federal government increases its​ borrowing, A. the tax burden on future generations will be lessened. B. aggregate expenditures and real GDP will rise more rapidly. C. investment will be crowded out. D. taxes will be raised immediately.

c

The U.S. federal government has contemplated ways to reduce its national debt. Which of the following suggestions would best enable the government to achieve this​ goal? A. Increase the money supply or print money to pay these obligations. B. Double the marginal tax rates on wealthy households. C. Reduce government​ spending, raise​ taxes, or both. D. Decrease the amount of government borrowing during the year.

c

The accumulation of borrowing by all federal government agencies is referred to as the A. gross private debt. B. net private debt. C. gross public debt. D. net public debt.

c

What is the relationship between the gross public debt... and the net public​ debt? Part 2 A. The net public debt only includes government debt held by domestic institutions and individuals. B. The gross public debt does not include government debt held by​ inter-governmental agencies. C. The net public debt only included government debt held by the public. D. The gross public debt is equal to the net public debt plus current deficits or less budget surpluses.

c

When considering the gross public​ debt, one can argue that it is overstated because A. it includes household debt too. B. the gross public debt is the​ pre-tax debt. C. the federal government owes itself money. D. the government borrows more than it needs as a precautionary measure.

c

Which of the following is the definition of the government budget deficit​? A. An excess of government revenues over spending during a given period of time. B. The total value of all outstanding government securities. C. An excess of government spending over revenues during a given period of time. D. The total of all past and future tax collections.

c

A trade deficit implies that A. the number of items imported is larger than the number of items exported. B. the dollar value of exports exceeds the dollar value of imports. C. the number of items exported is larger than the number of items imported. D. the dollar value of imports exceeds the dollar value of exports.

d

Entitlements A. are used to finance public goods. B. are tax programs that include lower tax rates for low income individuals. C. have been eliminated from the budget. D. are legislated federal government payments that anyone who qualifies is entitled to receive.

d

Entitlements A. are used to finance public goods. B. are tax programs that include lower tax rates for low income individuals. C. have been eliminated from the budget. D. include payments for Medicare and other health programs such as Medicaid

d

From the end of WWII through 1983 the U.S. government had consistently experienced A. a trade deficit. B. a budget surplus. C. a budget deficit. D. a trade surplus.

d

If a government spends more than it receives during a​ year, then during this year it experiences a​ ________, and if it spends less than it​ receives, it experiences a​ ________. A. budget​ surplus; budget deficit B. budget​ surplus; balanced budget C. budget​ deficit; balanced budget D. budget​ deficit; budget surplus

d

If the accumulation of additional global debt crowds out​ investment, the stock of capital goods will​ ________. The result for future generations would be​ ________ rates of global economic growth. A. remain the​ same; no B. ​fall; marginal C. ​rise; increased D. ​fall; reduced

d

In the long​ run, higher government budget deficits resulting from increased government spending​ and/or tax cuts will do all of the following except A. increase aggregate demand. B. increase inflation. C. redistribute a larger share of real GDP per year to​ government-provided goods and services. D. increase equilibrium real GDP.

d

The net public debt is equal to A. gross government debt minus government debt owned by foreign citizens. B. gross government debt irrespective of who owns it. C. gross government debt minus government debt owned by U.S. citizens. D. gross government debt minus all government interagency borrowing.

d

Which of the following is a reason why the public debt may impose a burden on future​ generations? A. Future generations will not have as much income as current generations. B. Foreign owners of U.S. debt will not spend their income on U.S. products. C. Current government spending is not used for infrastructure and capital investment. D. Government borrowing to finance the debt may drive up interest rates, crowding out investment and consumption.

d

Which of the following statements is true when considering the expenditures of the U.S. federal​ government? A. The expenditures are used for entitlements. B. The expenditures are used for investment in the​ country's infrastructure. C. The expenditures are used for the purchases of goods and services by the federal government. D. The expenditures are used for all these purposes.

d