Ch. 12

The U.S. private sector holds about _____ percent of outstanding U.S. Treasury bonds. 50 17 30 24

24

Interest payments on the national debt Make it easier for the government to balance the national budget. Are a redistribution of income from taxpayers to bondholders. Have high opportunity costs. Do not affect the national debt.

Are a redistribution of income from taxpayers to bondholders

The national debt increased by nearly $2 trillion in the 1980s because of all of the following except Recessions. Tax cuts. Defense spending. College financing.

College financing

The U.S. government incurred a national debt for the first time during World War II. Ronald Reagan's presidency. The Revolutionary War. The Great Depression.

The Revolutionary War

According to Keynes, an unbalanced budget is appropriate in all of the following situations except when The economy is below full employment. Leakages and injections are out of balance. Macro equilibrium is above full employment. The economy is at full employment.

The economy is at full employment

The largest single holder of the U.S. national debt after the U.S. government is The foreign sector. The private sector. U.S. businesses. None of the choices are correct.

The foreign sector

Which of the following is the best indication that the government is pursuing restrictive fiscal policy? The total deficit increases. The structural deficit increases. The cyclical deficit increases. The structural deficit decreases.

The structural deficit decreases

External debt of the United States refers to The ownership of nongovernment debt by the government. Combined foreign debt held by sources outside the U.S. government. The debt of nongovernment organizations. U.S. government debt held by foreigners.

U.S. government debt held by foreigners

An obligation to make future payment is Debt refinancing. Debt service. A liability. An asset.

a liability

A decrease in private sector borrowing and spending caused by increased government borrowing is Crowding in. Crowding out. Fiscal stimulus. The GDP gap.

Crowding out

Discretionary expenditures account for approximately One-fifth of the federal budget. One-half of the federal budget. One-third of the federal budget. Three-fourths of the federal budget.

One-fifth of the federal budget

Debt ceilings are designed to Reduce the deficit. Balance the federal budget. Specifically reduce the debt held by banks. Do nothing since the Supreme Court held them unconstitutional in 1985.

Reduce the deficit

An increase in unemployment, ceteris paribus, Leads to decreased government expenditures. Leads to increased government revenues. Reduces a budget surplus. Reduces a budget deficit.

Reduces a budget surplus

Which of the following best describes the federal budget during the 1990s? The absolute size of the deficit fell. The relative size of the deficit fell. The absolute size of the debt grew to over $5 trillion. There was a steady downward trend in the relative size of the deficit.

The absolute size of the debt grew to over $5 trillion

The national debt is The amount by which tax revenues exceed government spending for a given year. The accumulation of all annual deficit and surplus flows. The amount by which government spending exceeds tax revenues for a given year. A fairly risky asset that pays interest.

The accumulation of all annual deficit and surplus flows

If there was a federal budget surplus and the government decided to either increase spending or decrease taxes, The budget surplus would get smaller. The budget surplus would get larger. The budget surplus would remain unchanged. None of the choices are correct.

The budget surplus would get smaller

Which of the following is true regarding the "American Recovery and Reinvestment Plan"? The massive 2009 stimulus package was designed to jump-start the recession-bound economy. Critics argued that the massive deficits generated by President Obama's plan would undermine America's financial stability. Critics argued that in order to pay the deficits created by the plan, the government would be forced to raise taxes and cut spending, which would reverse the boost from the stimulus. All of the choices are correct.

All of the choices are correct

If Congress failed to keep the deficit below the ceiling, then the Gramm-Rudman-Hollings Act required Automatic spending cuts. Automatic tax increases. Automatic stabilizers. A balanced budget.

Automatic spending cuts

The government can use a budget surplus to do all of the following except Decrease taxes. Increase income transfers. Increase expenditures on goods and services. Decrease the money supply.

Decrease the money supply

The elements of the federal budget not determined by past legislative or executive commitments are Uncontrollable fiscal spending. Fiscal restraint items. Discretionary fiscal spending. Automatic stabilizers.

Discretionary fiscal spending

The national debt Is paid off each fiscal year when the debt is refinanced. Will never be paid off in any given year, but it will be entirely paid off when it is refinanced over a number of years. Will be paid off when the budget is finally balanced. Equals the dollar amount of outstanding U.S. Treasury bonds.

Equals the dollar amount of outstanding U.S. Treasury bonds

Debt accumulation by the U.S. government in the 1980s: Was small compared with earlier periods of history. Exceeded the debt the country had accumulated over the preceding 200 years. Was caused by war-related expenditures. None of the choices are correct.

Exceeded the debt the country had accumulated over the preceding 200 years

Which of the following is true about the U.S. federal government budget for the year 1998? The U.S. Constitution was amended to require a balanced federal budget. The federal budget deficit was the largest in history. Federal government receipts were greater than federal government spending for the first time in more than 25 years. Federal government outlays were greater than federal government receipts for the first time in more than 25 years.

Federal government receipts were greater than federal government spending for the first time in more than 25 years

Deficit spending results whenever the government Issues bonds to finance the debt. Finances current expenditures that exceed current tax revenues. Refinances the debt. None of the choices are correct.

Finances current expenditures that exceed current tax revenues

In contrast to the structural deficit, the cyclical deficit reflects Fluctuations in economic activity. Fiscal policy decisions. Changes in discretionary fiscal policy. Changes in the "full-employment" deficit.

Fluctuations in economic activity

Automatic stabilizers tend to stabilize the level of economic activity because they Are changed quickly by Congress. Increase the size of the multiplier. Increase spending during recessions and reduce spending during inflationary periods. Control the rate of change in prices.

Increase spending during recessions and reduce spending during inflationary periods

Which of the following policies will reduce the budget deficit while achieving greater fiscal restraint? More government expenditure and higher taxes. More government expenditure and lower taxes. Less government expenditure and higher taxes. Less government expenditure and lower taxes.

Less government expenditure and higher taxes

Much of each year's federal budget is considered "uncontrollable" because It must be spent for purchases, as opposed to transfer payments. Most of the current revenues and expenditures are the result of decisions made in prior years. It is determined by decision makers who do not have the power to change spending and taxes. None of the choices are correct.

Most of the current revenues and expenditures are the result of decisions made in prior years

For the United States, from the 1980s to today, there has been an increase in both absolute size and relative size (relative to GDP) for the federal government in The deficit and the debt. The deficit, but not the debt. The debt, but not the deficit. Neither the deficit nor the debt.

The deficit and the debt

Which of the following owns the largest portion of the U.S. national debt? Foreigners. The federal government. The private sector. State and local governments.

The federal government

In order to reduce the U.S. debt, The government must use deficit spending. The government should spend less than it collects in tax revenues. There will be a transfer of revenue from bondholders to taxpayers. Foreign governments must lend more money to the U.S. government.

The government should spend less than it collects in tax revenues

A deficit ceiling directly limits The rate at which government spending can exceed government revenue. The amount of the national debt. The trade deficit. Inflation.

The rate at which government spending can exceed government revenue

The fiscal agent of the U.S. government is the U.S. Treasury. Federal Reserve System. Securities and Exchange Commission. Congress.

U.S. Treasury