Question 1

The idea that a large national debt is "mortgaging the future of our children and grandchildren" is misleading because:

Accepted Answer

A)  it is the Federal Reserve that will be responsible for making interest payments on the debt.
B)  future generations will have to bear the opportunity costs of the resources that are used today.
C)  future generations will not be liable for the interest obligations of the national debt.
D)  future generations will inherit the interest income as well as the interest obligations.E) A) and B)
F) B) and C)

Question 2

Supply-siders feel that high levels of government spending:

Accepted Answer

A)  assist private sector investing by creating infrastructure.
B)  have no impact on private sector investment.
C)  complement private spending.
D)  cause private sector investment to decline because of crowding out.
E)  cause private sector spending to decrease because of increases in corporate taxes to finance the government spending.F) B) and C)
G) A) and D)

Question 3

An increase in fiscal deficit spending financed by borrowing will increase the national debt.

Accepted Answer

A) True 
 B)False

Question 4

The federal government never has to pay off the national debt.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following correctly describes the national debt?

Accepted Answer

A)  The excess of annual federal expenditures over annual federal tax revenues.
B)  Annual federal expenditures less annual federal tax revenues plus foreign U.S. bonds purchases.
C)  The total amount of money owed by the federal government.
D)  None of the above.E) A) and B)
F) A) and C)

Question 6

Increased government borrowing stimulates private borrowing because of its effect on interest rates.

Accepted Answer

A) True 
 B)False

Question 7

Between 1960 and 1997, the federal budget was never in surplus.

Accepted Answer

A) True 
 B)False

Question 8

Currently, the U.S. national debt is more than $20 trillion.

Accepted Answer

A) True 
 B)False

Question 9

The total accumulated debt of the federal government due to deficit spending is called the:

Accepted Answer

A)  federal deficit.
B)  Congressional debt.
C)  deficit debt ceiling.
D)  national debt.E) C) and D)
F) B) and D)

Question 10

"Crowding out" is the theory that an increase in our federal government's budget deficit will likely:

Accepted Answer

A)  increase the national debt.
B)  increase interest rates.
C)  decrease borrowing by households and businesses
D)  reduce the impact of the spending multiplier implies because of crowding out.
E)  all of these.F) C) and D)
G) A) and B)

Question 11

The entire national debt is owed to U.S. citizens.

Accepted Answer

A) True 
 B)False

Question 12

The national debt as a percentage of GDP has remained roughly constant since the end of World War II.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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.E) A) and B)
F) All of the above

Question 15

Which of the following statements is true ?

Accepted Answer

A)  The national debt is the current year's amount by which the government is spending more than it collects as taxes.
B)  Deficits are financed by the government issuing for sale more government securities.
C)  The debt ceiling refers to the amount of debt at which the government is officially declared as being bankrupt.
D)  Internal national debt is the portion of the national debt owed to foreigners.E) None of the above
F) A) and B)

Question 16

One of the problems with a growing national debt is the growing interest payments which must be paid on that debt.

Accepted Answer

A) True 
 B)False

Question 17

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

Question 18

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Accepted Answer

A)  the president has the right to raise the debt ceiling.
B)  federal agencies operate on the basis of the previous year's budget.
C)  the interest rate paid on the national debt automatically increases.
D)  the federal government shuts down.E) B) and D)
F) All of the above

Question 19

Which of the following statements about crowding out is false ?

Accepted Answer

A)  It is not caused by a budget surplus.
B)  It is caused by a budget deficit.
C)  It can completely offset the multiplier.
D)  It affects interest rates and not economic growth.E) None of the above
F) B) and C)

Question 20

The way to prevent the national debt from growing is for the budget not to be in deficit.

Accepted Answer

A) True 
 B)False

Exam 13: Federal Deficits, Surpluses, and the National Debt

The idea that a large national debt is "mortgaging the future of our children and grandchildren" is misleading because:

Correct AnswerverifiedShow Answer

If the fiscal year begins without a budget and Congress fails to pass continuing resolution, then:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Increased government borrowing stimulates private borrowing because of its effect on interest rates.

Correct AnswerverifiedShow Answer

Currently, the U.S. national debt is more than $20 trillion.

Correct AnswerverifiedShow Answer

Which of the following correctly describes the national debt?

Correct AnswerverifiedShow Answer

The way to prevent the national debt from growing is for the budget not to be in deficit.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Supply-siders feel that high levels of government spending:

Correct AnswerverifiedShow Answer

Which of the following statements is true ?

Correct AnswerverifiedShow Answer

"Crowding out" is the theory that an increase in our federal government's budget deficit will likely:

Correct AnswerverifiedShow Answer

Between 1960 and 1997, the federal budget was never in surplus.

Correct AnswerverifiedShow Answer

Which of the following statements about crowding out is false ?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

An increase in fiscal deficit spending financed by borrowing will increase the national debt.

Correct AnswerverifiedShow Answer

The entire national debt is owed to U.S. citizens.

Correct AnswerverifiedShow Answer

One of the problems with a growing national debt is the growing interest payments which must be paid on that debt.

Correct AnswerverifiedShow Answer

The national debt as a percentage of GDP has remained roughly constant since the end of World War II.

Correct AnswerverifiedShow Answer

The total accumulated debt of the federal government due to deficit spending is called the:

Correct AnswerverifiedShow Answer

The federal government never has to pay off the national debt.

Correct AnswerverifiedShow Answer

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