Question 1

The federal budget deficit has been over 30 percent of GDP since the early 1980s.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is true ?

Accepted Answer

A)   The national debt as a percentage of GDP is greater today than during any other period in our nation's history.
B)   A sizeable external national debt will transfer purchasing power away from foreigners to domestic citizens.
C)   Keynesian theory assumes a total crowding out effect associated with deficit spending.
D)   future generation must pay interest to finance the national debt.E) A) and B)
F) A) and D)

Question 3

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) A) and B)
F) B) and C)

Question 4

Supply-side economists argue that less government spending:

Accepted Answer

A)   will contract the productive side of the economy.
B)   will result in more crowding out.
C)   causes higher rates of unemployment and inflation.
D)   would cause interest rates to increase dramatically.
E)   would make more investment capital available at lower rates of interest to the private sector.F) A) and B)
G) All of the above

Question 5

To finance a federal budget deficit, the U.S. Treasury borrows by selling:

Accepted Answer

A)   Treasury bills.
B)   Treasury notes.
C)   Treasury bonds.
D)   All of the above.E) B) and C)
F) None of the above

Question 6

The sum of past federal budget deficits is the:

Accepted Answer

A)   GDP debt.
B)   trade debt plus GDP.
C)   national debt.
D)   Congressional debt.E) All of the above
F) B) and C)

Question 7

As the national debt grows as a percentage of the U.S. economy, which of the following is (are)  true ?

Accepted Answer

A)   ​ Future U.S. citizens will be forced to spend a larger percentage of their tax revenues on servicing the national debt, limiting the money that is available for health care, education, and national defense.
B)   ​ If today's deficit spending is primarily designed to benefit people today, and is not being invested to make the economy grow, then we are robbing the future for the sake of the present.
C)   ​If rising levels of federal borrowing today crowds out private borrowing for productive investment, then economic growth in the future will slow, and future living standards will fall.
D)   ​All of the answers above are correct.​E) B) and C)
F) None of the above

Question 8

Currently, how much of the U.S. national debt was owed to foreigners?

Accepted Answer

A)   About 25 percent.
B)   About 20 percent.
C)   About 30 percent.
D)   About 60 percent.E) A) and C)
F) A) and D)

Question 9

Which of the following U.S. Treasury securities represents ownership of the national debt?

Accepted Answer

A)   Bonds owned by the banks and insurance companies.
B)   Bonds owned by the Social Security Administration.
C)   Bonds owned by private individuals.
D)   Bonds owned by foreigners.
E)   All of the above.F) A) and B)
G) B) and C)

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

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) C) and D)
F) All of the above

Question 12

Between 1998 and 2001, the federal budget was:

Accepted Answer

A)   never in surplus.
B)   in surplus about as often as it was in deficit.
C)   in surplus.
D)   never in deficit.E) None of the above
F) A) and B)

Question 13

"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 the above.F) D) and E)
G) C) and D)

Question 14

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) All of the above
F) None of the above

Question 15

The percentage of the national debt held by foreigners is approximately 25 percent.

Accepted Answer

A) True 
 B)False

Question 16

The debt ceiling places a legal limit on the size of the national debt.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

The national debt in the U.S. is a much larger percentage of our annual GDP than in similar industrial countries such as Canada, Sweden, and Australia.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true ?

Accepted Answer

A)   A budget deficit will have no impact on the national debt.
B)   A budget deficit will increase the national debt.
C)   A balanced budget will increase the national debt.
D)   A budget surplus will increase the national debt.E) None of the above
F) A) and D)

Exam 17: Federal Deficits, Surpluses, and the National Debt

Which of the following statements is true ?

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Supply-side economists argue that less government spending:

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Which of the following is true ?

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The debt ceiling places a legal limit on the size of the national debt.

Correct AnswerverifiedShow Answer

The national debt in the U.S. is a much larger percentage of our annual GDP than in similar industrial countries such as Canada, Sweden, and Australia.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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Which of the following statements is true ?

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The sum of past federal budget deficits is the:

Correct AnswerverifiedShow Answer

Currently, how much of the U.S. national debt was owed to foreigners?

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

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The federal budget deficit has been over 30 percent of GDP since the early 1980s.

Correct AnswerverifiedShow Answer

To finance a federal budget deficit, the U.S. Treasury borrows by selling:

Correct AnswerverifiedShow Answer

As the national debt grows as a percentage of the U.S. economy, which of the following is (are) true ?

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The percentage of the national debt held by foreigners is approximately 25 percent.

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

Correct AnswerverifiedShow Answer

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

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Between 1998 and 2001, the federal budget was:

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

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Which of the following U.S. Treasury securities represents ownership of the national debt?

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