The United States national debt is
(A)the amount of money owed by the federal government to United States citizens
(B)the amount of money owed by the federal government to other United States government agencies
(C)the amount of currency in the hands of foreigners
(D)the amount of money owed by state and local governments to United States citizens
(E)the amount of money owed to holders of United States government securities
Crowding out is most likely to occur with which of the following changes?
(A)Decrease in government spending
(B)Increase in budget surplus
(C)Increase in budget deficit
(D)Decrease in the real interest rate
(E)Decrease in trade deficit
Assume that with a proportional tax system, the government always sets the tax rate at a level that yields a balanced
budget at full-employment. Which of the following is necessarily true?
(A)The government budget will balance every year.
(B)The government budget will be in deficit over the business cycle.
(C)The national debt will increase in any year the economy operates below full employment.
(D)Crowding out of private investment will occur whenever the economy operates at full employment.
(E)The tax system will be destabilizing.
A country’s government runs a budget deficit when which of the following occurs in a given year?
(A)The amount of new loans to developing nations exceeds the amount of loans paid off by developing nations.
(B)Government spending exceeds tax revenues.
(C)The debt owed to foreigners exceeds the debt owed to the country’s citizens.
(D)The amount borrowed exceeds the interest payment on the national debt.
(E)Interest payments on the national debt exceed spending on goods and services.
Hyperinflation is typically caused by
(A)high tax rates that discourage work effort
(B)continuous expansion of the money supply to finance government budget deficits
(C)trade surpluses that are caused by strong protectionist policies
(D)bad harvests that lead to widespread shortages
(E)a large decline in corporate profits that leads to a decrease in production
Which of the following is true about the national debt of the United States?
(A)It is the debt owed to foreign investors.
(B)It is the accumulation of past and current budget deficits and surpluses.
(C)It increases when gross domestic product increases.
(D)It increases when exports decrease, and decreases when exports increase.
(E)It did not exist before 1980.
Which of the following will most likely occur if a government adopts an annually balanced budget rule that requires the
government to eliminate any deficits or surpluses?
(A)Unemployment will be eliminated and prices will be stable.
(B)The national debt will increase.
(C)Business cycles will become more stable.
(D)The automatic stabilizing effect of fiscal policy will be eliminated.
(E)The government will be forced to spend less when there are surpluses.
Which of the following will occur if the federal government runs a budget deficit?
(A)The expenditure multiplier will increase.
(B)The size of the national debt will increase.
(C)The economy’s output will decrease.
(D)State governments will run a budget surplus to offset the federal deficit.
(E)Interest rates will tend to decline.
Federal budget deficits occur when
(A)more money is being spent on entitlement programs than has been allocated
(B)the Internal Revenue Service spends more than it collects in taxes in a given year
(C)the federal government spends more than it collects in taxes in a given year
(D)high levels of unemployment use up tax collections
(E)interest payments on the national debt increase from one year to the next
When the United States government engages in deficit spending, that spending is primarily financed by
(A)increasing the required reserve ratio
(B)borrowing from the World Bank
(C)issuing new bonds
(D)appreciating the value of the dollar
(E)depreciating the value of the dollar