Question 1

Which of the following countries has the largest national debt as a percentage of GDP?

Accepted Answer

A)   Greece.
B)   Japan.
C)   United States.
D)   Canada.
E)   Italy.

Question 2

The national debt is the:

Accepted Answer

A)   difference between a nation's exports and imports of goods and services.
B)   sum of the personal debt of all citizens in the United States.
C)   indebtedness of the federal government in the form of outstanding interest-earning government security.
D)   sum of the net personal debts of Americans to foreigners.

Question 3

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.

Question 4

An increase in fiscal deficit spending financed by borrowing will not affect the national debt but decrease interest rates.

Accepted Answer

A) True 
 B)False  False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

The national debt is:

Accepted Answer

A)   the difference between a nation's exports and imports of goods and services.
B)   the sum of the personal debt of all citizens in the United States.
C)   the cumulative effect of all past budget deficits and surpluses of the federal government.
D)   equal to the current size of the budget deficit.

Question 7

Between 1945 and 1980, the national debt as a percent of GDP:

Accepted Answer

A)   decreased slightly.
B)   decreased substantially.
C)   remained about the same.
D)   increased slightly.
E)   increased substantially.

Question 8

External debt refers to the portion of the national debt owned by private individuals and internal debt refers to that part owned by the public sector.

Accepted Answer

A) True 
 B)False  False

Question 9

The crowding-out effect can be:

Accepted Answer

A)   zero.
B)   partial.
C)   complete.
D)   any of the above.

Question 10

Which of the following statements about crowding out is true ?

Accepted Answer

A)   It can completely offset the multiplier.
B)   It is caused by a budget deficit.
C)   It is not caused by a budget surplus.
D)   All of the above are true.

Question 11

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. D

Question 12

"Crowding out" refers to federal government deficits financed by:

Accepted Answer

A)   borrowing which increases interest rates and thereby reduces private spending.
B)   increasing taxes which reduces private spending.
C)   the federal government buying foreign debt which reduces the amount of government spending and government programs.
D)   reducing government spending which reduces interest rates.

Question 13

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

Accepted Answer

A) True 
 B)False

Question 14

Most of the U.S. national debt is owed to ____. Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

Accepted Answer

A)   foreigners, foreigners
B)   other U.S. citizens, bondholders
C)   foreigners, those needing government services
D)   other U.S. citizens, those needing government services

Question 15

With regard to the national debt, to whom does the federal government owe money?

Accepted Answer

A)   Taxpayers.
B)   Federal government workers.
C)   The Federal Reserve System.
D)   Investors who buy U.S. Treasury bills, bonds, and notes.

Question 16

Among the major industrial economies, which of the following had the lowest national debt as a percent of GDP?

Accepted Answer

A)   Canada
B)   Australia
C)   United States
D)   Italy

Question 17

When we speak of the national debt, we refer to the federal government debt only.

Accepted Answer

A) True 
 B)False

Question 18

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.

Question 19

A concern about crowding out caused by increased government borrowing is that:

Accepted Answer

A)   interest rates on private borrowing fall.
B)   lower rates of economic growth can result from a decline in business investment spending.
C)   the federal government may default on its loans.
D)   foreign lenders find it less attractive to help finance federal deficits.

Question 20

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

Accepted Answer

A) True 
 B)False

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

Which of the following countries has the largest national debt as a percentage of GDP?

Correct AnswerverifiedShow Answer

The national debt is the:

Correct AnswerverifiedShow Answer

Which of the following statements about crowding out is false ?

Correct AnswerverifiedShow Answer

An increase in fiscal deficit spending financed by borrowing will not affect the national debt but decrease interest rates.

Correct AnswerverifiedFalse

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

Correct AnswerverifiedShow Answer

The national debt is:

Correct AnswerverifiedShow Answer

Between 1945 and 1980, the national debt as a percent of GDP:

Correct AnswerverifiedShow Answer

External debt refers to the portion of the national debt owned by private individuals and internal debt refers to that part owned by the public sector.

Correct AnswerverifiedFalse

The crowding-out effect can be:

Correct AnswerverifiedShow Answer

Which of the following statements about crowding out is true ?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

"Crowding out" refers to federal government deficits financed by:

Correct AnswerverifiedShow Answer

An increase in a budget deficit financed by borrowing can increase interest rates and reduce investment spending thereby creating lower rates of economic growth.

Correct AnswerverifiedShow Answer

Most of the U.S. national debt is owed to ____. Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of ____.

Correct AnswerverifiedShow Answer

With regard to the national debt, to whom does the federal government owe money?

Correct AnswerverifiedShow Answer

Among the major industrial economies, which of the following had the lowest national debt as a percent of GDP?

Correct AnswerverifiedShow Answer

When we speak of the national debt, we refer to the federal government debt only.

Correct AnswerverifiedShow Answer

Supply-siders feel that high levels of government spending:

Correct AnswerverifiedShow Answer

A concern about crowding out caused by increased government borrowing is that:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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False

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False

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D

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Most of the U.S. national debt is owed to . Thus a rising national debt implies that there will be a future redistribution of income and wealth in favor of .

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