Deck 17: Fiscal Policy: Austerians and Deficit Hawks V Stimulus

Question 1

The major points of the Conservative views presented in the chapter include five arguments. Which of the following three are included:

A) Deficit spending crowds out private investment, cutting deficits causes recessions, increasing deficit spending causes inflation.
B) Deficit spending crowds out private investment, government spending is mostly wasteful, increasing deficit spending causes inflation.
C) Deficit spending crowds out private investment, government spending leads to no net increase in GDP, government spending improves the quality of life
D) Deficit spending leads to increases in private investment, government spending leads to no net increase in GDP, increased deficit spending causes inflation.

Answer 1

B

Question 2

The major points of the Conservative views presented in the chapter include five arguments. Which of the following three are included:

A) A growing national debt places a heavy burden on the economy, a growing national debt has no impact on the economy, government spending is mostly wasteful
B) A growing national debt places a heavy burden on the economy, deficit spending crowds out private investment, government spending improves the quality of life.
C) A growing national debt places a heavy burden on the economy, government spending is mostly wasteful, deficit spending creates inflation.
D) A growing national debt places a heavy burden on the economy, deficit spending reduces inflation, deficit spending crowds out private investment.

Answer 2

D

Question 3

When the book refers to a policy of austerity it means:

A) A policy of reducing the level of government spending in the economy
B) A policy of reducing the amount of calories that people eat at each meal
C) A policy of reducing incomes of certain groups of people in society
D) All of the above

Answer 3

D

Question 4

2012 presidential candidate Mitt Romney was in favor of cutting government spending in every area except:

A) Health care spending
B) Nutrition programs
C) Infrastructure spending
D) Military spending

Question 5

In the 2012 presidential election, President Barack Obama was in favor of cutting all spending except

A) Training and education programs
B) Research and technology spending
C) Infrastructure investment-roads, high-speed rail
D) All of the above

Question 6

Deficit hawks believe:

A) That even underweight mice are worth eating
B) That financing government spending by borrowing harms the economy
C) That deficits are okay if they are caused by tax cuts
D) That deficits actually need to be increased during recessions

Question 7

The crowding out argument states that

A) When the government borrows money it leads to more economic growth
B) When the government borrows money it leads to lower interest rates and rising investment
C) When the government borrows money it leads to higher interest rates and falling investment
D) None of the above

Question 8

Progressives respond to the crowding out analysis by arguing that

A) In a recession, increased deficit spending does not raise interest rates
B) Weak investment during economic recoveries with high deficit spending occurs despite the deficit not because of it
C) If the deficit spending raises incomes, the rising demand will lead to higher investment spending even if interest rates do rise.
D) All of the above

Question 9

Conservatives argue that government spending leads to no net increase in GDP because:

A) Government spending is wasteful and useless
B) Government spending on useful items reduces the ability of private investors to spend on the same things.
C) Government spending is exactly balanced by government taxes
D) Government spending on useful items increases the ability of consumers to spend on consumption items

Question 10

A conservative member of Congress once famously said that the best thing the federal government can do to help the economy is "stop trying to create jobs."

Question 11

Why do conservatives believe government cannot create jobs?

A) Only the private sector creates jobs?
B) Government spending to create jobs only reduces private spending.
C) For every government job there is a private sector job that will not be created to do the same thing
D) All of the above

Question 12

Progressives argue that what the book calls useful government spending can increase GDP without reducing private investment. An example of useful government spending according to the book is

A) Building pyramids by hand labor alone
B) Buying more military equipment
C) Fighting wars
D) Building highways

Question 13

According to the US House of Representatives' budgets in 2011 and 2012 it was essential to cut

A) The military budget
B) The size of the military
C) Spending on the wars in Afghanistan and Iraq
D) The civilian budget

Question 14

In 2011 and 2012, the House of Representatives passed a budget that replaced the Medicare program with

A) A government run health care system for everyone
B) A program that only permitted low income people to get government health insurance
C) A program that appropriates money to help senior citizens purchase private insurance
D) All of the above

Question 15

In 2011 and 2012, the House of Representatives passed budgets that promised spending reductions of

A) $5 trillion a year
B) $5 trillion over a number of years
C) $1 trillion a year
D) $10 trillion over a number of years

Question 16

The 2009 recovery act spent money on what the book calls a number of useful projects. They included:

A) Jobs for health care workers, jobs for teachers, jobs for bartenders in gambling casinos
B) Jobs for health care workers, jobs for the production of clean energy, jobs for people building military equipment
C) Jobs for health care workers, jobs for teachers, jobs for production of clean energy
D) None of the above

Question 17

The National Debt is different from a private personal debt because

A) The federal government can print dollars, you cannot
B) Much of the national debt is owed to people within the United States, thus "we owe it to ourselves"
C) The federal government can tax its citizens to service its debt, people have to earn money to service their own debt
D) All of the above

Question 18

The National Debt of the United States in 2011 was

A) $10 trillion
B) $12 trillion
C) $15 trillion
D) $20 trillion

Question 19

The National Debt of the United States in 2011 was (approximately) what percent of GDP

A) It was more than GDP
B) It was 50% of GDP
C) It was 80% of GDP
D) It was 100% of GDP

Question 20

Approximately what percent of the National Debt was owned within the United States government in 2011?

A) 50%
B) 27%
C) 17%
D) 7%

Question 21

The federal debt was first funded in

A) 1790
B) 1800
C) 1809
D) 1829

Question 22

The last time the federal (national debt) of the United States was zero was:

A) 1790
B) 1837
C) 1860
D) It has never been zero since it was first funded

Question 23

Individuals and governments have very different experiences "rolling over" outstanding debt because:

A) Individuals die and governments can live forever
B) Individuals much earn income to service debt, governments can tax their citizens
C) Individuals cannot issue their own currencies, governments can
D) All of the above

Question 24

A National Government never has to "pay off" its debt because:

A) People trust governments
B) Governments can always roll over their outstanding debt
C) Governments have the power to tax their citizens
D) National governments DO have to pay off the national debt at some time in the future.

Question 25

Conservatives argue that increases in the National Debt have dangerous consequences for the economy because:

A) Government will never be able to repay it
B) People will refuse to buy government bonds in the future
C) Potential investors will lose confidence in the future
D) All of the above

Question 26

Progressives argue that deficit spending will cause inflation only if:

A) The economy is operating at a level of full employment
B) The economy is in a recession
C) Deficit spending will never cause inflation
D) None of the above

Question 27

In the first two years of the recovery from the Great Recession (2010-2011), despite big increases in deficit spending, inflation in the US measured

A) 0%
B) )6%
C) 1.6%
D) 2.6%

Question 28

The groups the book refers to as "deficit hawks" and "austerians" argue that there should be:

A) Restraints on government spending
B) Reductions in government regulation
C) Cuts to marginal income tax rates and corporate taxes
D) All of the above

Question 29

The rise in deficit spending between 2008 and 2011 is evidence against the "crowding out" argument because

A) Interest rates rose and investment fell
B) Interest rates did not rise
C) Interest rates remained the same and investment went up
D) The period between 2008 and 2011 was evidence FOR the "crowding out" argument.

Question 30

According to some conservatives, government spending on useful activities reduces private investment because the government "pre-empts" private opportunities.

Question 31

Progressives argue that many things government spends money on (infrastructure, health insurance) cannot or will not be done efficiently by the private sector.

Question 32

The federal government deficit during World War II was what percentage of GDP?

A) 10%
B) 15%
C) 20%
D) 25%