Question 1

Between fiscal years 2008 and 2010,our federal budget deficit as a percent of GDP

Accepted Answer

According to historical data from the Congressional Budget Office, the federal budget deficit as a percent of GDP rose from 3.2% in fiscal year 2008 to 9.8% in fiscal year 2010, a substantial increase.

Question 2

If G = $800 billion,tax receipts = $850 billion,and there is an inflationary gap of $100 billion,there is

Accepted Answer

A budget surplus occurs when tax receipts exceed government spending. In this case, tax receipts are $850 billion and government spending (G) is $800 billion, indicating a budget surplus. The inflationary gap does not directly affect the determination of a budget surplus or deficit.

Question 3

The national debt is ____ of the United States government and ___ of the people who hold it.

Accepted Answer

The national debt is a liability of the United States government because it represents the amount of money that the government owes to its creditors. However, for individual investors who own government bonds, the debt is an asset because it represents the amount of money that they are owed by the government.

Question 4

Large budget deficits tend to

Accepted Answer

Large budget deficits typically require the government to borrow more money, increasing the demand for loans, which in turn drives up interest rates. Higher interest rates can make it more expensive for businesses and individuals to borrow money, which can slow economic growth.

Question 5

Two ways to lower the deficit are to

Accepted Answer

Raising taxes will increase government revenue while lowering government spending will decrease expenditures. This combination will lead to a reduction in the deficit. Option A would result in further increasing the deficit, and option B and D would only address one side of the deficit equation.

Question 6

When there is an inflationary gap

Accepted Answer

An inflationary gap occurs when aggregate demand exceeds aggregate supply at the full employment level, leading to inflation. Raising taxes can reduce consumer spending and demand, helping to close the gap.

Question 7

Which statement is true about the graph above?

Accepted Answer

The answer of 
Which statement is true about the graph...

Question 8

Fiscal policy includes each of the following except

Accepted Answer

Fiscal policy refers to the government's use of taxation and spending to influence the overall economy. The money supply is a component of monetary policy, which is conducted by the central bank.

Question 9

Which statement is true?

Accepted Answer

According to recent data, over 50 percent of the outstanding public debt is indeed owed by foreigners. A is false as the public debt is actually lower than the GDP. B is also false, as the public debt has not doubled over the past four years. Therefore, the correct answer is C.

Question 10

In the mid-1990s,the federal budget deficit

Accepted Answer

In the mid-1990s, the federal budget deficit fell substantially due to a combination of increased tax revenue resulting from a growing economy and spending reductions implemented by the Clinton administration.

Question 11

Right now our national debt is

Accepted Answer

According to the US Department of the Treasury, as of October 2021, the national debt of the United States is over $28 trillion. Therefore, option E, "over $12 trillion," is the correct choice.

Question 12

In the 1930s,John Maynard Keynes said that our main economic problem was

Accepted Answer

In the 1930s, John Maynard Keynes argued that the main economic problem was weak aggregate demand, meaning that there was not enough overall demand in the economy to support full employment. He believed that the government could stimulate demand through fiscal policies such as increasing government spending and cutting taxes. This approach became known as Keynesian economics.

Question 13

Which statement is true?

Accepted Answer

A recessionary gap occurs when actual output is below potential output, indicating that there is insufficient aggregate demand in the economy. To boost aggregate demand and close the gap, the government may implement expansionary fiscal policies, such as lowering taxes or increasing government spending. Therefore, when there is a recessionary gap, we are spending too little and taxes should be lowered.

Question 14

Statement I: Fiscal policy was invented by John Maynard Keynes in the 1930s.
Statement II: Until the 1980s,virtually all economists thought that the federal government should balance its budget every year.

Accepted Answer

The answer of Statement I: Fiscal policy was invented by...

Question 15

Which statement is true?

Accepted Answer

This statement is true as the growth of national debt leads to increased interest payments, which leads to growing deficits, which further increases the debt. A is false as the United States Treasury has never gone bankrupt and has the ability to print money. C is also false as any institution can potentially go bankrupt. D is also false as statement B is true.

Question 16

Since 1980,our national debt as a percentage of GDP has

Accepted Answer

The national debt as a percentage of GDP has risen since 1980. In 1980, the national debt was approximately 33% of GDP, and by 2020 it had risen to over 100% of GDP.

Question 17

For a short period in 2009,the Social Security trust ran a temporary deficit.As a result,the 2009 federal budget deficit

Accepted Answer

The answer of For a short period in 2009,the Social...

Question 18

Which statement is false?

Accepted Answer

While it's true that the national debt rises during wartime (B) and that foreigners hold an increasing percentage of the national debt (A), it is not necessarily true that we will have to pay off most of the national debt over the next 50 years (C). The national debt can be managed through various means such as economic growth, increased taxes, and spending cuts. Therefore, statement C is false.

Question 19

Interest rates in the United States would have been higher in recent years had it not been for

Accepted Answer

The inflow of funds from foreigners, often in the form of purchasing U.S. Treasury bonds, helps to offset the supply of bonds and keeps interest rates lower than they would be otherwise. Without this inflow, demand for bonds would fall and interest rates would rise.

Question 20

If our unemployment rate were eight percent

Accepted Answer

The answer of If our unemployment rate were eight percent
...

Quiz 12: Fiscal Policy and the National Debt

Between fiscal years 2008 and 2010,our federal budget deficit as a percent of GDP

If G = $800 billion,tax receipts = $850 billion,and there is an inflationary gap of $100 billion,there is

The national debt is __ of the United States government and _ of the people who hold it.

Large budget deficits tend to

Two ways to lower the deficit are to

When there is an inflationary gap

Which statement is true about the graph above?

Fiscal policy includes each of the following except

Which statement is true?

In the mid-1990s,the federal budget deficit

Right now our national debt is

In the 1930s,John Maynard Keynes said that our main economic problem was

Which statement is true?

Statement I: Fiscal policy was invented by John Maynard Keynes in the 1930s. Statement II: Until the 1980s,virtually all economists thought that the federal government should balance its budget every year.

Which statement is true?

Since 1980,our national debt as a percentage of GDP has

For a short period in 2009,the Social Security trust ran a temporary deficit.As a result,the 2009 federal budget deficit

Which statement is false?

Interest rates in the United States would have been higher in recent years had it not been for

If our unemployment rate were eight percent