Deck 12: Federal Deficits, Surpluses, and the National Debt

Question 1

In which of the decades below was the inflation-adjusted deficit largest?

A)The 1940s.
B)The 1950s.
C)The 1960s.
D)The 1970s.

Answer 1

A

Question 2

As a percentage of GDP, the largest deficits in the twentieth century

A)resulted from the Vietnam War.
B)resulted from World War II.
C)were caused by huge tax cuts in the 1980s.
D)resulted from spending increases in the 1990s.

Answer 2

B

Question 3

In which of the decades below was the inflation-adjusted deficit largest?

A)The 1950s.
B)The 1960s.
C)The 1970s.
D)The 1980s.

Answer 3

D

Question 4

During the record deficits of the 1980s, the off-budget elements were

A)also in record deficit territory.
B)in surplus.
C)in deficit, but only barely.
D)fluctuating annually between surpluses and deficits.

Question 5

A budget deficit is the

A)amount by which revenues exceed expenditures.
B)total amount owed by the federal government.
C)amount by which revenues fall short of projections.
D)amount by which expenditures exceed revenues.

Question 6

Prior to 1950, for most of the years in which there were deficits we were also

A)under Republican Presidents.
B)at war.
C)under Democratic Presidents.
D)in financial panics or depressions.

Question 7

A budget surplus is the

A)amount by which revenues exceed expenditures.
B)total amount owed by the federal government.
C)amount by which revenues fall short of projections.
D)amount by which expenditures exceed revenues.

Question 8

Many economists look at the Federal Budget and see that it should be broken into

A)an operating budget and a defense budget.
B)a capital budget and an everyday budget.
C)an operating budget and a capital budget.
D)a defense budget and a non-defense budget.

Question 9

Functional finance is that part of the deficit that is attributable to

A)specific programs (like Medicare).
B)the exponential increase in interest rates.
C)spending programs or tax cuts passed to stimulate an economy in recession.
D)fighting the war on terror.

Question 10

The national debt is the

A)amount by which revenues exceed expenditures.
B)total amount owed by the federal government.
C)amount by which revenues fall short of projections.
D)amount by which expenditures exceed revenues.

Question 11

In which of the decades below was the inflation-adjusted deficit largest?

A)The 1940s.
B)The 1950s.
C)The 1960s.
D)The 1980s.

Question 12

The deficit that showed the biggest increase after the events of 2001 through 2004 (the first and second Bush tax cuts, the recession of 2001 and the war of terrorism)was the

A)on-budget side.
B)off-budget side.
C)must-budget side.
D)far side.

Question 13

The pattern of the 1930s through the middle 1990s was

A)deficits interspersed with a few years of surplus.
B)deficits each and every year.
C)surpluses each and every year.
D)surpluses interspersed with a few years of deficits.

Question 14

Which of the following programs is off-budget?

A)Interest on the debt.
B)Defense.
C)Social Security.
D)Student loans.

Question 15

Most economists would place the costs of a new public transit system in the

A)operating budget.
B)capital budget.
C)social budget.
D)smart budget.

Question 16

A peace dividend

A)results from the reduction in defense spending as a war is concluded.
B)results from making the defeated enemy pay war reparations.
C)never materialized after the Cold War.
D)never materialized after World War II.

Question 17

Which of the following programs is on-budget?

A)The post office.
B)Medicare.
C)Social Security.
D)Student loans.

Question 18

Which of the following programs is off-budget?

A)Interest on the debt.
B)Defense.
C)Medicare.
D)Student loans.

Question 19

Most economists would place the costs of food for soldiers in the

A)operating budget.
B)entitlement budget.
C)capital budget.
D)food stamp budget.

Question 20

In inflation adjusted terms, the largest deficits in the twentieth century

A)resulted from the Vietnam War.
B)resulted from World War II.
C)were caused by huge tax cuts in the 1980s.
D)resulted from spending increases in the 1990s.

Question 21

An argument has been made that the shrinking deficits of the 1990s were attributable to the

A)Cold War.
B)Gulf War.
C)bailout of the savings and loans.
D)peace dividend that resulted from the end of the Cold War.

Question 22

The percentage of the federal debt owned by trust funds has

A)increased consistently over the past 20 years.
B)decreased consistently over the past 20 years.
C)remained remarkable constant over the past 20 years.
D)increased in good times and decreased in bad times.

Question 23

On the notion of the Balanced Budget Amendment, economists are

A)apathetic.
B)unanimously in favor of a rigid requirement of budget balance.
C)unanimously against a rigid requirement of budget balance.
D)mostly against a rigid requirement of budget balance.

Question 24

In which of the decades below was the deficit as a percentage of GDP the largest?

A)The 1940s.
B)The 1950s.
C)The 1960s.
D)The1970s.

Question 25

Projections of the deficit, surplus and debt picture are

A)usually accurate as many as thirty years out.
B)rarely accurate even year to year.
C)highly sensitive to changes in the economy.
D)rarely accurate even year to year and are highly sensitive to changes in the economy.

Question 26

As a percentage of GDP the national debt consistently

A)rose from 1950 to 1975.
B)rose from 1950 to 1960 but not thereafter.
C)fell from 1950 to 1975.
D)fell from 1950 until 1990.

Question 27

A decreasing portion of the U.S. national debt is held by

A)the public.
B)the Federal Reserve.
C)government trust funds.
D)the public and the Federal Reserve.

Question 28

Which of the following events occurred during the 1996-2000 time-frame and had an important impact on the deficit/surplus projections?

A)A dramatic increase in the price of oil.
B)A dramatic increase in the rate of inflation.
C)A dramatic increase in the rate of unemployment.
D)A dramatic increase in the value of most major stock markets.

Question 29

As a percentage of GDP the national debt consistently

A)rose from 1975 to 1995.
B)rose from 1950 to 1960 but not thereafter.
C)rose from 1950 to 1975.
D)fell from 1950 until 1990.

Question 30

The argument that a Balanced Budget Amendment would be "pro-cyclical" means that it would cause

A)bad times to be better than they would otherwise be.
B)good times to be worse than they would otherwise be.
C)bad times to be worse than they would otherwise be.
D)bad times to be better and good times to be worse than they would otherwise be.

Question 31

Generational accounting refers to the

A)wealth of the old versus the wealth of the young.
B)net tax rate of each generation given the taxes they will pay and the benefits they will receive.
C)tax rates paid by each generation.
D)benefits received by each generation.

Question 32

An increasing portion of the U.S. national debt is held by

A)the public.
B)the Federal Reserve.
C)government trust funds.
D)the public and the Federal Reserve.

Question 33

Which of the following countries increased its holding of U.S. government debt by the greatest percentage between 2001 and 2011?

A)Canada
B)Saudi Arabia
C)China
D)The United Kingdom

Question 34

Compared to Italy and Japan in recent years, the debt as a percentage of GDP in the US is

A)substantially greater.
B)slightly smaller.
C)substantially smaller.
D)roughly equal.

Question 35

In which of the decades below was the deficit as a percentage of GDP the largest?

A)The 1950s.
B)The 1960s.
C)The 1970s.
D)The 1980s.

Question 36

In which of the periods below was the deficit as a percentage of GDP the largest?

A)The 1950s.
B)The 1960s.
C)The 1980s.
D)In 2009-2011.

Question 37

Compared to the Canada and Germany in recent years, the debt as a percentage of GDP in the US is

A)substantially greater.
B)substantially smaller.
C)slightly smaller.
D)negligible.

Question 38

In which of the periods below was the inflation-adjusted deficit largest?

A)The 1950s.
B)The 1960s.
C)The 1980s.
D)In 2009-2011.

Question 39

A Balanced Budget Amendment would be

A)procyclical.
B)countercyclical.
C)homocyclical.
D)heterocyclical.

Question 40

In which of the time periods below was the surplus as a percentage of GDP the largest?

A)Late 1940s.
B)Late 1960s.
C)Late 1980s.
D)Late 1990s.

Question 41

Which of the following events occurred during the 2000 to 2005 time-frame and had an important impact on the deficit/surplus projections?

A)The tax cuts of 2001 and 2003.
B)The increase in interest rates from 2001 to 2003.
C)The increase in inflation rates from 2000 to 2002.
D)The decrease in unemployment rates from 2002 to 2003.

Question 42

The projections by the Congressional Budget Office and the Office of Management and Budget for deficits are

A)usually right on target even ten years out into the future.
B)typically off target even though most of what affects the deficit is easily forecast.
C)typically off target because most of what affects the deficit is not easily forecast.
D)always too low suggesting that both are using wishful thinking rather than analysis.

Question 43

The budget deficit/surplus projections for 2005 that were made in 2000 were wrong because there was an

A)unanticipated increase in defense spending.
B)unanticipated increase in interest rates.
C)anticipated increase in immigration.
D)anticipated increase in defense spending.

Question 44

If monetary policy is unchanged, the outstanding national debt will increase whenever

A)government tax receipts exceed government spending.
B)there is a deficit in the federal budget.
C)Social Security tax receipts exceed Social Security benefit payments.
D)there is a surplus in the federal budget.

Question 45

Following the financial collapse in late 2008, the deficit increased in part because of the

A)U)S. return to the gold standard.
B)weakened state of the economy caused tax revenues to slow.
C)massive expansion of foreign aid to Central American democracies.
D)high short-term interest rates and restrictive monetary policy.

Question 46

Following the financial collapse in late 2008, the deficit increased in part because of the

A)high short-term interest rates and restrictive monetary policy.
B)massive expansion of foreign aid to Central American democracies.
C)troubled Asset Relief Program (TARP), increasing federal spending by about $750 billion.
D)surge in illegal immigration.

Question 47

The budget deficit/surplus projections for 2005 that were made in 2001 were wrong because there was an

A)unanticipated increase in war-related spending.
B)unanticipated increase in interest rates.
C)anticipated increase in immigration.
D)anticipated increase in defense spending.

Question 48

The budget deficit/surplus projections for 2005 that were made in 2001 were wrong because there was an

A)unanticipated increase in homeland security spending.
B)unanticipated increase in interest rates.
C)anticipated increase in immigration.
D)anticipated increase in defense spending.

Question 49

Between 2001 and the financial collapse of 2008, U.S. federal budget deficits hovered around

A)zero.
B)$150 billion.
C)$400 billion.
D)$800 billion.

Question 50

Which of the following events occurred during the 2000 to 2003 time-frame and had an important impact on the deficit/surplus projections?

A)The recession of 2001.
B)The increase in interest rates from 2001 to 2003.
C)The increase in inflation rates from 2000 to 2002.
D)The decrease in unemployment rates from 2002 to 2003.

Question 51

If monetary policy is unchanged, the outstanding national debt will increase whenever

A)government tax receipts exceed government spending.
B)there is a surplus in the federal budget.
C)Social Security tax receipts exceed Social Security benefit payments.
D)government spending exceeds government tax receipts.

Question 52

Major causes of the increase in U.S. federal budget deficits between 2001 and 2008 were

A)tax cuts, and spending on homeland security, the war in Iraq and the war in Afghanistan.
B)research into HIV/AIDS and the new lunar landing mission.
C)investment in decaying public infrastructure and caring for The Lost Generation.
D)high interest rates and expansionary monetary policy.

Question 53

Compared to Italy and Japan the debt as a percentage of GDP in the US is

A)substantially greater.
B)substantially smaller.
C)slightly smaller.
D)roughly equal.

Question 54

Which of the following events occurred during the 2000 to 2005 time-frame and had an important impact on the deficit/surplus projections?

A)The steep decline in taxable capital gains that resulted from declines in the Stock Market from March 2000 to the end of 2002.
B)The increase in interest rates from 2001 to 2003.
C)The increase in inflation rates from 2000 to 2002.
D)The decrease in unemployment rates from 2002 to 2003.

Question 55

The budget deficit/surplus projections for 2005 that were made in 2001 were wrong by

A)less than a billion.
B)several trillion.
C)several hundred billion.
D)several hundred trillion.

Question 56

The budget deficit/surplus projections for 2003 that were made in 2000 were wrong because there was an

A)unanticipated recession.
B)unanticipated increase in interest rates.
C)anticipated increase in immigration.
D)anticipated increase in defense spending.

Question 57

The budget deficit/surplus projections for 2005 that were made in 2001 were wrong because there was an

A)unanticipated tax cut.
B)unanticipated increase in interest rates.
C)anticipated increase in immigration.
D)anticipated increase in defense spending.

Question 58

In 2005-2006, the magnitude of the federal budget deficit decreased because

A)government spending decreased precipitously.
B)government spending increased precipitously.
C)income tax rates were significantly increased across the board.
D)growth in income increased tax receipts by more than government spending increased.

Question 59

Following the financial collapse in late 2008, the deficit increased in part because of the

A)weakened state of the economy caused increased spending on unemployment compensation.
B)high short-term interest rates and restrictive monetary policy.
C)U)S. return to the gold standard.
D)massive expansion of foreign aid to Central American democracies.

Question 60

Since the global recession of 2008 and the Troubled Asset Relief Program (TARP), U.S. total public debt as a share of GDP has hovered around

A)zero.
B)15%.
C)30%.
D)100%.

Question 61

The portion of US debt owned by the public (non-Federal Reserve)

A)Dropped from the 1940s through the 1970s, spiked in the 1980s, dropped in the 1990s and early 2000, and rose in the 2010s
B)continues to fall
C)dropped to an all-time low in 2015
D)rose from around 6% to around 12% as a result of the Great Recession

Question 62

If a Balanced Budget Amendment to the U.S. Constitution were passed, during an economic slowdown, such an amendment would

A)cause those bad times to be even worse
B)bolster those bad times so it wasn't as bad
C)have no impact on the economy
D)automatically return the economy to a period of growth

Question 63

The portion of US debt owned by the Federal Reserve

A)Dropped quickly from 2010 to 2015 from a peak in the 2010
B)continues to rise
C)dropped to an all-time low in 2015
D)rose from around 6% to around 12% as a result of the Great Recession

Question 64

Suppose an economist is analyzing the impact of a budget deficit used to finance a significant infrastructure project that will pay significant dividends in the coming years. That economist will focus on

A)strictly the amount borrowed.
B)strictly the inflation adjusted amount borrowed.
C)strictly the ratio of the deficit to GDP
D)both the ratio of the deficit to GDP and whether what is purchased with the borrowed money will produce enough gains to be worth that borrowed.

Question 65

The amount of US debt owned by the Chinese

A)Dropped from the 1940s through the 1970s, spiked in the 1980s, dropped in the 1990s and early 2000, and rose in the 2010s
B)continues to rise
C)dropped to an all-time low in 2015
D)fell as a result of the Great Recession

Question 66

The portion of US debt owned by various government trust funds

A)Dropped quickly from 2010 to 2015 from a peak in the 2010
B)continues to rise
C)dropped to an all-time low in 2015
D)has remained constant (by law)

Question 67

The amount of US debt owned by the Japanese

A)Dropped from the 1940s through the 1970s, spiked in the 1980s, dropped in the 1990s and early 2000, and rose in the 2010s
B)continues to rise
C)dropped to an all-time low in 2015
D)fell as a result of the Great Recession

Question 68

The portion of US debt owned by various government trust funds

A)peaked in the 2010
B)continues to rise
C)dropped to an all-time low in 2015
D)has remained constant (by law)

Question 69

If a Balanced Budget Amendment to the U.S. Constitution were passed, during economic prosperity, such an amendment would

A)cause those good times to be even better
B)dampen those good times
C)have no impact on the economy
D)throw the economy into a depression

Question 70

If a Balanced Budget Amendment to the U.S. Constitution would be "pro-cyclical," an economist would consider that to be ____ economic stability.

A)slightly helpful for
B)enormously helpful for
C)counterproductive to
D)independent of concerns regarding

Question 71

Suppose an economist is analyzing the impact of a debt and its ability to be paid. That economist will focus on

A)strictly the debt.
B)strictly the inflation adjusted amount of debt.
C)strictly the ratio of the debt to GDP
D)both the ratio of the debt to GDP and the interest payments as a percentage of GDP

Question 72

If a Balanced Budget Amendment to the U.S. Constitution were passed, during an economic slowdown, such an amendment would

A)help policymakers respond effectively
B)tie the hands of policymakers but at least not force them into counterproductive policies
C)force policymakers into counterproductive policies
D)have little impact on policymakers.

Question 73

If a Balanced Budget Amendment to the U.S. Constitution were passed, during an economic slowdown, such an amendment would

A)necessitate a tax cut or spending increase or both
B)necessitate a tax increase or spending cut or both
C)necessitate an increase in interest rates
D)have no impact

Question 74

Compared to the U.K. and Germany the debt as a percentage of GDP in the US is

A)somewhat greater.
B)substantially smaller.
C)somewhat smaller.
D)roughly equal.

Question 75

When analyzing the impact of a budget deficit, an economist will focus on

A)strictly the amount borrowed.
B)strictly the inflation adjusted amount borrowed.
C)strictly the ratio of the deficit to GDP (it doesn't matter what is purchased with the borrowed money).
D)the ratio of the deficit to GDP and whether what is purchased with the borrowed money can be considered an investment.

Question 76

The amount of US debt owned by the English

A)Dropped from the 1940s through the 1970s, spiked in the 1980s, dropped in the 1990s and early 2000, and rose in the 2010s
B)continues to rise
C)dropped to an all-time low in 2015
D)has remained relatively low and constant (relative to other countries)