Question 1

If the government runs a deficit, the total amount of government debt is

Accepted Answer

When the government runs a deficit, it means that they are spending more money than they are earning in revenue. As a result, they will need to borrow money to make up the difference, which increases the total amount of government debt. Therefore, the correct answer is D - increasing.

Question 2

$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 4 by the government shown in the above table?

Accepted Answer

The government's expenditures in year 4 were $320 billion, while its revenues were $300 billion. Therefore, the government incurred a deficit of $20 billion in year 4.

Question 3

If the government has a balanced budget, the total amount of government debt is

Accepted Answer

A balanced budget means that the government is not adding to its debt, but also not paying off any existing debt. Therefore, the total amount of government debt would remain constant.

Question 4

The U.S. governmentʹs budget

Accepted Answer

The U.S. government's budget has mostly been in deficit during the past 30 years, meaning that the government spends more money than it takes in through revenue. While there have been brief periods of surplus, such as in the late 1990s, deficits have been the norm. The government is not required to balance the budget each year.

Question 5

A country has been in existence for only two years. In the first year, tax revenues were $1.0 million and outlays were $1.5 million. In the second year, tax revenues were $1.5 million and outlays were
$2)0 million. At the end of the second year, the total government debt was__________ .

Accepted Answer

The answer of A country has been in existence for...

Question 6

Suppose a country has been running a persistent government budget deficit. If the deficit is reduced, but remains positive,

Accepted Answer

Government debt will still increase despite the reduction in the deficit because the deficit is still positive. A deficit represents the amount by which government expenses exceed revenues in a given period, whereas government debt represents the cumulative amount of past deficits minus any surpluses. Therefore, even if the deficit is reduced, the government is still adding to its outstanding debt.

Question 7

If tax revenue equal $1.5 billion and government outlays equal $1.6 billion, then the

Accepted Answer

Government outlays exceed tax revenue, leading to a deficit of $0.1 billion.

Question 8

In 2011, the U.S. government budget had a deficit. By definition, then,

Accepted Answer

A budget deficit means that the government's expenditures exceeded its revenues (in this case, tax revenues). Therefore, tax revenues were less than government outlays.

Question 9

$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 2 by the government shown in the above table?

Accepted Answer

The answer of \[\begin{array} { | l | l |...

Question 10

$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 1 by the government shown in the above table?

Accepted Answer

The government's tax revenues and expenditures are equal in year 1, so there is no surplus or deficit.

Question 11

Suppose the only revenue taken in by the government is in the form of income tax, and the tax rate is 10 percent. If aggregate income is $800 billion, and government outlays are $100 billion then the government budget has

Accepted Answer

The government collects 10% of $800 billion in taxes, which is $80 billion. With government outlays of $100 billion, there is a deficit of $20 billion ($100 billion - $80 billion).

Question 12

If the government runs a surplus, the total amount of government debt is

Accepted Answer

When the government runs a surplus, it means they are taking in more revenue than they are spending. This allows them to pay off some of their debt, which leads to a decrease in the total amount of government debt.

Question 13

An increase in the government __________reduces the governmentʹs __________.

Accepted Answer

The answer of An increase in the government __________reduces the...

Question 14

$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 5 by the government shown in the above table?

Accepted Answer

The government's surplus or deficit is the difference between its tax revenues and its expenditures. In year 5, the government's tax revenues were $325 billion and its expenditures were $340 billion. Therefore, the government incurred a deficit of $340 billion - $325 billion = $15 billion.

Question 15

In 2011, the federal government of Happy Isle had tax revenues of $1 million, and spent $500,000 on transfer payments, $250,000 on goods and services and $300,000 on debt interest. In 2011, the government of Happy Isle had a __________.

Accepted Answer

A budget deficit occurs when expenses exceed revenues. In this case, total expenses amount to $1,050,000 ($500,000+$250,000+$300,000), which exceeds total tax revenues of $1,000,000. Therefore, the government of Happy Isle had a budget deficit of $50,000 in 2011.

Question 16

The federal government debt is equal to the

Accepted Answer

The federal government debt is the cumulative result of past budget deficits and surpluses. It is calculated as the sum of all past budget deficits minus the sum of all past budget surpluses.

Question 17

When tax revenues exceed outlays, the government has a__________ , and when outlays exceed tax revenues, the government has a__________ .

Accepted Answer

A budget surplus occurs when tax revenues exceed government outlays, meaning that the government has extra funds available. A budget deficit occurs when outlays exceed tax revenues, meaning that the government must borrow funds to finance its spending.

Question 18

$$\begin{array} { | l | l | l | } 
\hline \text { Year } & \begin{array} { l } 
\text { Government } \
\text { tax revenues } \
\text { (billions of } \
\text { dollars) }
\end{array} & \begin{array} { l } 
\text { Government } \
\text { expenditures } \
\text { (billions of } \
\text { dollars) }
\end{array} \
\hline 1 & 240 & 240 \
\hline 2 & 250 & 245 \
\hline 3 & 260 & 255 \
\hline 4 & 300 & 320 \
\hline 5 & 325 & 340 \
\hline
\end{array}$$
-What is the amount of the surplus or deficit incurred in year 3 by the government shown in the above table?

Accepted Answer

In year 3, the government's tax revenues were $260 billion and its expenditures were $255 billion. Therefore, the government incurred a surplus of $5 billion in year 3.

Question 19

A government that currently has a budget deficit can balance its budget by__________ .

Accepted Answer

Increasing tax revenues by more than it increases outlays will result in a surplus, which can be used to balance the budget. Decreasing tax revenues, as in option B and D, will only worsen the deficit. Option C suggests increasing both tax revenues and outlays by the same amount, which may not necessarily lead to budget balance.

Question 20

The sum of past budget deficits minus the sum of past budget surpluses refers to

Accepted Answer

The sum of past budget deficits minus the sum of past budget surpluses refers to the national debt, which is the accumulation of all past deficits and surpluses.

Quiz 13: Fiscal Policy