Econ 102 - Principles of Macroeconomics » Fall 2022 » Government Debt Deficit Quiz

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Question #1
The argument that the national debt imposes a burden on future generations becomes more compelling as
A.   interest rates fall.
B.   the percentage of the national debt held by foreigners decreases.
C.   debt service payments (interest) rise.
D.   tax rates rise.
Question #2
With no change in fiscal policy, the budget
A.   deficit will fall during a recession and rise during a boom. .
B.   deficit will rise during a recession and fall during a boom.
C.   will run a surplus during a recession and a deficit during a boom.
D.   will remain unchanged by adverse economic conditions.
Question #3
Crowding in can be defined as
A.   the budget deficit falls enough to lower interest rates to stimulate investment.
B.   an increase in the budget deficit increases demand so that investment increases.
C.   consumption rises in a recovery, which increases demand for investment.
D.   tax incentives on investment encourage capital formation, an increase in aggregate supply.
Question #4
One of the principle reasons the Mexican debt crisis of 1995 was so serious was because the Mexican debt was
A.   an obligation to pay in domestic currency.
B.   owed entirely to U.S. citizens and banks.
C.   an obligation to pay over a shorter period of time.
D.   an obligation to pay in foreign currency.
Question #5
Until the 1980's, most of the national debt was
A.   financed by printing money.
B.   owned by banks.
C.   owned by foreigners.
D.   acquired either during wars, especially World War II, or during recessions.
Question #6
If the economy is in a recessionary gap, and the government attempts to balance the budget, the effect will be to
A.   end the recession sooner.
B.   increase the level of real GDP.
C.   worsen and prolong the recession.
D.   counteract the recession.
Question #7
Crowding out occurs when
A.   deficit spending by the government forces private investment spending to contract.
B.   foreign investors are willing to pay higher prices for U.S. bonds than TOP: American citizens will pay.
C.   local businesses cannot get government contracts because of the higher bids of large corporations.
D.   increased taxes force higher levels of national saving.
Question #8
A chart of the ratio of national debt to GDP from 1915 to 2001 would show
A.   significant increases from 1993 to 2001.
B.   sharp increases from 1945 to 1975.
C.   a continuous decline.
D.   significant increases from 1980 to 1995.

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