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.   tax rates rise.
B.   the percentage of the national debt held by foreigners decreases.
C.   debt service payments (interest) rise.
D.   interest rates fall.
Question #2
With no change in fiscal policy, the budget
A.   deficit will rise during a recession and fall during a boom.
B.   will remain unchanged by adverse economic conditions.
C.   deficit will fall during a recession and rise during a boom. .
D.   will run a surplus during a recession and a deficit during a boom.
Question #3
Crowding in can be defined as
A.   tax incentives on investment encourage capital formation, an increase in aggregate supply.
B.   the budget deficit falls enough to lower interest rates to stimulate investment.
C.   an increase in the budget deficit increases demand so that investment increases.
D.   consumption rises in a recovery, which increases demand for investment.
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 foreign 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 domestic 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.   counteract the recession.
C.   increase the level of real GDP.
D.   worsen and prolong the recession.
Question #7
Crowding out occurs when
A.   foreign investors are willing to pay higher prices for U.S. bonds than TOP: American citizens will pay.
B.   deficit spending by the government forces private investment spending to contract.
C.   increased taxes force higher levels of national saving.
D.   local businesses cannot get government contracts because of the higher bids of large corporations.
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.   a continuous decline.
C.   sharp increases from 1945 to 1975.
D.   significant increases from 1980 to 1995.

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