978-1259723223 Test Bank TBChap033 Part 6

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161.

The largest proportion of the U.S. public debt is held by

162.

In 2015, about percent of the U.S. public debt was held by people and institutions abroad.

163.

In 2015, about percent of the U.S. public debt was held by the U.S. government and Federal

Reserve.

164.

To say that “the U.S. public debt is mostly held internally” is to say that

165.

Payment of interest on the U.S. public debt

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Test Bank: I

Topic:

The U.S. Public Debt

166.

The most likely way the public debt burdens future generations, if at all, is by

167.

Other things equal, the stock of capital inherited by future generations is likely to be smaller

when government spending

168.

The crowding–out effect suggests that

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

Diffic ult y: 02 Medium

Learning Objective: 33-06 Discuss the size, composition, and consequences of the U.S.

public debt.

Test Bank: I

Topic:

The U.S. Public Debt

169.

The federal government has a large public debt that it finances through borrowing. As a

result, real interest rates are higher than otherwise and the volume of private

investment

spending is lower. This illustrates the

170.

The real burden of an increase in the public debt

171.

Which one of the following might offset a crowding-out effect of financing a large public

debt?

172.

Refer to the diagram. Assume that the investment demand curve is ID1. The crowding-out effect

of a large public debt would be shown as a(n)

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of $5 billion.

D. increase in the interest rate from 6 percent to 8 percent and a decline in investment spending

of $40 billion.

173.

Refer to the diagram. Assume that the investment demand curve is ID1. Which of the following

effects of financing a large public debt might shift the investment

demand curve from ID1 to

ID2, wholly offsetting any crowding-out effect?

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Blooms: Understand

Diffic ult y: 02 Medium

Learning Objective: 33-06 Discuss the size, composition, and consequences of the U.S.

public debt.

Test Bank: I

Topic: The U.S. Public Debt

Type: Graph

174.

Which of the following is the best example of public investment?

175.

Which of the following is not considered a legitimate concern of a large public debt?

176.

Which of the following is considered a legitimate concern of a large public debt?

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C.

burdening future generations

D.

collapse of the financial system

177.

(Last Word) The combined cost of Social Security and Medicare programs was what

percentage of U.S. GDP in 2014?

178.

(Last Word) In 1960 the ratio of workers to Social Security and Medicare beneficiaries was

; by 2040 it is projected to be .

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Topic:

Problems, Criticisms, and Complications of Implementing Fiscal Policy

179.

(Last Word) Which of the following would not help to relieve the Social Security and

Medicare shortfalls?

True / False Questions

180.

Expansionary fiscal policy is so named because it involves an expansion of the nation‘s

money supply.

181.

If the MPC in the economy is 0.75, government could shift the aggregate demand curve

rightward by $30 billion by cutting taxes by $10 billion.

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Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of

fiscal policy.

Test Bank: I

Topic:

Fiscal Policy and the AD–AS Model

182.

A contractionary fiscal policy shifts the aggregate demand curve leftward.

183.

Demand–pull inflation can be restrained by increasing government spending and reducing

taxes.

184.

Built–in stability is synonymous with discretionary fiscal policy.

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185.

The actual budget may be in deficit while the cyclically adjusted budget is in surplus.

186.

An increase in the cyclical deficits will automatically increase the cyclically adjusted

budget deficit.

187.

Tax revenues automatically increase during economic expansions and decrease during

recessions.

188.

The operational lag of fiscal policy refers to the time that elapses between the beginning of a

recession or inflation and the certain awareness that it is actually

happening.

189.

The crowding-out effect refers to the possibility that deficit spending may motivate people to

increase their saving in anticipation of higher future taxes.

190.

Fiscal policy is mainly undertaken by the Federal Reserve.

191.

Tax increases and government spending cuts by state governments during recessions often

reduce the expansionary impact of fiscal policy by the federal government.

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

Diffic ult y: 02 Medium

Learning Objective: 33-05 Discuss the problems that governments may encounter in

enacting and applying fiscal policy.

Test Bank: I

Topic: Problems, Criticisms, and Complications of Implementing Fiscal Policy

192.

Permanent tax reductions are more likely to be expansionary than temporary tax reductions.

193.

As measured by the cyclically adjusted budget, the U.S. government engaged in a

contractionary fiscal policy in 2005 and 2006.

194.

Financing wartime expenditures by increasing internally held public debt permits a nation to

defer a part of the economic cost of war.

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Diffic ult y: 02 Medium

Learning Objective: 33-06 Discuss the size, composition, and consequences of the U.S.

public debt.

Test Bank: I

Topic: The U.S. Public Debt

195.

It is more meaningful economically to measure the public debt relative to the GDP than to

measure it in absolute terms.

196.

The United States has experienced both budget surpluses and deficits since 2000.

197.

The public debt is the accumulation of all deficits and surpluses that have occurred through

time.

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Test Bank: I

Topic:

The U.S. Public Debt

198.

The public debt is held as Treasury bills, Treasury notes, Treasury bonds, and U.S. savings

bonds.

199.

The crowding–out effect of the public debt may be dampened if the investment-demand

curve is shifting to the right.

200.

When the Federal government uses taxation and spending actions to stimulate the economy,

it is conducting

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Difficulty: 01 Easy

Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of

fiscal policy.

Test Bank: II

Topic: Fiscal Policy and the AD–AS Model

201.

When the Federal government takes budgetary action to stimulate the economy or rein in

inflation, such policy is

202.

When changes in taxes and government spending occur in the economy without explicit

action by Congress, such policy is called fiscal policy.

203.

When the Federal government cuts taxes and increases spending to stimulate the economy

during a period of recession, such actions are design to be

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B.

automatic.

C. countercyclical.

D. nondiscretionary.

204.

Fiscal policy is enacted through changes in

205.

Discretionary fiscal policy is often initiated on the advice of the

206.

If Congress passes legislation to increase government spending to counter the effects of a

recession, then this would be an example of a(n)

207.

If the U.S. Congress passes legislation to raise taxes to control demand–pull inflation, then

this would be an example of a(n)

208.

The set of fiscal policies that would be most contractionary would be a(n)

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Blooms: Remember

Difficulty: 01 Easy

Learning Objective: 33-01 Identify and explain the purposes, tools, and limitations of

fiscal policy.

Test Bank: II

Topic:

Fiscal Policy and the AD–AS Model

209.

The intent of contractionary fiscal policy is to

210.

The goal of expansionary fiscal policy is to increase

211.

If the government wishes to increase the level of real GDP, it might reduce

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D.

its purchases of goods and services.

212.

Refer to the accompanying graph. What combination would most likely cause a shift from AD1 to

AD2?