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301.
Government Spending
Tax Revenues
GDP
Year 1
$800
$825
$4,000
Year 2
850
850
4,200
Year 3
900
875
4,350
Year 4
950
900
4,500
Year 5
1,000
925
4,600
The table contains budget information for a hypothetical economy. All data are in billions of
dollars. Assume that Year 1 is the first year for this economy and Year 5
is the current year.
What is the public debt in this economy at Year 5?
302.
In 2015, U.S. individuals and private banks (and other financial institutions) held about
what percentage of U.S. federal debt?
33-162
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. 75 percent
303.
In 2015, the Federal Reserve and other U.S. (federal) government agencies held about what
percentage of U.S. federal debt?
304.
As of 2015, most of the U.S. federal debt was owed to
305.
In 2015, foreign ownership of the total public debt of the United States was about
306.
Of the U.S. federal debt held by foreigners in 2015, China held roughly
307.
To track the public debt over time and understand its significance to the economy, it is best
33-164
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written consent of McGraw-Hill Education.
public debt.
Test Bank: II
Topic:
The U.S. Public Debt
308.
Which of the following nations had the highest public sector debt as a percentage of GDP in
2015?
309.
In 2015, interest payments on the public debt, as a percentage of GDP, were about
310.
From 1995 to 2001, the U.S. public debt relative to GDP
33-165
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
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: II
Topic:
The U.S. Public Debt
311.
In 2015, the public debt in the U.S. on a per capita basis was about
312.
The two reasons why bankruptcy is a false concern about the public debt are
313.
A major reason that the public debt cannot bankrupt the federal government is because
33-166
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
B.
the federal government has the Social Security Trust Fund.
C. the public debt can be easily refinanced by issuing new bonds.
D. the federal government can draw on its gold reserves.
314.
Incurring an internal debt to finance a war like World War II does not pass the true cost of
the war on to future generations because
315.
Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is
one reason that the public debt
33-167
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Learning Objective: 33-06 Discuss the size, composition, and consequences of the U.S.
public debt.
Test Bank: II
Topic:
The U.S. Public Debt
316.
The economic burden of World War II for the United States was primarily
317.
One important reason why the United States government is not likely to go bankrupt even
with a large public debt is that it has
318.
Which of the following is an important real consequence of the public debt of the United
States?
33-168
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. Its consequent higher interest rates lead to fewer incentives to bear risk and innovate.
319.
One of the potential consequences of the public debt is that it may
320.
Which of the following is not an important problem associated with the public debt?
321.
A public debt that is owed to foreigners can be burdensome because
322.
An increase in the public debt and its subsequent repayment will tend to
323.
Crowding out is a decrease in private investment caused by
33-170
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
public debt.
Test Bank: II
Topic: The U.S. Public Debt
324.
The crowding-out effect from government borrowing to finance the public debt is reduced
when
325.
Which would tend to reduce the crowding-out effect that occurs when the Federal
government increases its borrowing to finance a deficit?
326.
Increased government spending for investments such as highways or harbors financed by
increasing the public debt would most likely
33-171
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written consent of McGraw-Hill Education.
D. crowd out private investment.
327.
Interest Rate
Investment
0%
$100
2
92
4
78
6
61
8
45
Refer to the accompanying investment schedule. Investment spending is in billions of dollars.
When the government runs a budget deficit and issues more Treasury
securities, crowding out
will occur if
328.
Interest Rate
Investment
0%
$100
33-172
2
92
4
78
6
61
8
45
Refer to the accompanying investment schedule. Investment spending is in billions of dollars.
Assume that private investment spending is initially $78 billion. If the
government finances a
deficit and this action increases the interest rate by 2 percentage points, then the government
financing will have potentially crowded out
329.
Refer to the graph. Private investments are initially at point 5 on curve B. The crowding-out
effect would be illustrated by a movement from point 5 to point
330.
Refer to the graph. If the economy was initially in equilibrium at point 3 and a government deficit
makes interest rates increase by 4 percentage points, then the
crowding-out effect would be a
reduction of
33-174
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Diffic ult y: 02 Medium
Learning Objective: 33-06 Discuss the size, composition, and consequences of the U.S.
public debt.
Test Bank: II
Topic:
The U.S. Public Debt
Type: Graph
331.
Refer to the graph. The economy is initially at point 1. Which of the following events would
cause a shift that would help offset the crowding-out effect? An increase
in
