Chapter 13 – Fiscal Policy, Deficits, and Debt
111. Of the U.S. Federal debt held by foreigners in 2009, China held roughly:
112. To track the public debt over time and understand its significance to the economy, it is
best:
113. Which of the following nations had the highest public sector debt as a percent of GDP in
2009?
Chapter 13 – Fiscal Policy, Deficits, and Debt
114. In 2009, interest payments on the public debt as a percentage of GDP were about:
115. From 1995 to 2001, the U.S. public debt relative to GDP:
116. In 2009, the public debt in the U.S. on a per capita basis was about:
Chapter 13 – Fiscal Policy, Deficits, and Debt
117. The two reasons why bankruptcy is a false concern regarding the public debt are:
118. A major reason that the public debt cannot bankrupt the Federal government is because:
119. 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:
Chapter 13 – Fiscal Policy, Deficits, and Debt
120. Most of the public debt is owed to the nation’s citizens and domestic institutions. This is
one reason that the public debt:
121. The economic burden of World War II for the United States was primarily:
122. One important reason why the United States government is not likely to go bankrupt
even with a large public debt is that it has:
Chapter 13 – Fiscal Policy, Deficits, and Debt
123. Which of the following is an important real consequence of the public debt of the United
States?
124. One of the potential consequences of the public debt is that it may:
125. The following are important problems associated with the public debt, except:
Chapter 13 – Fiscal Policy, Deficits, and Debt
126. A public debt which is owed to foreigners can be burdensome because:
127. An increase in the public debt and its subsequent repayment will tend to:
128. Crowding out is a decrease in private investment caused by:
Chapter 13 – Fiscal Policy, Deficits, and Debt
129. The crowding-out effect from government borrowing to finance the public debt is
reduced when:
130. Which would tend to reduce the crowding-out effect that occurs when the Federal
government increases its borrowing to finance a deficit?
131. Increased government spending for investments such as highways or harbors financed by
increasing the public debt would most likely:
Chapter 13 – Fiscal Policy, Deficits, and Debt
The following is an investment schedule. Investment spending is in billions of dollars.
132. Refer to the above data. Which of the following would illustrate the effects of crowding
out produced by government financing a deficit?
133. Refer to the above data. 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 would have potentially crowded out:
Chapter 13 – Fiscal Policy, Deficits, and Debt
134. Refer to the above 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:
135. Refer to the above 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:
Chapter 13 – Fiscal Policy, Deficits, and Debt
13–50
136. Refer to the above 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:
137. Refer to the above graph. The economy was initially in equilibrium at point 3 and
interest rates increased by 4 percentage points because of government deficit financing. The
public spending, however, improves business confidence and activity that exactly offsets the
potential crowding-out effect. This situation would result in a new equilibrium at point:
The table gives data on interest rates and investment demand (in billions of dollars) in a
hypothetical economy.
Chapter 13 – Fiscal Policy, Deficits, and Debt
138. Refer to the above table. Using the Id1 schedule, assume that the government needs to
finance the public debt and this public borrowing increases the interest rate from 3% to 4%.
How much crowding out of private investment will occur?
139. Refer to the above table. Assume that the public debt is used to improve the capital stock
of the economy and that, as a consequence, the investment-demand schedule changes from Id1
to Id2. At the same time, the interest rate rises from 3% to 4% as the government borrows
money to finance the public debt. How much crowding out of private investment will occur in
this case?
140. The Social Security Program is designed to pay: