Answered: A federal budget deficit is financed…

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter17: Federal Deficits, Surpluses, And The National Debt

Section: Chapter Questions

Problem 7SQP

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A federal budget deficit is financed by: a. Printing money b. Selling Treasury bonds c. Raising taxes d. Cutting spending Eighty percent of the federal budget: a. Is available for discretionary spending b. Is already funded from decisions made in previous years c. Is devoted to military spending d. Is devoted to health care spending An example of an automatic stabilizer is: a. Military spending b. Social security payments c. Unemployment compensation d. A decision to spend more on highway construction The cyclical deficit: a. Increases with economic growth b. Increases during the peak of a business cycle c. Decreases with faster economic growth d. Decreases during the trough of the business cycle President Obama wants the government to spend a considerable amount of funds on education; healthcare and infrastructure. This spending will lead to which type of deficit? a. Cyclical b. Natural c. Full employment d. Structural A federal budget deficit increases with: a. An economic boom b. War and recession c. Increased federal tax revenues d. None of the above Crowding out occurs when: a. Business investment increases due to lower interest rates b. There is an increase in business borrowing c. An increase in federal borrowing reduces private borrowing d. There is an increase in the nations’ savings The national debt is: a. Completely owed to foreign governments b. Is the sum total of all money printed to pay for the budget deficits c. Is the sum total of all outstanding Treasury bonds d. Is larger than GDP The only way to reduce the national debt is to: a. Lower taxes b. Lower interest rates c. Stop running budget deficits d. Stop printing too much money The effects of a budget deficit can be offset by: a. External financing b. Crowding out c. A structural deficit d. All of the above

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