ECO 302 Week 9 Quiz - Strayer
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Chapter 14 and 15
TRUE/FALSE
1. When
a country has a deficit, its debt is growing.
2. A
pay as you go social security system raises the capital stock.
3. If
government budget is in deficit, then real government saving is in surplus.
4. If
the government runs a deficit, households will feel wealthier.
5. A
budget deficit caused by changing labor income taxes changes the labor and
production.
6. The
debt-to-GDP ratio typically rises during a recession.
7. The
major peaks in the ratio of public debt to GDP in the U.S. reflect expenditures
on Social Security.
8. Real
national saving equals net investment.
9. Real
government saving is positive when the real public debt increases.
10. If
government expediture exceeds government revenue, then the government has a
budget surplus.
MULTIPLE CHOICE
1. The
governments sources of funds include:
a. taxes. c. borrowing.
b. printing money. d. all of the
above.
2. The
governments sources of funds include:
a. taxes. c. paying interest on past bonds.
b. government purchases. d. all
of the above.
3. The
governments sources of funds include:
a. transfer payments. c. paying
interest on the government debt.
b. printing money. d. all of the
above.
4. The
governments sources of funds include:
a. government purchases. c. borrowing.
b. transfer payments. d. all
of the above.
5. The
governments uses of funds include:
a. government purchases. c. paying
interest on the past government debt.
b. transfer payments. d. all
of the above.
6. The
governments uses of funds include:
a. government purchases. c. printing
money.
b. borrowing. d. all of the
above.
7. The
governments uses of funds include:
a. printing money. c. taxes.
b. transfer payments. d. all
of the above.
8. The
governments uses of funds include:
a. borrowing. c. paying
interest on the past government debt.
b. printing money. d. all of the
above.
9. A
balanced government budget is one where:
a. government purchases equal taxes. c. the
governments real savings is zero.
b. government debt is zero. d. all
of the above.
10. Total
bond holding of all households is Bgt because:
a. the quantity of all private bonds held
by the public is zero. c. the public views government bonds as
less risky than private bonds.
b. the quantity of all government bonds
held by the public is zero. d. the public views private bonds as less
risky than government bonds.
11. Total
bond holding of all households is equal to
a. the quantity of all private bonds. c. the
quantity of all private bonds plus all government bonds.
b. the quantity of all government bonds. d. the
quantity of all private bonds minus all government bonds.
12. If
money and the price level are constant, then the government’s real budget
deficit is:
a. (Bgt - Bgt-1)/P. c. (Bt +
Bgt)/P.
b. Bgt/P. d. none of the above.
13. If
money and the price level are constant, then the government’s real budget debt
is:
a. (Bgt - Bgt-1)/P. c. (Bt +
Bgt)/P.
b. Bgt/P. d. none of the above.
14. If
the government reduces taxes by $1 this year without raising taxes or printing
more money, then
a. future tax liabilities will rise by $1
plus the interest, R, that must be paid on the borrowing. c. future
tax liabilities will fall by $1 plus the interest, R, that must be paid on the
borrowing.
b. future tax liabilities will rise by $1
less the interest, R, that must be paid on the borrowing. d. future
tax liabilities will fall by $1 less the interest, R, that must be paid on the
borrowing.
15. Ricardian
equivalence implies that a government budget deficit:
a. increases current consumption. c. reduces
national saving.
b. increases future tax liabilities. d. all
of the above.
16. Ricardian
equivalence holds:
a. only for year to year changes in the
governments budget. c. only with a government deficit not a
surplus.
b. no matter how long until the bonds are
to be paid off. d. only with a government surplus not a
deficit.
17. A
strategic budget deficit is designed to:
a. increase GDP. c. constrain the
behavior of future governments.
b. increase economic activity. d. all
of the above.
18. The
standard view of the budget deficit is that it:
a. reduces the GDP in the long run. c. reduces
the capital stock in the long run.
b. reduces investment. d. all
of the above.
19. The
standard view of the budget deficit is that it:
a. reduces the GDP in the long run. c. increases
the capital stock in the long run.
b. increases investment. d. all
of the above.
20. The
standard view of the budget deficit is that it:
a. increases the GDP in the long run. c. increases
the capital stock in the long run.
b. reduces investment. d. all
of the above.
21. The
standard view of the budget deficit is that it:
a. increases the GDP in the long run. c. reduces
the capital stock in the long run.
b. increases investment. d. all
of the above.
22. The
standard view of the budget deficit is that a deficit:
a. does not affect the economy in the long
run. c. does
not affect the economy in the short run.
b. and the public debt are a burden on the
economy. d. encourages economic growth.
23. Households
may feel wealthier due to a tax cut, if:
a. they are very concerned about future
generations. c. they are using an infinite planning horizon.
b. they expect the bonds created by the
deficit to be paid off after their lifetime. d. they plan to leave a bequest to their
heirs.
24. Households
may feel wealthier due to a tax cut, if:
a. they are not able to borrow as much
against future earnings as they wish. c. they care a lot about future
generations.
b. they are not able to lend present
earnings as much as they wish. d. they plan to leave a bequest to their
heirs.
25. If
households ignore effects on future generations, a pay as you go social
security system:
a. reduces current national savings. c. reduces
the future capital stock.
b. reduces investment. d. all
of the above.
26. If
households ignore effects on future generations, a pay as you go social
security system:
a. reduces current national savings. c. raises
the future capital stock.
b. raises investment. d. all
of the above.
27. If
households ignore effects on future generations, a pay as you go social
security system:
a. raises current national savings. c. raises
the future capital stock.
b. reduces investment. d. all
of the above.
28. If
households ignore effects on future generations, a pay as you go social
security system:
a. raises current national savings. c. reduces
the future capital stock.
b. raises investment. d. all
of the above.
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