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Multiple Choice Quiz
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1
A federal budget deficit is financed by:
A)Printing money
B)Selling Treasury bonds
C)Raising taxes
D)Cutting spending
2
A federal budget surplus occurs when:
A)Tax revenues fall short of federal spending
B)The government sells Treasury bonds
C)There is a recession
D)Tax revenues are greater than federal spending
3
Budget deficits:
A)Have occurred rarely in recent U.S. history
B)Rose during the late 1990's
C)In 2004 are the largest in 30 years
D)Often occur in economic booms
4
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
5
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
6
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
7
A federal budget deficit increases with:
A)An economic boom
B)War and recession
C)Increased federal tax revenues
D)None of the above
8
Crowding out occurs when:
A)Business investment increases due to lower interest rates
B)An increase in business borrowing
C)An increase in federal borrowing which reduces private borrowing
D)There is an increase in the nations' savings
9
Crowding out can result in:
A)Inflation
B)Higher interest rates
C)An economic boom
D)All of the above
10
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
11
The national debt increased:
A)During WWII
B)During the depression of the 1930's
C)During 2004
D)All of the above
12
Which of the following items contributes to a reduction in the budget surplus in response to higher inflation?
A)Social security payroll taxes
B)Indexed retirement and social security benefits
C)Individual income tax receipts
D)All of the above
13
The only way to reduce the national debt is to:
A)Lower taxes
B)Use fiscal policies
C)Stop running budget deficits
D)Stop printing too much money
14
The social security trust fund:
A)Is used for federal spending programs
B)Is estimated to run deficits after 2014
C)Will run out of money because of the obligations owed to the Baby Boomer generation
D)All of the above
15
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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