Unit 5 Economics Test

What is the difference between national debt and a national deficit?

• Government debt is the difference between receipts and outlays, but the deficit is the total amount of money the government borrows.

• The national debt is recorded on an annual basis whereas a deficit is over the course several years.

• A deficit is money owed whereas debt is net money taken in that results in a negative balance.

• The national debt is a shortage that accumulates over several annual deficits.

Which of these will the government do to  repay the national debt?

I Cut spending.

II Raise taxes.

III Increase interest rates.

IV Borrow more money.

• III and IV only

• I and II only

• IV only

• II only

What is the main problem with reducing government spending as a way to pay down the national debt?

• Taxes will increase.

• Trade will decrease.

• Inflation will increase.

• Unemployment will increase.

In the long run, increasing the national debt will cause which of these?

• higher tax revenue

• an increase in jobs

• higher interest rates

• an increase in production

Suppose the government increases the amount of money it spends. This is an example of which of these?

• using fiscal policy to decrease inflation

• using fiscal policy to stimulate the economy

• using monetary policy to stimulate the economy

• using monetary policy to slow down the economy

What causes the national debt to rise from one year to the next?

• a tax surplus

• a budget deficit

• a budget surplus

• a stop-gap measure

With regards to economic growth, what is the goal of an expansionary fiscal policy?

• to increase trade deficits

• to increase economic growth

• to decrease economic growth

• to maintain current economic levels

What will increased budget surpluses do to the national debt?

• not affect it

• grow the debt

• shrink the debt

• change monetary policy

Which pairs of operations BEST fit with fiscal policy?

• government spending and taxation

• taxation and open market operations

• discount rate and government spending

• open market operations and discount rate

Federal program that provides monthly payments (entitlements) to people who are retired or unable to work is called

• Welfare.

• Medicare.

• Social Security.

• Senior Citizen's program.