Understanding Government Finance

What is generally considered a negative thing by most people?

• Borrowing money

• Earning

• Saving

• Investing

What is created when a government spends more than its tax revenue in a given year?

• Loan

• Surplus

• Profit

• Deficit

What is a surplus?

• When government spending exceeds tax revenue

• A decrease in national debt

• When tax revenue exceeds government obligations

• A type of government loan

Who are the primary holders of government debt?

• Non-profit organizations

• Banks

• Private sector and pension funds

• Foreign governments

How do governments usually borrow money?

• By cutting public spending

• By increasing taxes

• By selling securities

• By taking loans from international banks

What can excessive government debt lead to?

• Increased confidence in the currency

• Decreased inflation

• Stable interest rates

• Increased inflation

What is the debt-to-GDP ratio used to measure?

• The total value of goods and services produced

• The country's economic growth

• The efficiency of tax collection

• A country's ability to pay back its debt

What happens if a government defaults on its loan?

• It receives additional funds from the IMF

• It fails to pay back the borrowed money

• It has to increase taxes immediately

• It can borrow more without interest

What makes up the largest share of the American federal budget?

• Military spending

• Discretionary spending

• Mandatory spending

• Interest on debt

What is considered an entitlement in the United States?

• Social Security

• Interest on debt

• Mandatory spending

• Discretionary spending