Federal Budget and Fiscal Policy Quiz

Which two main components make up the federal budget?

• A) Loans and Debts

• B) Assets and Liabilities

• C) Revenue and Expenditures

• D) Savings and Investments

What is a budget surplus?

• A situation in which budget expenditures exceed revenues

• A situation in which budget revenues equal expenditures

• A situation in which budget revenues exceed expenditures

• A situation in which budget revenues are less than expected

What is a budget deficit?

• A situation in which budget revenues exceed expenditures

• A situation in which budget revenues are less than expected

• A situation in which budget expenditures equal revenues

• A situation in which budget expenditures exceed revenues

What can be a consequence of creating more money once the economy reaches full employment?

• Deflation

• Stagnation

• Inflation or hyperinflation

• Economic boom

How does the federal government usually respond to a deficit?

• By increasing taxes

• By borrowing money

• By printing more money

• By cutting public spending

What method does the government usually use to borrow money?

• By taking loans from foreign governments

• By selling stocks

• By selling bonds

• By selling state-owned assets

What is the benefit for people who loan money to the government through savings bonds?

• They get to vote on government decisions

• They receive a fixed monthly salary

• They earn interest on the bonds for up to 30 years

• They can redeem their bonds for government services

How is a national debt created?

• When the government invests in the stock market

• When the government borrows money

• When the government increases taxes

• When the government has a budget surplus

What is a problem with a high national debt?

• The government can reduce taxes

• The government must pay interest to bondholders

• The government increases spending on education

• The government has a surplus to spend on other programs

Which President's administration was associated with the federal government surplus in the late 1990s?

• President George W. Bush

• President Barack Obama

• President Bill Clinton

• President Ronald Reagan