Government Deficits and Debt
1) The total value of government bonds outstanding at any particular time is called the
A) government debt.
B) government deficit.
C) seignorage revenue.
D) yield curve.
2) Increases in the debt-GDP ratio are primarily caused by
A) a high growth rate of GDP.
B) a high government deficit relative to GDP.
C) increases in government borrowing through bonds.
D) increases in interest rates.
3) If the deficit is 0.02 times GDP, the existing debt/GDP ratio is 0.5, and the growth rate of nominal GDP is 0.03, then the change in the debt-GDP ratio is
4) If the deficit is 0.1 times GDP, the existing debt/GDP ratio is 0.5, and the growth rate of nominal GDP is 0.04, then the change in the debt-GDP ratio is
5) If the deficit is 0.08 times GDP, the existing debt/GDP ratio is 0.8, and the growth rate of nominal GDP is 0.05, then the change in the debt-GDP ratio is
6) A Social Security system in which payroll taxes that workers and their employers pay in go directly to retirees and other beneficiaries is known as
A) a pay-as-you-go system.
B) an individual-account system.
C) a primary-deficit system.
D) a social-lockbox system.
7) According to current projections, in about 2033, the Social Security trust fund will
A) own all the government bonds that have been issued.
B) own about half of all the stock issued on the New York Stock Exchange.
C) run out of assets.
D) start to run deficits.
8) Which of the following policies would not prevent the Social Security trust fund from running out of assets?
A) Reduce promised benefits
B) Reduce taxes
C) Increase taxes
D) Earn a higher rate of return
9) Social Security benefits could be reduced in each of the following ways EXCEPT
A) cutting the promised monthly benefit.
B) increasing the retirement age.
C) investing the trust fund in the stock market.
D) reducing the degree to which benefits are adjusted for inflation.
10) To earn a higher return on the assets in the Social Security trust fund, a suggestion has been made to allow the trust fund to
A) buy government bonds.
B) sell limited partnerships.
C) sell insurance.
D) invest in the stock market.
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