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Unformatted text preview: CH-15 sample questions1. A government budget deficit occurs when government revenues exceed government expenditures. True False2. The portion of the budget deficit or surplus that would exist even if the economy were at potential income is called the passive deficit or surplus. True False3. The larger the debt and the inflation rate, the less debt will be eliminated by inflation. True False4. The real deficit is the nominal deficit adjusted for inflation's effect on the debt. True False5. A cash flow accounting system includes cash inflows and outflows as well as future obligations to the Social Security system. True False6. In the short-run framework, budget deficits should: A. never be run since they slow economic growth over the long run.B. never be run since they crowd out investment in the short run.C. be run on a temporary basis whenever the economy is below potential output.D. be run on a permanent basis since they can always be financed by printing money.7. In the long-run framework, deficits reduce _______. A. investmentB. government consumptionC. taxesD. subsidies8. A passive deficit is the portion of the deficit that exists when: A. the economy is at potential income.B. the economy is beneath potential income.C. inflation is not fully anticipated.D. inflation is fully anticipated.9. If a passive surplus exists, the economy must be: A. at potential income.B. above potential income.C. below potential income.D. experiencing deflation.10. In 2007, the U.S. economy was operating close to potential. The budget deficits experienced by the U.S. in 2007 was: A. primarily passive deficits.B. primarily structural deficits.C. neither structural nor passive deficits.D. about evenly split between structural and passive deficits.11. If actual income is $300 billion, potential income is $350 billion, the total deficit is $20 billion, and tax revenue increases with income, then the structural deficit can be any of the following except: A. zero.B. $1 billion.C. $10 billion.D. $20 billion.12. Suppose potential income is $60 billion, actual income is $40 billion, and expenditures don't vary with income. If the actual budget deficit is $4 billion and the marginal tax rate is 20 percent, the structural deficit: A. is zero....
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This note was uploaded on 12/08/2009 for the course ACCT 101 taught by Professor Jim during the Spring '09 term at CSU Channel Islands.
- Spring '09