Practice Questions
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Which of the following is NOT considered a source of revenue when calculating budget deficits?
Public donations are not regular income for the government. Other options are incorrect because Taxes are a main way the government gets money; Govern...
How does a contractionary monetary policy typically impact budget deficits during periods of economic growth?
A contractionary monetary policy means the government is trying to slow down the economy. Other options are incorrect because This answer suggests tha...
Which of the following best describes how deficit financing is used in fiscal policy to address budget deficits?
Deficit financing means borrowing money to pay for expenses when there isn't enough income. Other options are incorrect because Some people think rais...
If a government increases its spending significantly during a recession, which of the following outcomes is most likely to occur in the short term, assuming the economy is operating below its potential output?
When the government spends more, it creates jobs and boosts demand. Other options are incorrect because Some might think that more spending will autom...
Which of the following statements best describes a cyclical budget deficit and its implications for government spending?
A cyclical budget deficit happens when the economy is not doing well, like during a recession. Other options are incorrect because This answer suggest...
What is a budget deficit?
A budget deficit happens when a government spends more money than it earns. Other options are incorrect because This option suggests that the governme...
What is the budget deficit if a government spends $500 billion and its total revenue is $400 billion?
The budget deficit is the amount spent minus the money earned. Other options are incorrect because This answer might come from thinking the deficit is...
Which of the following is NOT considered a source of revenue when calculating budget deficits?
Public donations are gifts from people. Other options are incorrect because Many think taxes are optional, but they are a main way the government gets...
Which of the following statements accurately describe the implications of a budget deficit on a nation's economy? Select all that apply.
All the statements given are incorrect. Other options are incorrect because Some might think a budget deficit doesn't affect national debt; It's a com...
When a government's expenditures exceed its revenues, resulting in a negative balance, this situation is referred to as a _________.
A budget deficit happens when a government spends more money than it earns. Other options are incorrect because A fiscal surplus means the government ...
In 2023, the government of a small country, Greenlandia, decided to increase its infrastructure spending to improve roads and schools, leading to an annual budget deficit. If Greenlandia's expenditures are projected to exceed its revenues by $500 million this year, which of the following best explains the potential long-term implications of this budget deficit on the nation's economy?
When a country spends more than it earns, it borrows money. Other options are incorrect because Some people think that as long as taxes are paid, the ...
A balanced budget is to a government's fiscal health as a healthy diet is to an individual's physical well-being. What would an increasing budget deficit be analogous to?
An increasing budget deficit is like eating junk food. Other options are incorrect because Some might think a balanced diet is good for health, but it...
If Faron's government transitions from a balanced budget in 2011 to a budget deficit in 2012, what is the most likely underlying cause of this change?
When a government spends more money than it earns, it creates a budget deficit. Other options are incorrect because This option suggests that more tax...
If a government shifts from a balanced budget to a budget deficit, which of the following is a likely consequence?
When a government spends more than it earns, it borrows money. Other options are incorrect because Some might think that cutting spending helps the ec...
If Faron's government transitions from a balanced budget in 2011 to a deficit in 2012, what is the most likely impact on its national debt?
When a government spends more money than it earns, it borrows money. Other options are incorrect because This answer suggests that spending less will ...
Arrange the following steps in the process of understanding how a budget deficit impacts national debt: A) Government increases expenditures without raising revenues, B) National debt increases due to the deficit, C) Analysis of fiscal health reveals persistent deficits, D) Government evaluates its budget to restore balance.
First, the government spends more money than it makes, which is a deficit. Other options are incorrect because This option suggests that we see the de...
In 2011, Faron's government maintained a balanced budget, but in 2012, expenditures exceeded revenues, resulting in a budget deficit. Based on this scenario, how would you classify the fiscal policy of Faron's government in 2012?
In 2012, Faron's government spent more money than it earned. Other options are incorrect because Some might think this means spending less; This optio...
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