SOLVED

1) As of 2010, the debt of the U.S. government amounted to roughly ________ per person. A) $25,000 B) $8 million C) $800,000 D) $800 2) Private saving + Government saving equals ________. A) Taxes + Investment B) Output minus Consumption C) Government capital + human capital D) Investment + Net exports 3) The negative impact of government debt on the economy is mitigated by ________. A) the impact of the debt on national saving. B) government spending on schools and highways. C) the interest rate effects of government budget deficits. D) the phenomenon of crowding-out. 4) Suppose total government spending is increased permanently by ten percent, with no change in tax rates. In the long run, the resulting deficit will disappear, ________. A) only if government spending is brought back down to the original level B) if economic growth raises tax revenue by ten percent C) if the government debt is sold to foreigners D) unless the money is spent entirely on government consumption 5) Tax smoothing is intended to ________. A) reduce income inequality B) avoid fluctuations in the ratio of the government deficit to GDP C) shift the burden from current taxpayers onto future generations D) keep the tax wedge from shrinking 6) The phenomenon of crowding-out suggests that the positive impact of budget deficits on economic activity are reduced by ________. A) the impact produced by government spending on the environment. B) an increase in national savings. C) the interest rate effects associated with federal deficits. D) the increase in pork barrel projects deficit spending entails. 7) ________ refers to a government’s failure to repay its debt. A) Intolerance B) Distortion C) Seignorage D) Repudiation 8) Sustained federal deficits tend, other things the same ________. A) to decrease income inequality in the United States. B) to decrease income inequality in Europe but not the United States. C) to increase income inequality in the United States. D) have little effect on the distribution of income in market economies. 9) The policy of keeping tax rates stable as government spending fluctuates is known as ________. A) Ricardian equivalence. B) tax smoothing. C) crowding-out. D) a tax smoothie. 10) A tax wedge is ________. A) the difference between the tax rate on income and capital gains. B) equal to the difference between what people earn before and after taxes are accounted for. C) the size of the decrease in labor force participation when labor income is taxed. D) the difference between the rate on Treasury securities and the income tax rate.