Macroeconomics
Country a has a debt of $10 trillion. Country B. has a debt of $5 trillion.
Country A is in a better position than Country B.
Country B. is in a better position than Country A.
One cannot say what relative position the countries are in.
Countries A and B. are in equal positions.
A budget deficit is:
never desirable.
desirable if it helps to stabilize output at potential output.
desirable if it helps to increase current consumption.
always desirable.
The Social Security trust fund:
creates a lockbox that will prevent the Social Security system from failing in the future.
coverts an unfunded pension system into a fully funded pension system.
may help to reduce the problems facing the Social Security system but is not likely to eliminate them entirely.
d. creates the illusion of a lockbox but in fact does nothing to alleviate the crisis facing the Social Security system.
Assuming all else is equal, the retirement of the baby boomers will affect:
a. both aggregate supply and aggregate demand.
b. aggregate demand but not aggregate supply.
c. aggregate supply but not aggregate demand.
d. neither aggregate supply nor aggregate demand.
Government debt is unlike individual debt for all of the following reasons except:
a. most of government debt is external, unlike individual debt.
b. government can pay its debt by printing money.
c. governments can use taxes to help repay their debt while individuals cannot.
d. government never has to pay back its debt.
External government debt is:
a. more like an individual's debt because paying interest on it involves a net reduction in domestic income.
b. more like an individual's debt because paying interest on it involves no net reduction in domestic income.
c. less like an individual's debt because paying interest on it involves a net reduction in domestic income.
d. less like an individual's debt because paying interest on it involves no net reduction in domestic income.
Internal government debt is:
a. debt owed by citizens to their government.
b. debt owed by one government to another government.
c. government debt owed to citizens.
d. government debt owed to foreigners.
If inflation is unanticipated, lenders:
a. will suffer losses as inflation reduces the value of the debt.
b. will not suffer losses because inflation will not reduce the value of the debt.
c. will not suffer losses because the nominal deficit will not rise to offset the effect that inflation has on the debt.
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