The large budget deficits of the early 1990s resulted in large current account deficits.
Indicate whether the statement is true or false
Ques. 2During most of the years of the Great Depression, the actual federal budget was in ________, and the cyclically adjusted budget was in ________.
A) surplus; surplus B) deficit; deficit C) surplus; deficit D) deficit; surplus
Ques. 3Suppose that the federal budget is balanced when GDP is at potential GDP. If equilibrium GDP falls below potential
A) government transfer payments will be rising and tax receipts will be falling.
B) this will result in a current budget deficit.
C) the cyclically adjusted budget will be balanced.
D) All of the above are correct.
Ques. 4An increase in the government budget deficit will not lead to a current account deficit if domestic investment declines.
Indicate whether the statement is true or false
Ques. 5Persistent current account deficits for the United States have
A) increased government budget deficits.
B) decreased investment in new plant and equipment.
C) slowed economic growth.
D) None of the above are correct.
Ques. 6If the federal budget has an actual budget deficit of 100 billion and a cyclically adjusted budget deficit of 75 billion, then the economy
A) must be at potential real GDP. B) must be above potential real GDP.
C) could be below or above potential real GDP. D) must be below potential real GDP.
Ques. 7The current account deficits incurred by the United States in the 1990s and early 2000s were caused, in the opinion of many economists, by
A) federal budget deficits.
B) a sharp decline in private saving.
C) flight to quality as foreign investors favored U.S. investments.
D) Both B and C are correct.
Ques. 8During the twentieth century, the largest budget deficits as a percentage of GDP occurred
A) during the 1980s. B) during the Vietnam war.
C) during the 1990s. D) during World Wars I and II.
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