30 Questions
Which of the following best describes government deficits?
The difference between government revenues and expenditures
What is the main source of financing for government deficits?
Private pension and insurance fund portfolio investments
Why is it more likely for governments to have deficits than surpluses over long periods of time?
Governments face unexpected expenses
What historical events have had a major impact on the ratio of public debt to GDP for the United Kingdom?
The Napoleonic Wars and World Wars I and II
What was the effect of the credit crisis of 2008 on government debt in the United Kingdom and the United States?
Government debt increased in both countries
What was a concern in the financial markets in 2010 for some countries, such as Greece?
The increase in government borrowing
What impact did the fiscal expansion by governments during the financial crisis have on the general government debt-to-GDP ratio?
It increased the ratio
What was the change in central government debt in the United Kingdom between 2008 and 2009 according to the OECD?
It increased by USD1.2 trillion
What was the change in central government debt in the United States between 2008 and 2009 according to the OECD?
It increased by USD1.7 trillion
What factor has historically caused fluctuations in the ratio of public debt to GDP for the United Kingdom?
The financing of wars
What is the effect of government borrowing on private sector investment?
Government borrowing diverts private sector investment (crowding out)
What is the impact of larger government demands on interest rates and private sector investing?
Larger government demands lead to higher interest rates and lower private sector investing
What is the distinction between long- and short-run effects of crowding out?
Crowding out has a significant distinction between long- and short-run effects
What is the impact of tax distortions over the short term?
Tax distortions have a minor impact over the short term
What is the potential impact of crowding out on capital accumulation in an economy?
Crowding out damages capital accumulation over a longer time
What is the relationship between government borrowing and interest rates?
Government borrowing leads to higher interest rates
What is the impact of tax distortions over many years?
Tax distortions have a significant impact over many years
What is the potential impact of crowding out over short periods of time?
Crowding out has a minor impact over short periods of time
What is the impact of larger government demands on private sector investing over short periods of time?
Larger government demands have no impact on private sector investing over short periods of time
What is the impact of larger government demands on private sector investing over longer periods of time?
Larger government demands lead to lower private sector investing over longer periods of time
What is one potential indicator for potential insolvency of a country?
The ratio of interest rate payments to GDP
What concern arises when government spending is far in excess of revenues?
Concerns about the scale of governmental debt accumulation
How much did government debt relative to GDP for the OECD countries overall rise from 2005 to 2015?
35.8 percent
In Japan, how much did the ratio of government debt relative to GDP rise from 1995 to 2015?
247.4 percent
When does the debt ratio worsen even though the economy is growing?
When the real growth in the economy is lower than the real interest rate on the debt
What happens to the real value of the outstanding debt if the overall price level rises?
It falls
What may happen if investors lose confidence in a government's ability to honor its debts?
Financing costs may escalate even more quickly
What is one argument against being concerned about national debt relative to GDP?
The debt is owed internally to fellow citizens
What may high levels of debt to GDP lead to?
Higher tax rates
What may happen if markets lose confidence in a government?
The central bank may have to print money to finance a government deficit
Test your knowledge on deficits and the national debt with this informative quiz. Learn about government revenues, expenditures, borrowing, and the accumulation of deficits over time. Challenge yourself and expand your understanding of this crucial economic topic.
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