# Government Debt And Deficits

This question bank verified by Studydeets
All Questions
Filter by:
Question 1
Free
Multiple Choice

## What is the difference between the government's debt and the government's deficit?

The debt is the annual shortfall of revenues minus disbursements whereas the deficit is the accumulation of past debts.

The debt is the amount the government pays in interest payments whereas the deficit has not yet incurred interest charges.

The debt is the amount payable to the Bank of Canada whereas the deficit is the annual shortfall of revenue minus disbursements.

The debt is the accumulation of past deficits whereas the deficit is the annual shortfall between revenues and disbursements.

The debt is the difference between tax revenues and government expenditures whereas the deficit is the difference between tax revenues and borrowing.

Question 2
Free
Multiple Choice

## A simple equation describing the government's budget constraint is

government expenditure = tax revenue - borrowing.

government expenditure = tax revenue + borrowing.

government expenditure = tax revenue + debt-service payments.

tax revenue = government expenditure + borrowing.

tax revenue = borrowing - government expenditure.

Question 3
Free
Multiple Choice

## Consider the following variables: G = government purchasesI = interest rate on government debtD = stock of government debtT = net tax revenueThe government's budget constraint can be expressed as

(G + iD)= borrowing - T.

(G + iD)- T = borrowing.

(G + iD)+ T = borrowing.

G - T - (iD)= borrowing.

(G - iD)= borrowing + T.

Question 4
Free
Multiple Choice

## Consider the following variables: G = government purchasesI = interest rate on government debtD = stock of government debtT = net tax revenueThe government's budget deficit can be expressed as

ΔD = (G + iD)- T.

ΔD = (G - iD)+ T.

deficit = D - (G + iD)+ T.

deficit = D - T + (G + iD).

T = ΔD - (G + iD).

Question 5
Free
Multiple Choice

## In any given year,the government's debt-service payments are

equal to the annual budget deficit.

equal to the annual primary budget deficit.

the interest payments on the outstanding stock of government debt.

not related to the government deficit.

not required unless the debt is held by foreigners.

Question 6
Multiple Choice

## In any given year,the government's debt-service payments are equal to

(fiscal borrowing)× (the interest rate).
(government spending)× (the interest rate).
(government spending - tax revenue)× (the interest rate).
(total outstanding government debt)× (the interest rate).
(government spending + tax revenue)× (the interest rate).
To unlock the question
Question 7
Multiple Choice

## Consider the government's budget constraint.The accumulated stock of government debt will begin to fall

if the government's debt-service payments are zero.
if the government does not borrow money.
if the growth rate of real GDP is higher than the real interest rate.
when the government's annual budget is in deficit.
when the government's annual budget is in surplus.
To unlock the question
Question 8
Multiple Choice

## The federal government's "primary budget deficit"

includes domestic borrowing but excludes foreign borrowing.
excludes debt-service payments.
is the amount of government borrowing in a fiscal year.
is the amount of tax revenue minus the amount of interest paid on the public debt.
is the most important indicator of the level of government spending.
To unlock the question
Question 9
Multiple Choice

## The government's annual primary budget deficit is equal to the

accumulation of government borrowing.
decrease in the stock of government debt during the course of a year.
excess of government's program expenditures over tax revenues in a given fiscal year.
total amount of government spending on program expenses,personnel,and capital outlays.
excess of current revenue over current expenditure.
To unlock the question
Question 10
Multiple Choice

## Do we get a useful and meaningful statistic by dividing the national debt by the GDP?

No - we are essentially "dividing apples by oranges," which is unhelpful.
No - the GDP is not a meaningful measure of the well-being of the economy.
Yes - we can then see how much of the national debt is owed by each individual citizen.
Yes - we can see the burden of the debt in relation to the size of the economy.
No - dividing a stock by a flow can never be sensible.
To unlock the question
Question 11
Multiple Choice

## The government's primary budget deficit (or surplus)is the

non-interest expenditures and interest payments.
sum of total government expenditures and revenues.
sum of interest payments and revenues.
total budget deficit between two fiscal years.
total budget deficit (or surplus)excluding debt-service payments.
To unlock the question
Question 12
Multiple Choice

## The government's primary budget deficit (or surplus)is the difference between the

non-interest expenditures and interest payments.
interest payments and revenues.
total budget deficit (or surplus)and debt-service payments.
total budget deficit (or surplus)between one year and the next.
total government expenditures and revenues.
To unlock the question
Question 13
Multiple Choice

## Consider the federal government's budget constraint.If the government's total budget deficit is \$27 billion and its debt-service payments are \$29 billion,then its

primary budget deficit is \$2 billion.
primary budget deficit is \$56 billion.
primary budget surplus is \$2 billion.
primary budget surplus is \$56 billion.
Not enough information to determine.
To unlock the question
Question 14
Multiple Choice

## Suppose that in Year 2 there was a higher federal budget deficit than in Year 1.This could be explained by ________ in Year 2.

lower real interest rates
higher real GDP (with fiscal policy constant)
lower real GDP (with fiscal policy constant)
lower government expenditure (with real GDP constant)
a lower primary budget surplus
To unlock the question
Question 15
Multiple Choice

## The extent to which tax revenues are able to finance the discretionary part of total government expenditure is best measured by the

government's current fiscal policy.
debt-to-GDP ratio.
government's primary budget deficit or surplus.
tax-to-GDP ratio.
To unlock the question
Question 16
Multiple Choice

## When a government changes its fiscal policy,it is

changing the exchange rates to change national income.
increasing the money supply to increase national income.
changing government spending and/or tax rates to achieve some objective.
using government spending and taxes together with changing the money supply in order to achieve full employment.
buying and selling private bonds to increase or decrease the overnight lending rate.
To unlock the question
Question 17
Multiple Choice

## If we want to know whether tax revenues are sufficient to finance the discretionary part of government expenditure,which of the following measures should we analyze?

the government's budget constraint
the debt-to-GDP ratio
the government's primary deficit/surplus
the interest rate on government bonds compared to the growth rate of real GDP
To unlock the question
Question 18
Multiple Choice

## If voters want to know how their tax dollars are being spent and how the federal government is managing its current spending,they should look at

federal/provincial tax transfers.
changes in the money supply.
the primary budget balance.
the overall budget balance.
To unlock the question
Question 19
Multiple Choice

## Suppose the stock of government debt in Canada at the end of one fiscal year is \$475 billion.If the stock of debt falls to \$461 billion by the end of the next fiscal year,then we know that in that year

the government had a primary budget surplus of \$14 billion.
the government had a primary budget deficit of \$14 billion.
tax revenues increased by \$14 billion.
the government had an annual budget surplus of \$14 billion.
debt-service payments fell by \$14 billion.
To unlock the question
Question 20
Multiple Choice