Debt and Deficits Clicker Questions

[#1]

Budget deficits tend to:

A) decline during recessions because government spending automatically declines

B) decline during recessions because tax revenue automatically declines

C) increase during recessions because the government must cut spending

D) increase during recessions because the government must pursue contractionary fiscal policy

E) None of the above

Which of the following statements is FALSE:

A) The national deficit is the difference between federal government revenue and federal government spending over a particular period of time.

B) The national debt increases when the government runs a deficit.

C) If the national deficit decreases, the national debt also must decrease.

D) If the national debt decreases, the national deficit also must decrease.

When the government engages in deficit spending, it can lead to the crowd-out effect which:

A) drives interest rates down

B) drives interest rates up

C) leads to higher tax rates

D) causes wages to fall

[Discussion starter] Several states have balanced budget rules, requiring a balanced budget every year (i.e., the state can not run a deficit). Congress periodically considers legislation requiring a similar balanced budget rule for the federal budget. If you were a member of Congress, would you vote for such a law?