1. Which of the following would necessarily entail a government budget surplus?

A reduction in government spending with the same tax revenue

An increase of taxes with flat spending

An inflationary gap with no government intervention

Tax revenues exceeding the sum of spending and transfer payments

An increase in the national debt

2. Deficit spending is paid for by

business investment being less than savings

consumer spending

imports exceeding exports

issuing new debt or government bonds

the central bank

3. The ________ is annual and the ________ is continuous year-over-year accumulation.

budget; national debt

national debt; budget

GDP; budget

budget; GDP

monetary policy; fiscal policy

4. If a government with a budget deficit sees its tax revenue decrease from one year to the next while its spending increases, what will happen to the budget deficit and national debt year-over-year accumulation?

The budget deficit will increase, and the national debt will not change.

The budget deficit will decrease, and the national debt will increase.

The budget deficit and national debt will both increase.

The budget deficit will not change, and the national debt will increase.

The budget deficit and national debt will both decrease.

5. In year 1, the government spent more than it collected in tax revenue. In year 2, the government increased spending more with no other budget changes. Which of the following is the most likely result from year 1 to year 2?

The budget surplus would decrease.

The budget surplus would increase.

The budget deficit would increase.

The national debt would decrease.

The budget deficit would decrease.