16) In order to reduce the U.S. debt a) The government must use deficit spending b) The government should spend less than it collects in tax revenues c) There will be a transfer of revenue from bondholders to taxpayers d) Foreign governments must lend more money to the U.S. government Gi G2 PUBLIC SECTOR OUTPUT G3 PRIVATE SECTOR OUTPUT H1 H2 H3 PRIVATE SECTOR OUTPUT Figure 12.1 17) Refer to Figure 12.1. Assuming the economy is on the production possibilities curve, crowding out suggests that an increase in government spending financed by internal borrowing would move the economy from point a) C to point F b) C to point A c) A to point C d) C to point E 18) The direct exchange of one good for another a) Is barter b) Is most efficient for an economy c) Facilitates specialization in production d) Facilitates market exchanges