The statement that “repaying our enormous national debt will ruin the nation” is
A. true, because taxes will have to go up by such large amounts that American citizens will have very little income to live on.
B. true, because most of our national debt is owed to foreigners.
C. false, because the government will take emergency measures to prevent national bankruptcy.
D. false, because each time the principal on the debt comes due, the U.S. Treasury rolls it over by issuing more debt.
Answer: D
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The U.S. dollar exchange rate, e, expressed as Japanese yen per U.S. dollar, will depreciate when:
A. the U.S. Federal Reserve tightens monetary policy. B. real GDP in Japan increases. C. real GDP in Japan decreases. D. U.S. consumers decrease their preference for Japanese cars.
"As interest rates rise, people save more money." A graph displaying this relationship would show
A) an inverse relationship. B) a positive relationship. C) a cross-section graph. D) a positive then a negative relationship.
Assume that one of two possible outcomes will follow a decision. One outcome yields a $75 payoff and has a probability of 0.3; the other outcome has a $125 payoff and has a probability of 0.7. In this case the expected value is
A) $85. B) $60. C) $110. D) $35.
Economic profits and losses are true market signals because they
A) convey information in an asymmetrical fashion. B) convey information about rewards people should anticipate experiencing by shifting resources from one activity to another. C) convey information to public officials about where to encourage people to invest and what skills people should develop. D) cause people to move into careers in both undesirable and desirable industries with equal ease.