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Public Debt and Fiscal Sustainability

Description: This quiz covers the concepts of public debt and fiscal sustainability. It explores the various aspects of public debt, its impact on the economy, and the strategies for achieving fiscal sustainability.
Number of Questions: 15
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Tags: public finance public debt fiscal sustainability economics
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What is the primary source of government revenue to finance its expenditures?

  1. Taxes

  2. Borrowing

  3. Printing money

  4. Selling government assets


Correct Option: A
Explanation:

Taxes are the primary source of government revenue, as they are mandatory payments made by individuals and businesses to the government.

What is the term used to describe the total amount of money that a government owes to its creditors?

  1. Public debt

  2. National debt

  3. Government debt

  4. All of the above


Correct Option: D
Explanation:

Public debt, national debt, and government debt all refer to the total amount of money that a government owes to its creditors.

Which of the following is NOT a type of public debt?

  1. Domestic debt

  2. External debt

  3. Corporate debt

  4. Municipal debt


Correct Option: C
Explanation:

Corporate debt is not a type of public debt, as it is debt owed by corporations to their creditors, not by governments.

What is the term used to describe the situation when a government's debt is so high that it cannot meet its financial obligations?

  1. Fiscal crisis

  2. Debt crisis

  3. Sovereign default

  4. All of the above


Correct Option: D
Explanation:

Fiscal crisis, debt crisis, and sovereign default all refer to the situation when a government's debt is so high that it cannot meet its financial obligations.

What is the primary cause of public debt?

  1. Government spending exceeding revenue

  2. Economic recession

  3. Natural disasters

  4. War


Correct Option: A
Explanation:

The primary cause of public debt is when government spending exceeds revenue, leading to a budget deficit that must be financed through borrowing.

Which of the following is NOT a potential consequence of high public debt?

  1. Higher interest rates

  2. Inflation

  3. Economic growth

  4. Currency devaluation


Correct Option: C
Explanation:

High public debt can lead to higher interest rates, inflation, and currency devaluation, but it does not directly lead to economic growth.

What is the term used to describe the government's ability to meet its financial obligations in the long run?

  1. Fiscal sustainability

  2. Debt sustainability

  3. Solvency

  4. All of the above


Correct Option: D
Explanation:

Fiscal sustainability, debt sustainability, and solvency all refer to the government's ability to meet its financial obligations in the long run.

Which of the following is NOT a strategy for achieving fiscal sustainability?

  1. Reducing government spending

  2. Increasing taxes

  3. Printing money

  4. Refinancing debt


Correct Option: C
Explanation:

Printing money is not a sustainable strategy for achieving fiscal sustainability, as it can lead to inflation and currency devaluation.

What is the term used to describe the situation when a government's debt is so low that it has room to borrow more without compromising its fiscal sustainability?

  1. Fiscal space

  2. Debt capacity

  3. Budget surplus

  4. All of the above


Correct Option: D
Explanation:

Fiscal space, debt capacity, and budget surplus all refer to the situation when a government's debt is so low that it has room to borrow more without compromising its fiscal sustainability.

Which of the following is NOT a potential benefit of public debt?

  1. Financing government spending

  2. Stimulating economic growth

  3. Reducing income inequality

  4. All of the above


Correct Option: C
Explanation:

Public debt does not directly reduce income inequality, although it can have indirect effects on income distribution.

What is the term used to describe the government's plan for managing its public debt and achieving fiscal sustainability?

  1. Fiscal policy

  2. Debt management strategy

  3. Budget plan

  4. All of the above


Correct Option: D
Explanation:

Fiscal policy, debt management strategy, and budget plan all refer to the government's plan for managing its public debt and achieving fiscal sustainability.

Which of the following is NOT a potential risk associated with public debt?

  1. Crowding out private investment

  2. Inflation

  3. Economic growth

  4. Currency devaluation


Correct Option: C
Explanation:

Public debt does not directly lead to economic growth, although it can have indirect effects on economic growth.

What is the term used to describe the situation when a government's debt is so high that it is unable to borrow more money at a reasonable interest rate?

  1. Debt trap

  2. Sovereign default

  3. Fiscal crisis

  4. All of the above


Correct Option: A
Explanation:

A debt trap is a situation when a government's debt is so high that it is unable to borrow more money at a reasonable interest rate.

Which of the following is NOT a potential consequence of fiscal sustainability?

  1. Lower interest rates

  2. Stable economic growth

  3. Reduced risk of financial crisis

  4. Increased government spending


Correct Option: D
Explanation:

Fiscal sustainability does not directly lead to increased government spending, although it can create fiscal space for increased spending.

What is the term used to describe the government's ability to borrow money at a reasonable interest rate?

  1. Creditworthiness

  2. Debt sustainability

  3. Fiscal sustainability

  4. All of the above


Correct Option: A
Explanation:

Creditworthiness is the government's ability to borrow money at a reasonable interest rate.

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