Midterm

Question 1

Toll goods are characterized by:

Answer 1

Joint use (inexhaustible/nonrival) and exclusion feasible

Question 2

Which of the following is most likely a common pool resource?

Answer 2

Water reservoir

Question 3

What is a budget?

Answer 3

A financial plan that focuses on the financial implications of carrying out a particular response to anticipated operating conditions in a future period

Question 4

Which of the following is NOT an agency of the legislative branch?

Answer 4

Office of Management and Budget

Question 5

Which of the following would give evidence of horizontal equity?

Answer 5

None of the above:
Horizontal equity concerns the comparison of taxpayers with equal capability to pay taxes (the ability to pay principle). Different tax bills from two different jurisdictions, a property tax bill that has increased for an individual from 1985 to 1998, or different property tax bills within the same jurisdiction can’t tell you anything about horizontal equity. The different tax bills could be the result of different nominal tax rates, bigger homes, or just an adjustment for time passed. You need effective tax rates to be able to compare if two or more taxpayers with equal capability to pay taxes are being treated ‘fairly.’ See Mikesell’s discussion titled, Equity: Horizontal and Vertical. Also, see Lesson 4.

Question 6

You are an administrator in a large new federal agency. You have great ideas for new services that your program could provide in the next fiscal year. In what stage of the budget process will you know how much money will actually be funded and appropriated to your program?

Answer 6

When both houses of Congress have passed appropriations bills and they are approved by the President.

Question 7

Nonappropriability (public goods’ characteristics) consists of the following two aspects:

Answer 7

Nonexclusion and nonexhaustion

Question 8

A pure public good is characterized by:

Answer 8

Both joint use (nonrivalry - the use by additional people doesn’t diminish the good) and exclusion is not feasible.

Question 9

Which of the following represents the largest expense for state governments?

Answer 9

Public welfare programs

Question 10

Imagine you are the head of the Immigration and Naturalization Service. You find that the agency has spent through half the fiscal year more than the plan envisioned in the agency’s appropriation. The problem has emerged because of an unexpected influx of refugees. Which of these actions is most reasonable?

Answer 10

Prepare a request for a supplemental appropriation

Question 11

Impoundment occurs during which stage of the budget process?

Answer 11

Execution

Question 12

Which of the following is correct about the U.S. Government Accountability Office?

Answer 12

It does not report to the President.

Question 13

Local government expenditure is dominated by:

Answer 13

Elementary and secondary education

Question 14

Which of the following pieces of evidence would by itself allow a judgment about the regressivity or progressivity of a tax?

Answer 14

Upper-income families pay a higher effective tax rate than lower-income families.

Question 15

Which of the following statements is correct?

Answer 15

The federal government in the United States levies no general sales tax.

Question 16

A tax levied on a business will:

Answer 16

Result in one or more of the above actions depending upon the market conditions the firm faces

Question 17

A continuing resolution enables an agency to:

Answer 17

Continue operations when a new fiscal year begins before agency appropriation laws have been approved for the year

Question 18

The precept that people who are equals in all relevant ways should be taxed equally is known as:

Answer 18

Horizontal equity

Question 19

Statement A: The 1921 act attempted fiscal responsibility by giving the president stronger budget powers. Statement B: The 1974 act attempted fiscal responsibility by giving Congress stronger budget powers.

Answer 19

Both statements are true.

Question 20

The budget process which emphasizes the achievement of goals and competition between alternatives is:

Answer 20

Program budgeting

Question 21

Which of the following is a special problem associated with line-item budget systems?

Answer 21

The answer is none of the above: line-item budgets are not complex and officials prefer that format because of its simplicity; the format is all about making it easy for agencies to purchase their inputs at the expense of not showing what was the outcome or result of their use of the inputs; and line-item budgets are the least expensive to prepare because it doesn’t require special technical expertise and there is less time involved in the preparation of a line-item budget than any other format.

Question 22

Which of the following statements about federal government finances is NOT correct?

Answer 22

The corporate income tax is the second largest source of total revenue for the federal government.

Question 23

Which of the following distinctions separates government user charges from taxes?

Answer 23

Taxes are collected by coercion; user charges are proceeds from voluntary exchange.

Question 24

Government expenditures fall under two main categories. These are:

Answer 24

Transfer payments and government purchases of goods and services

Question 25

Most state governors possess extraordinary fiscal powers when compared to powers by the state legislatures. One important power is:

Answer 25

The ability to use line-item veto power to limit spending

Question 26

One budget feature that is very different when comparing state and local governments is:

Answer 26

State and local governments may have a single appropriation law covering all expenditures, or they may have many appropriation laws

Question 27

Key to preparing successful agency budget request is the development of:

Answer 27

narrative or budget justification

Question 28

Budget requests are almost always greater than available resources. In most cases requests need to be reduced. How do budget examiners review budget requests?

Answer 28

they examine the policy rationale used by the agency making the request to determine if the request makes sense

Question 29

One peculiar federal budget feature is that:

Answer 29

the president does not have line-item veto power but governors do

Question 30

Vaccinations are an example of:

Answer 30

positive externality

Question 31

Which of the following is a logical reason for a state to implement a lottery as a way to increase state revenue?

Answer 31

Lotteries are a way for the state to receive money from its citizens without levying a tax.

Question 32

Which of the following is a unit excise tax?

Answer 32

The 12 cents per gallon Indiana beer tax.

Question 33

Which of the following gives the legislative branch the greatest control over unforeseen expenditures during budget execution?

Answer 33

Budget Resolutions

Question 34

Which of the following best describes the Congressional Budget resolution?

Answer 34

Budget priorities established by Congress

Question 35

The largest single source of federal revenue is

Answer 35

The individual income tax

Question 36

Which of the following statements is correct?

Answer 36

The federal government in the United States levies no general sales tax.

Question 37

Which of the following statements is NOT accurate?

Answer 37

None of the above - all are accurate.

Question 38

Exemption of food purchases from a sales tax reduces regressivity because:

Answer 38

The percent of income spent on food generally falls as family income is higher.

Question 39

A state applies a 7 percent sales tax to consumer purchases of many items. These are data for a typical family:

Annual Income: $60,000

Family Size: 2

Purchases of taxed items: $30,000

What statutory sales tax rate does the family pay?

Answer 39

7.0%

Question 40

Well developed justifications are the key to successful budget requests. Indicate which of the following should be included in budget requests.

Answer 40

Address the current situation, additional needs, and expected results.

Question 41

What item(s) might be included on a checklist for a budget justification?

Answer 41

all of the above

Question 42

The Budget Enforcement Act of 1990 created two legal categories of federal spending. What are those two categories?

Answer 42

mandatory and discretionary spending

Question 43

The types of budget authority at the federal level include…

Answer 43

appropriations, contract, borrowing, loan and loan-guarantee, and entitlement

Question 44

National defense is

Answer 44

public goods

Question 45

Going to the movies is an example of the use of…

Answer 45

toll goods

Question 46

If Fred buys a new car, it is a

Answer 46

private good

Question 47

Petroleum reserves represent an example of a

Answer 47

common-pool goods

Question 48

There is rivalry use of

Answer 48

private goods and common-pool goods

Question 49

Within the federal budget, mandatory spending includes

Answer 49

Social Security and Medicaid

Question 50

Which federal agency supervises the audits of federal agencies?

Answer 50

The Government Accountability Office (GAO)