Test 3

Question 1

what is benefit spillover

Answer 1

a critical factor in deciding what level of government should provide a public service. EX: should the state provide trash services or local

Question 2

what is the correspondence principal

Answer 2

the first principal in assigning responsibility for government services. Says services whose benefits do not exceed the local government should be provided by the local government (and so on)

Question 3

what is the subsidiary principal

Answer 3

says that governments responsibilities should be at the lowest levels possible to be as efficient as possible (brings it closer to the people so resources are allocated efficiently)

Question 4

what is devolution

Answer 4

when more responsibility is placed on lower parts of government

Question 5

what are the 3 things government can do to provide equal financial services

Answer 5

1. revenue adjustments
2. grants
3. mandates

Question 6

what are revenue adjustments

Answer 6

reliefs done in the tax base. EX: deductions or credits

Question 7

what are the 4 types of categorical grants

Answer 7

1. matching
2. maintenance of effort
3. revenue sharing grants
4. education LOANS

Question 8

what are matching categorical grants

Answer 8

grants that for every dollar spent is matched by the federal government (to a certain amount)

Question 9

what are maintenance of effort categorical grants

Answer 9

grants that say you must spend the money given to you by the federal government (NOT REPLACE IT WITH YOUR MONEY)

Question 10

what are revenue sharing categorical grants

Answer 10

grants with little to no restrictions (only happen on state and local level now)

Question 11

what are mandates

Answer 11

a constitutional provision that places an expenditure on the government. EX: money mandated that Jewish people are given money from antisemite actions

Question 12

what are the 3 characteristics of capital projects

Answer 12

1. long life
2. large price tag
3. one time project`

Question 13

what are the 4 aspects of a capital implementation plan (CIP)

Answer 13

1. consequences of failure
2. benefits from facility
3. cost and financial impact of project
4. citizen attitude towards project

Question 14

what is discounting

Answer 14

the process of turning benefits and costs overtime into the present period

Question 15

what is an unfunded liability

Answer 15

any liability that does not have funding set aside for it

Question 16

how does the federal government fund debt

Answer 16

treasury bonds

Question 17

how does state government fund debt

Answer 17

municipal bonds

Question 18

what is social security funded by

Answer 18

payroll tax

Question 19

what 3 things to debt come from

Answer 19

1. covering deficits
2. financing capital project
3. covering short periods of time where bills exceed cash

Question 20

what is rollover

Answer 20

when the cash to pay the principal comes from additional borrowing (also called refinancing)

Question 21

what are the 2 types of debt

Answer 21

1. gross debt- equals all federal debt
2. debt held by private investors- all federal debt except debt held by the federal reserve

Question 22

2 types of municipal debt

Answer 22

1. full faith and credit obligations - general obligation bonds
2. non-guaranteed debt- revenue bonds (issued on capital projects)

Question 23

what are the 3 parts to the agency budget request paper

Answer 23

1. narrative
2. detail schedule of objectives
3. cumulative schedules

Question 24

2 types of debt

Answer 24

1. term
2. serial

Question 25

what is term debt

Answer 25

the total amount paid back at the maturity of the bond

Question 26

what is serial debt

Answer 26

the amount paid back with the different interest rates during the entire term of the bond

Question 27

what is new performance budgeting

Answer 27

results driven budgeting with society achieving their goals (desired budgeting form)

Question 28

2 types of funds

Answer 28

1. proprietary funds- self supporting government entities (post office)
2. fiduciary funds- pension based funds

Question 29

what are the different types of accounting

Answer 29

1. cash basis
2. full accrual
3. modified accrual

Question 30

what is cash basis accounting

Answer 30

revenue when cash received and expenditures when payment complete

Question 31

what is full accrual accounting

Answer 31

revenues when earned, expenditures when good or service is used (used by private firms)

Question 31

what is modified accrual accounting

Answer 31

revenues in period when measurable, expenditures when liability incurred. (used by the government)

Question 32

3 stages of cash management

Answer 32

1. cash mobilization - getting the use of the money owned to the government asap
2. disbursement- making payments as late as economically reasonable
3. investment- doing something with the difference in those other balances

Question 33

what is an underwriter

Answer 33

bonds that are too large to be sold to an individual so a FIRM buys the entire bond (money goes into a SUNK FUND)

Question 34

what did the panic of 1907 do

Answer 34

created a run on banks

Question 35

what did the Glass Steagall act do

Answer 35

kept commercial and investment banks from doing activities together

Question 36

who is on the FOMC

Answer 36

7 board of governors + 5 rotating district bank presidents

Question 37

what does the modern monetary theory say

Answer 37

governments that spend and tax in a currency “under their control” are not constrained by revenues when it comes time to spend

Question 38

what is the dual mandate of the FOMC

Answer 38

1. maintain price stability
2. promote full employment and economic growth

Question 39

what does the federal funds rate do

Answer 39

increases or decreases the rate when banks lend between each other

Question 40

what does the discount rate do

Answer 40

increases or decreases the interest rate of funds held at the fed