Multiple Choice
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This is just for practive, not for a grade.
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1.
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The
largest category of federal government expenditures is A) | national
defense | B) | interest on the federal debt | C) | direct benefit
payments to individuals | D) | grants to states and localities | E) | capital
expenditures | | |
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2.
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The
federal government's fiscal year A) | is less than a calendar year in
length | B) | runs from October 1 to September 30 | C) | runs from
January 1 to December 31 | D) | is actually 15 months in length | E) | none of the
above | | |
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3.
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The
President's budget is presented to Congress each year A) | in the
Economic Report of the President | B) | in a report followed shortly by the Economic Report of the
President | C) | at the beginning of the fiscal year | D) | in a form that
must be voted up or down within 60 days | E) | and requires a two-third vote for
ratification | | |
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4.
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The
annual Economic Report of the President is written by A) | the
President | B) | Congress | C) | the Office of
Management and Budget | D) | the Council of Economic Advisers | E) | the Secretary of
the Treasury | | |
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5.
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Which
institution was created under the Employment Act of 1946 to assist the President in formulating an
appropriate fiscal policy? A) | the Council of Economic Advisers | B) | the Board of
Governors of the Fed | C) | the Office of Management and Budget | D) | the Fed's Open
Market Committee | E) | the Department of Commerce | | |
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6.
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The
beginning of the formal budget process is signified by A) | Congress's
submission to the President of the Budget of the United States | B) | the submission
of the Economic Report of the President to Congress | C) | the President's
submission to Congress of the Budget of the United States | D) | passage of a
budget resolution by Congress | E) | the President signing the budget into
law | | |
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7.
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A
continuing resolution A) | shuts down government agencies in the absence of an approved
budget | B) | allows agencies to spend at the rate of the previous year in
the absence of an approved budget | C) | enables Congress to override the President's
budget | D) | contributes to the efficiency of the federal budget
process | E) | is seldom used | | |
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8.
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Problems with the budget process include the fact that A) | all of the
following | B) | frequently missed timetables result in continuing resolutions
replacing budgets | C) | budgets are frequently overly
detailed | D) | much of federal spending is
uncontrollable | E) | overlapping budget authorities exist across
committees | | |
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9.
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Approximately __________ of the budget falls into expenditure categories that are
determined by existing law. A) | one-fourth | B) | one-third | C) | half | D) | two-thirds | E) | three-quarters | | |
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10.
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One
proposal for improving the budget process is to A) | switch to a two-year or biennial
budget | B) | remove the Council of Economic Advisers from the
process | C) | require more detail in the various line items of the
budget | D) | provide for automatic annual increases in all budget
categories | E) | eliminate the role of Congressional committees in the
process | | |
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11.
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The
federal budget deficit becomes __________ during recessions because __________. A) | smaller;
transfer payments increase and tax revenues decline | B) | larger; transfer
payments increase and tax revenues decline | C) | larger; both transfer payments and tax revenues
increase | D) | smaller; both transfer payments and tax revenues
increase | E) | smaller; both transfer payments and tax revenues
decrease | | |
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12.
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Because of automatic stabilizers, government budget deficits are A) | positive during
both expansions and contractions | B) | negative during both expansions and
contractions | C) | zero if averaged out over the entire business
cycle | D) | larger during expansions and smaller during
contractions | E) | smaller during expansions and larger during
contractions | | |
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13.
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In
the Keynesian philosophy of government budgets, A) | permanent deficits are desirable | B) | permanent
surpluses are desirable | C) | the goal is to have a budget surplus | D) | surpluses are
appropriate during recessions | E) | deficits are appropriate during
recessions | | |
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14.
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Which
of the following is true of an annually balanced federal budget? A) | Most economists
agree that the federal government should balance its budget just as each household must
do. | B) | Such a policy
would require government to increase its spending when tax receipts fell. | C) | Such a policy
became popular between the 1930s and 1960s. | D) | Such a policy
would guarantee that the economy always remained at its potential level. | E) | Such a policy
could worsen a contractionary gap. | | |
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15.
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Which
of the following would decrease the size of a federal budget deficit? A) | a
recession | B) | an increase in defense spending | C) | growth in real
GDP | D) | a decrease in
taxes | E) | an increase in transfer payments | | |
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16.
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Until
1980, the national debt was mostly the result of A) | wartime borrowing | B) | inflation | C) | bad monetary policy | D) | wasteful
Congressional spending | E) | Social Security obligations | | |
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17.
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Crowding out refers to the government's increased demand for credit,
which A) | displaces some
private sector consumption by decreasing the price level | B) | displaces some
private sector borrowing by decreasing the interest rate | C) | displaces some
private sector borrowing by increasing the interest rate | D) | hires labor away
from the private sector | E) | means longer lines at government
agencies | | |
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18.
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What
were the chief links between the U.S. federal budget deficit and the U.S. trade deficit during the
1980s? A) | Relatively
higher U.S. interest rates led to a rise in the relative value of the
dollar. | B) | Relatively higher U.S. interest rates led to a decrease in the
relative value of the dollar. | C) | U.S. interest rates fell relative to foreign rates and thus the
dollar appreciated. | D) | The U.S. price level declined relative to that of foreign
countries, causing U.S. interest rates to fall. | E) | The recessions
of 1980 and 1981-1982 are the key links; recession widened the budget deficit and this caused the
U.S. price level to fall, enabling foreigners to invest in U.S. assets. | | |
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19.
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As of
December 2008, the U.S. national debt held by the public was closest to... A) | about $1
million | B) | about $1 billion | C) | $1
trillion | D) | $4 trillion | E) | $6
trillion | | |
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20.
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The
difference between the federal budget deficit and the national debt is that the A) | deficit is a
stock and the debt is a flow | B) | deficit is a flow and the debt is a
stock | C) | debt includes interest payments and the deficit does
not | D) | deficit can be
positive but the debt cannot | E) | debt can be negative but the deficit
cannot | | |
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