Deck 3: Budget Incentives and Strategies

Question 1

In the market exchange model, conflicting interests are balanced because

A) Consumers are simultaneously purchasers of outputs and suppliers of inputs
B) Producers are simultaneously purchasers of output and suppliers of inputs
C) Regulators simultaneously control input and output markets
D) All of the above

Answer 1

A

Question 2

In a subsidized market, inefficiency arises because

A) Subsidized consumers will consume excess amounts of a good or service
B) Producers have less incentive to reduce production costs
C) Suppliers of resources may have little direct control over output
D) All of the above

Answer 2

D

Question 3

A healthcare good or service that earns high profits but does not meet a pressing community needs is a

A) Star
B) Cash cow
C) Samaritan
D) Dog

Answer 3

B

Question 4

What group of individuals fall outside the Iron Triangle?

A) People receiving goods and service
B) People providing resources to produce the goods and services
C) People producing the goods and services
D) People deciding what goods and services will be produced

Question 5

According to Bureaucrats in Business (World Bank, 1995), reform of state-owned enterprises requires political desirability, political feasibility, and credibility; political desirability requires

A) A change in leadership and/or a crisis
B) A change in leadership and the ability to neutralize opponents of reform
C) A crisis and the ability to neutralize opponents of reform
D) A crisis and a track record of following through on promises
E) The ability to neutralize opponents of reform and a history of following through on promises

Question 6

Approving the budget is the responsibility of

A) Operating managers, finance, and senior management
B) Finance and senior management
C) Senior management and the board of directors
D) The board of directors and regulators

Question 7

Due to the time required to construct, manage, and evaluate budgets, how many different budget years may a manager be required to work on at one time?

A) One budget year
B) Two budget years
C) Three budget years
D) Four or more budget years

Question 8

Which of the following may NOT be a legitimate reason for a budget increase?

A) Increase in output
B) Backlog
C) Increase in input prices
D) Cost increasing change in production technology
E) Improving the quality of a good or service

Question 9

The most common reason why budgets increase from one year to the next is

A) Increase in output
B) Increase in input prices
C) Increase in the quality of the good or service produced
D) Adoption of cost increasing production technology

Question 10

Which of the following is NOT an All-Purpose budget strategy?

A) Cultivate a clientele
B) Cultivate confidence
C) Obfuscate
D) New programs

Question 11

Which of the following strategies attempts to overwhelm budget reviewers with detail to circumvent short circuit budget review?

A) Policy trap
B) Exclusive terminology
C) Chrome plating
D) Flattery
E) Numbers

Question 12

Cultivating the confidence of budget reviewers attempts to minimize budget reviews by

A) Demonstrating the need for the department and its funding
B) Demonstrating the effectiveness and/or efficiency of current operations
C) Shrouding current operations in mystery
D) Demonstrating the need for program expansion

Question 13

Which of the following strategies could be both a legitimate and an illegitimate reason for a budget increase?

A) Over-estimation of output
B) Rounding up
C) Sprinkling
D) Backlogs

Question 14

Mislabeling a proposed expenditure in order to fund a new program involves

A) Repackaging old programs as new programs
B) Deliberately starting a new program with inadequate funding
C) Claiming the expenditure will create cost savings in excess of the expenditure
D) Claiming the expenditure will generate revenue in excess of the expenditure
E) Deliberately misstating the purpose of the expenditure

Question 15

Which of the following strategies is designed to delay budget cuts until they may no longer be necessary?

A) Propose a study
B) Cut popular programs
C) Predict dire consequences
D) All or nothing
E) You pick

Question 16

Which of the following is the budget cutter's strategy equivalent to "You pick" used by managers to prevent budget reductions?

A) Across-the-board reductions
B) Employ restructuring consultants
C) Cut expansions of existing programs
D) Cut "luxury" items
E) Cut funding to poorly performing managers

Question 17

Which of the following strategies are used to create a public outcry to prevent budget cuts?

A) Propose a study and cut popular programs
B) Cut popular programs and predict dire consequences
C) Predict dire consequences and present the budget cut as an all-or-nothing choice
D) Present the budget cut as an all-or-nothing choice and shift the responsibility for any reductions to the budget cutters
E) Shift the responsibility for any reductions to the budget cutters and challenge the understanding of budget cutters

Question 18

Which of the following is the most commonly used strategy to reduce budgets?

A) Across-the-board reductions
B) Cut new programs
C) Cut expansions of existing programs
D) Cut "luxury" items
E) Cut funding to poorly performing managers

Question 19

According to the author, which is the most sensible strategy to reduce budgets?

A) Across-the-board reductions
B) Cut new programs
C) Cut expansions of existing programs
D) Cut low value departments
E) Cut funding to poorly performing managers

Question 20

The purpose of the financial review of a budget requests is to determine

A) If it is consistent with the goals of the organization
B) If it complies with budget instructions
C) Whether it is complete
D) Whether any arithmetic errors have been made
E) All of the above

Question 21

A budget is best described as

A) A financial plan
B) A means of assuring that past practices are continued
C) A means to reduce expenses
D) An information system

Question 22

A primary difference between for-profit and non-profit organizations and public agencies is demand, determined by market transactions in the former and by the ballot box in the latter.

Question 23

The primary source of funds in public agencies arises from the sale of output.

Question 24

The purpose of a cash cow is to meet a pressing community need and subsidize low-profit programs.

Question 25

The primary role of finance in the budget process is to approve the final budget.

Question 26

A budget is a means of understanding an organization, its priorities, operations, and incentive structures.