Deck 12: Federal Budgets and Public Policy

Question 1

If the functional finance approach to federal budgeting is followed,the federal government's budget deficit should be zero.​

Answer 1

False

Question 2

In 2009,the U.S.budget deficit was $1.4 trillion.​

Answer 2

True

Question 3

State and local governments issue bonds to fund capital projects,such as schools and infrastructure.​

Answer 3

True

Question 4

​If a budget is cyclically balanced,the government should run a surplus when the economy experiences a contractionary gap.

Question 5

With few exceptions,the U.S.federal government has historically run a balanced budget.​

Question 6

Transfer payments are included in the government budget deficit but not included in the government purchases component of GDP.​

Question 7

Some economists argue that federal government capital projects,which offer benefits over a number of years,should be financed through deficit financing.​

Question 8

Before the Great Depression,federal deficits occurred primarily during wartime.​

Question 9

The U.S.federal budget is determined exclusively by Congress.​

Question 10

An annually budgeted budget can only be met if automatic stabilizers are effective.​

Question 11

Biennial budgets have replaced the annual budget process for the federal government.​

Question 12

Other things equal,an increase in defense spending will increase the budget deficit.​

Question 13

The federal budget has been in deficit in all but 9 years since 1960.​

Question 14

The budget deficit tends to decline during periods of recession and to increase during periods of economic recovery.​

Question 15

Only about one-fourth of the federal budget involves expenditure categories determined by existing obligations and laws.​

Question 16

In order for the government to increase spending,it must increase taxes to finance that spending.​

Question 17

If a budget is cyclically balanced,the government should run a surplus when the economy experiences an expansionary gap.​

Question 18

Except for World War II,the U.S.deficits from 2009 to 2012 were the largest deficits in the nation's history relative to GDP,even larger than during the Great Depression.​

Question 19

The functional finance philosophy is based on the idea that balancing the federal budget is less important than using it to promote an economy operating at its potential.​

Question 20

In the 1980s,tax rates were cut,government revenues fell below expectations,and there was a then-historic peacetime deficit.​

Question 21

The U.S.government can continue to run a deficit as long as the cost of servicing the resulting debt remains manageable.​

Question 22

Crowding out occurs because lower interest rates discourage saving and make it harder to borrow.​

Question 23

Crowding out refers to the effect that deficits have on private investment spending.​

Question 24

The growth-reducing effects of high public debt are transmitted entirely through high real interest rates on that debt.​

Question 25

Nearly half of the publicly held U.S.federal debt are held by foreigners.​

Question 26

If a budget deficit is the result of expenditures for programs such as farm subsidies and Social Security,the burden on future generations is slight.

Question 27

​Which of the following categories constitutes the majority of federal outlays in 2016?

A)National defense
B)Interest on the federal debt
C)Social Security,Medicare,and welfare
D)Grants to states and localities
E)Capital expenditures

Question 28

If U.S.interest rates are higher than the world interest rates,we would expect the U.S.dollar to appreciate.

Question 29

Since 1970,the federal government budget has never been in surplus.​

Question 30

Between 1990 and 2000,expenditures by the federal government on defense as a proportion of total federal spending increased.​

Question 31

In the years when the U.S.economy was in debt,the economic growth of the country was significant because it had easy access to capital markets.​

Question 32

Crowding in occurs when government spending improves business expectations about the future and leads to higher business investment spending.​

Question 33

If the automatic stabilizers are creating budget deficits,the economy must be experiencing falling output.​

Question 34

If discretionary fiscal policy creates a federal budget deficit,the economy must be experiencing falling output.​

Question 35

When there are large federal budget deficits,the trade deficit tends to shrink.​

Question 36

Which of the following is true of the federal budget?​

A)The federal budget is a plan that describes a government's monetary policy for the current financial year.
B)The federal budget is a plan that describes a government's fiscal policy for the current financial year.
C)The federal budget is a plan that describes the president's take on the economy.
D)The federal budget is a plan for federal government outlays and revenues for a specified period,usually a year.
E)The federal budget is a plan that describes the eligibility criteria of the major entitlement programs taken up by Congress for the current financial year.

Question 37

The U.S.federal debt as a percentage of GDP is currently on the rise.​

Question 38

The public sector grew the most in Japan,rising from 35 percent relative to GDP in 1997 to 39 percent in 2016.​

Question 39

U.S.interest payments on the federal debt as a percentage of federal outlays are lower today than in the 1990s.​

Question 40

Government deficits of one generation cannot affect the standard of living of the next generation.​

Question 41

​Continuing resolutions are:

A)budget agreements that allow agencies,in the absence of an approved budget,to spend at the rate of the previous year's budget.
B)guaranteed benefits for those who qualify for government transfer programs such as Social Security and Medicare.
C)agreements about total outlays,spending by major category,and expected revenues of the federal government.
D)budget resolutions that allow the federal government to allocate a fixed proportion of yearly outlays toward military related expenditures.
E)legislative actions undertaken to balance the budget.

Question 42

​The beginning of the formal budget process is signified by:

A)Congress's submission of The Budget of the United States Government to the President.
B)the submission of the Economic Report of the President to Congress.
C)the President's submission of The Budget of the United States Government to Congress.
D)the passage of a budget resolution by Congress.
E)the President signing the budget into law.

Question 43

​In the short run,a federal budget deficit will most likely _____.

A)stimulate aggregate supply
B)reduce federal debt
C)boost economic growth
D)reduce national saving
E)boost domestic saving

Question 44

​The President's budget is presented to Congress:

A)in the form of 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 report that should be voted up or down within 60 days.
E)in a report that requires a two-thirds vote for ratification.

Question 45

​The federal budget is:

A)submitted by Congress to the President and contains proposals for tax increases.
B)submitted by Congress to the President and contains proposals for government expenditures.
C)always in balance,with receipts equal to expenditures.
D)equal to government purchases plus cash and in-kind transfer payments.
E)usually planned for the calendar year,which starts from January.

Question 46

​In 2016,interest payments on the national debt accounted for almost _____ of federal outlays.

A)7 percent
B)25 percent
C)14 percent
D)52 percent
E)40 percent

Question 47

​Because deadlines are frequently missed,budgets typically run from year to year based on _____.

A)continuing resolutions
B)budget resolutions
C)congressional suggestions
D)the suggestions of the President
E)the suggestions of the President's Council of Economic Advisers

Question 48

​A _____ is a congressional agreement about total outlays,spending by major category,and expected revenues,which guides spending and revenue decisions by the many congressional committees and subcommittees.

A)continuing resolution
B)budget resolution
C)disclaimer vote
D)filibuster
E)stimulus plan

Question 49

​The entire U.S.federal budget process,beginning with the delivery of the President's budget to Congress and ending with the beginning of the fiscal year,takes about _____.

A)one month
B)six months
C)nine months
D)one year
E)three months

Question 50

​In 2016,national defense accounted for almost _____ of federal outlays.

A)25 percent
B)15 percent​
C)40 percent
D)54 percent
E)60 percent

Question 51

​In the short run,a surplus federal budget _____.

A)reduces national saving
B)boosts domestic saving
C)stimulates aggregate demand
D)promotes economic growth in the long run
E)increases the federal debt

Question 52

​The budget of an economy is said to be in deficit when:

A)federal outlays exceed revenues.
B)federal revenues exceed outlays.
C)anticipated inflation rate exceeds its actual rate.
D)there is a loss of value of a country's currency with respect to one or more foreign reference currencies.
E)anticipated interest rate exceeds its actual rate.

Question 53

​A spike in "All Other Outlays" of the federal government in 2009 was due to:

A)an increase in the financial aid given to Greece earlier that year.
B)an increase in the expenditures on Social Security and Medicare.
C)the fiscal stimulus package passed earlier that year.
D)a sudden increase in military expenditure as a result of the war in Iraq.
E)an increase in the national debt earlier that year.

Question 54

​In 2016,welfare spending accounted for almost _____ of federal outlays.

A)5 percent
B)10 percent
C)14 percent
D)20 percent
E)31 percent

Question 55

​The Budget of the United States Government is officially submitted by:

A)the President to Congress and contains spending and revenue proposals for the upcoming fiscal year.
B)Congress to the President and contains spending and revenue proposals for the upcoming fiscal year.
C)the President to Congress and contains proposals for tax revenues.
D)Congress to the President and contains proposals for tax revenues.
E)the President to Congress and is reviewed by the Supreme Court.

Question 56

​Which of the following is true of an increase in the federal government budget surplus?

A)An increase in surplus results in a decrease in the national saving.
B)An increase in surplus shifts the aggregate demand curve rightward.
C)An increase in surplus increases the federal debt.
D)An increase in surplus dampens aggregate demand in the short run.
E)An increase in surplus increases the natural rate of unemployment.

Question 57

​When a budget is not approved in time,_____.

A)agencies operate on the basis of continuing resolutions
B)agencies operate on the basis of a budget resolution developed by budget committees
C)agencies tend to shuts down
D)the President can force Congress to act
E)agencies borrow from the Federal Reserve

Question 58

​The Economic Report of the President is prepared 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.

Question 59

​In 2016,Social Security and Medicare payments accounted for almost _____ of federal outlays.

A)7 percent
B)25 percent
C)15 percent
D)38 percent
E)52 percent

Question 60

​The U.S.government's fiscal year extends from:

A)January to December.
B)April of one year to March of the next year.
C)June of one year to May of the next year.
D)September of one year to August of the next year.
E)October of one year to September of the next year.

Question 61

​If government increased Social Security benefits and decreased the salaries of government workers by the same amount,which of the following is the expected immediate effect?

A)An increase in the budget deficit and government purchases of goods and services.
B)An increase in the budget deficit,but no change in government purchases of goods and services.
C)An increase in the budget deficit and a decrease in government purchases of goods and services.
D)No change in the budget deficit because there has been no change in government purchases of goods and services.
E)No change in the budget deficit because government purchases of goods and services have decreased by the same amount as transfer payments have increased

Question 62

​If the government increased defense spending by $1 million and laid off enough Justice Department employees to decrease the Department of Justice budget by $1 million,which of the following is the likely net effect?

A)An increase in the budget deficit and transfer payments
B)An increase in the budget deficit and net taxes
C)An increase in the budget deficit and government spending
D)No change in the budget deficit because there is no net change in government spending
E)No change in the budget deficit because neither defense spending nor the Department of Justice is included in government spending

Question 63

​Problems with the federal government budget process include:

A)tough choices to be made by Congress each year on which entitlement programs will receive full support.
B)the constitutional requirement of Congress to balance the budget on an annual basis.
C)an overly detailed budget that allows Congress to reward friends,thereby discouraging restraint on spending.
D)a short review period for Congress that results in poor choices in funding programs.
E)Congress having too much control over the budgetary process.

Question 64

​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

Question 65

​If the U.S.government spent $20 million paying people to dig holes in 2005 and then spent $30 million paying the same people to fill the holes up again that same year,we would expect the net effect to be a(n):

A)decrease in transfer payments
B)increase in the budget deficit as transfer payments increased
C)increase in the budget deficit as government purchases of goods and services increased by $50 million
D)increase in the budget deficit as government purchases of goods and services increased by $30 million
E)$10-million-dollar increase in the budget deficit

Question 66

​A continuing resolution is:

A)an agreement that requires Congress to balance the budget on an annual basis.
B)an agreement that allows Congress to have too much control over the budgetary process.
C)an agreement that allows agencies to spend at the rate of the previous year's budget.
D)a decision made by congressional committee about the federal spending and revenue levels for five years.
E)a guaranteed benefit for those who qualify for government transfer programs.

Question 67

​Suppose that government purchases of goods and services increase by $200 and at the same time lump-sum taxes increase by $200.Which of the following is true in this case?

A)Whether the budget deficit will increase or decrease will depend on the value of the marginal propensity to consume.
B)The budget deficit will increase by $200.
C)The budget deficit will increase by $400.
D)The budget deficit will decrease as the economy expands.
E)There will be no change in the budget deficit.

Question 68

​Which of the following would decrease the size of a federal budget deficit?

A)A recession
B)An increase in defense spending
C)An increase in the use of automatic stabilizers
D)An increase in taxes
E)An increase in transfer payments

Question 69

​One way of improving the federal government budget process is to:

A)switch to a two-year or biennial budget.
B)remove the Council of Economic Advisers from the process.
C)detail budgeting by focusing on all groupings and line items.
D)provide for automatic annual increases in all budget categories.
E)eliminate the role of Congressional committees in the process.

Question 70

​A biennial budget:

A)is more useful than an annual budget as a tool of discretionary fiscal policy.
B)is implemented by the federal government,while an annual budget is implemented by state governments.
C)would ensure that cabinet members spend more time on administering an approved budget and defending a proposed budget.
D)would encourage cabinet members to focus more on running their agencies rather than being involved in budget deliberations.
E)would require shorter-term economic forecasts than an annual budget.

Question 71

​A possible budget reform involves:

A)a quadrennial budget.
B)breaking down the budget into increasingly small budget lines.
C)appointing agency heads with different priorities than those of elected representatives.
D)to simplify the budget document by concentrating only on major groupings and eliminating line items.
E)to eliminate the operating budget.

Question 72

​The problem with a detailed federal government budget is that:

A)monetary policy becomes more difficult to implement.
B)it reduces the flexibility of discretionary fiscal policy.
C)Congress cannot keep it up to date.
D)there is a shortage of congressional committees that deal with the budget.
E)there is a short review period,resulting in poor choices in funding programs.

Question 73

​Because of automatic stabilizers,_____.

A)fiscal policy focuses on maintaining an annually balanced budget
B)planning discretionary fiscal measures to reduce economic fluctuations is easy
C)government budget deficits are zero if averaged out over the entire business cycle
D)policy makers should be concerned less with balancing the budget annually
E)government budget deficits are smaller during expansions and larger during contractions

Question 74

​Which of the following is true of the federal budget process in the U.S.?

A)Congress must approve a budget with at least a two-thirds majority vote.
B)The federal budget must be balanced each year because the volume of international trade reduces if the government has a surplus or a deficit.
C)Most federal outlays are determined by existing laws.
D)Congress approves a budget that separates the capital budget and the operating budget.
E)Detailed budgeting allows the party in power to reward supporters.

Question 75

​Which of the following is not a problem associated with the U.S.federal budget process?

A)The congressional committee framework
B)The lengthy budget process
C)The failure to meet deadlines
D)The lack of detail in the budget
E)Uncontrollable budget items

Question 76

​A(n)_____ provides guaranteed benefits for those who qualify under government transfer programs such as Social Security or Medicare.

A)entitlement program
B)excise tax
C)continuing resolution
D)biennial budget
E)employment benefits

Question 77

​If the government decreased urban welfare payments by a dollar for every dollar increase in farm subsidies,which of the following is the likely net effect?

A)An increase in the budget deficit because government spending has increased
B)A decrease in the budget deficit because transfer payments are not included in the government's budget
C)An increase in the budget deficit because transfer payments have increased
D)An increase in the budget deficit because farm subsidies are transfer payments but urban welfare payments are not
E)No change in the budget deficit

Question 78

​Problems with the federal government budget process include:

A)budgeting that allows the President too much discretion in spending decisions.
B)budgeting that increases the flexibility of discretionary fiscal policy.
C)a budget outline that needs to be approved with at least a two-thirds majority vote.
D)most of the expenditures being for entitlement programs.
E)a brief budgeting that does not allow Congress to study whether the budget is an appropriate tool for fiscal policy.

Question 79

​Simplifying the budget document by concentrating only on major groupings and eliminating line items would:

A)ensure that cabinet members spend more time on administering an approved budget and defending a proposed budget.
B)require longer-term economic forecasts that are difficult to obtain.
C)prevent elected officials from including projects they prefer for their personal gains in the budget.
D)increase the flexibility of the discretionary fiscal policy implemented by the federal government.
E)require shorter-term economic forecasts that are easy to obtain.

Question 80

​Drawbacks of the federal government budget process include:

A)the use of continuing resolutions that reward last year's programs without adequate review of performance.
B)Congress having too much control over the budget.
C)a short review period for Congress that results in poor choices in funding programs.
D)Congress having to approve a budget with at least a two-thirds majority vote.
E)the President having too much power to cancel any proposed expenditure without the possibility of a Congressional override.