ap gov ch 14

1) A budget deficit occurs when expenditures exceed
A) revenues.
B) borrowing.
C) appropriations.
D) authorizations.
E) inflation.

A

2) Most of today's federal debt was run up by government borrowing during
A) World War II.
B) the 1980s.
C) the Vietnam War.
D) the Great Depression.
E) the Cold War (1947-1989).

B

3) Approximately what percentage of the annual federal budget pays interest on the nationaldebt?
A) 13
B) 15
C) 21
D) 9
E) 6

D

4) Which of the following is NOT currently one of the major sources of federal revenue?
A) personal income taxes
B) social insurance taxes
C) borrowing
D) excise taxes
E) corporate income taxes

D

5) In Pollock v. Farmer's Loan and Trust Co. (1895), the United States Supreme Court ruled that
A) the income tax was constitutional.
B) the national sales tax was unconstitutional.
C) banks and corporations must pay higher taxes.
D) the income tax was unconstitutional.
E) business income taxes were unconstitutional but individual income taxes wereconstitutional.

D

6) The Sixteenth Amendment, ratified in 1913,
A) explicitly permitted Congress to levy an income tax.
B) limited the total income tax Congress could levy on an individual.
C) set up the Social Security system.
D) forbade Congress from levying an income tax, but was later repealed.
E) required the federal government to balance its budget each year but it was repealedduring the Great Depression.

A

7) A(n) \________ is a policy document allocating taxes and expenditures, or a series of goals withprice tags attached.
A) balance sheet
B) procurement
C) fiscal register
D) apportionment
E) budget

E

8) A budget is
A) a blueprint for what the government should do.
B) a policy determination of how much to spend.
C) a policy document allocating burdens (taxes) and benefits (expenditures).
D) passed by the president's cabinet.
E) none of the above

C

9) Congress was officially given the power to levy an income tax through the
A) Sixteenth Amendment.
B) Supreme Court case of Pollock v. Farmer's Loan and Trust Co. (1895).
C) revenue clause of the original Constitution.
D) Internal Revenue Act.
E) Balanced Budget Amendment.

A

10) The federal government's budget is mainly
A) a technical document intended to ensure that tax revenues will be sufficient to meetexpenditures.
B) a line by line accounting of tax expenditures that is required annually by theConstitution.
C) an accounting tool that permits the government to keep track of its assets and liabilities.
D) a list of the ways in which the government has spent its money.
E) a policy statement that allocates burdens and benefits by attaching price tags to policygoals.

E

11) According to Aaron Wildavsky, budgeting is a process most concerned with
A) making sure every citizen receives a fair amount of government benefits.
B) translating financial resources into human purposes.
C) keeping the government running on a day-to-day basis.
D) keeping expenditures balanced with taxes.
E) redistributing the natural distribution of wealth in a capitalist economy in a fairer morecivilized way than the push and shove of free enterprise.

B

12) Which of the following is NOT the responsibility of the Internal Revenue Service?
A) investigating and prosecuting thousands of errant taxpayers or nonpayers of federaltaxes
B) establishing the annual tax rates that Americans of different incomes must pay
C) auditing more than one million taxpayers annually
D) collecting the federal income tax
E) All of these are the IRS's responsibilities.

B

13) Income taxes
A) provide the largest source of federal revenue.
B) were first used in 1915 after the Sixteenth Amendment was passed.
C) were declared constitutional in Pollock v. Farmer's Loan and Trust Co.
D) yield about 11 cents of every federal revenue dollar.
E) All of these are true.

A

14) In order of decreasing amounts, the sources of federal revenue include
A) individual income tax, excise tax, corporate income tax, and social insurance receipts.
B) individual income tax, social insurance receipts, borrowing and corporate income tax.
C) social insurance receipts, corporate income tax, individual income tax, and borrowing.
D) corporate income taxes, personal income taxes, borrowing and social insurance taxes.
E) borrowing, individual income tax, social insurance receipts, and corporate income tax.

B

15) Corporations today pay
A) income taxes which account for most federal revenue.
B) income taxes which account for more federal revenue than individual income taxes.
C) income taxes which account for much less federal revenue than individual income taxes.
D) no income taxes.
E) capital gains taxes and property taxes instead of income taxes.

C

16) The income tax is generally progressive, meaning that
A) it increases incrementally on an annual basis.
B) those with more income pay higher rates of tax on their income.
C) those with more income pay more in taxes than those with less income.
D) it is a newer form of taxation than excise and sales taxes.
E) it is better than a flat tax.

B

17) Social Security taxes are
A) paid for by employees and employers.
B) paid for by employees only.
C) paid for by employers only.
D) taxes paid on Social Security benefits.
E) levied and collected by state governments.

A

18) Social insurance taxes
A) are earmarked for a specific purpose.
B) have grown very little in recent years.
C) go into the government's general money fund.
D) are paid only by employers.
E) all of the above

A

19) The fastest growing source of federal revenue has been
A) fees for services.
B) Social Security taxes.
C) personal income taxes.
D) borrowing.
E) corporate income taxes.

B

20) The government borrows money principally by
A) selling bonds.
B) maintaining numerous departmental credit card accounts.
C) printing more currency.
D) obtaining loans from foreign governments.
E) obtaining loans from the Federal Reserve.

A

21) Who can purchase United States government bonds?
A) financial institutions
B) citizens
C) corporations
D) mutual funds
E) all of the above

E

22) The federal debt
A) consists of all the money borrowed over the years by the national government and stilloutstanding.
B) is money owed to foreign nations by the United States government when it imports moregoods than it exports.
C) is all money borrowed over the years by the federal government and owed to stategovernments.
D) is the difference between the amount of annual tax receipts and governmentexpenditures.
E) is money owed by taxpayers to the United States government, but never paid.

A

23) The federal debt in the United States
A) is the difference between federal government revenues and expenditures in a given year.
B) has increased due to the budget deficit caused by the difference between revenues andexpenditures.
C) was eliminated due to George W. Bush's efforts to balance the budget.
D) consists of the interest that government must pay on the budget deficit.
E) is just under $1,000,000,000.

B

24) Unlike state and local governments, the federal government is borrowing primarily for
A) its day-to-day expenses.
B) future development needs.
C) military defense.
D) printing money.
E) its capital needs.

A

25) \________ are revenue losses attributable to provisions of the federal tax laws which allow aspecial exemption, exclusion, or deduction.
A) Tax dividends
B) Fiscal seepages
C) Treasury bills
D) Tax reductions
E) Tax expenditures

E

26) Tax expenditures consist of
A) the way taxes are spent by the federal government.
B) tax exemptions, deductions, and exclusions.
C) taxes paid by employers for social insurance programs.
D) direct grants-in-aid to individuals by the government.
E) the amount of deficit caused by revenue shortfalls.

B

27) The federal income tax deduction for mortgage interest on an owner -occupied home is anexample of a
A) tax rebate.
B) negative income tax.
C) federally guaranteed loan.
D) tax expenditure.
E) tax refund.

D

28) An example of a tax expenditure is
A) a lower tax rate for lower income families.
B) direct government support of a charity.
C) the social security system.
D) a tax deduction for the mortgage interest paid by homeowners.
E) the purchase of a Stealth Bomber by the Pentagon.

D

29) The Office of Management and Budget estimates that the total tax expenditures is more than\________ of the federal government's total receipts.
A) 30 percent
B) 10 percent
C) 25 percent
D) 40 percent
E) 50 percent

A

30) Tax expenditures tend to most benefit
A) lower-income people and the poor.
B) lower-middle class people and small businesses.
C) the government.
D) middle- and upper-income people and corporations.
E) state and local governments and school districts.

D

31) Which of the following statements about President Reagan's 1981 tax cut is FALSE?
A) Taxes were indexed to the cost of living.
B) Corporate taxes were increased.
C) Federal taxes were reduced by 25 percent.
D) It provided new tax incentives for personal saving and investment.
E) none of the above

B

32) Which of the following statements about President Reagan's 1981 tax cut is TRUE?
A) It reduced the federal government's tax expenditures.
B) It provided new tax incentives for personal saving and investment.
C) It spread the tax burden more fairly among taxpayers.
D) It led to a major reduction in the federal deficits.
E) It helped curb inflation.

B

33) Which of the following was NOT a provision of President Reagan's 1985 tax simplificationprogram?
A) It removed several million low-income individuals from the tax rolls.
B) It eliminated or reduced the value of many tax deductions.
C) It increased the number of tax expenditures available to businesses.
D) It reduced the number of tax brackets to two.
E) none of the above

C

34) Beginning in 1985, federal income taxes were \________ to the cost of living, so thatgovernment no longer got a larger percentage when inflation pushed incomes into higherbrackets while the tax rates stayed the same.
A) raised
B) added
C) indexed
D) lowered
E) flat-rated

C

35) President Reagan's 1981 tax cuts were most beneficial to
A) low-income families.
B) the middle class.
C) the government.
D) high-income families.
E) the states

D

36) In 1993, Congress agreed to President Clinton's proposal to
A) cut Social Security expenditures.
B) decrease the top corporate income tax rate.
C) raise the income tax rate for families in the highest income brackets.
D) eliminate all energy taxes.
E) establish national health insurance

C

37) The United States government's annual budget is now approximately
A) $2.75 trillion.
B) $15 trillion.
C) $775 billion.
D) $12 trillion.
E) $11.3 trillion.

A

38) Compared to most other countries with developed economies, the national, state, and localgovernments in the United States tax
A) about twice as heavily.
B) about one and a half times as much per capita.
C) about four times as heavily.
D) less.
E) at about the same rate.

D

39) Compared to other Western nations, America's total government expenditure as a percentageof the Gross Domestic Product (GDP) is
A) one of the largest, but dropping.
B) about average.
C) the highest and increasing.
D) one of the largest.
E) one of the smallest.

E

40) Which of the following countries have the smallest total tax revenues as a percentage of theirgross domestic product?
A) Sweden
B) Canada
C) Germany
D) United States
E) United Kingdom

D

41) The federal budget consumes \________ of America's gross domestic product.
A) 20 percent
B) 30 percent
C) 50 percent
D) 25 percent
E) 12 percent

C

42) In order of decreasing amounts, federal expenditures include
A) national defense, interest on the national debt, and direct payments to individuals.
B) interest on the national debt, national defense, and direct payments to individuals.
C) national defense, direct payments to individuals, and state and local grants.
D) direct payments to individuals, national defense, and interest on the national debt.
E) none of the above

E

43) America's national, state and local governments spend an amount equal to \________ of theGDP.
A) 20 percent.
B) 30 percent.
C) 50 percent.
D) 25 percent.
E) 12 percent.

A

44) During the 1950s and early 1960s, over half the federal budget was spent every year on
A) agricultural subsidies and programs.
B) Medicare.
C) the interstate highway program.
D) the Department of Defense.
E) Social Security.

D

45) From the mid-1960s to the early 1980s, the biggest change in government spending was the
A) ratification and implementation of the Twenty-eighth Amendment, the Balanced BudgetAmendment.
B) abandonment of the gold standard and the creation of the Federal Reserve System.
C) growth of new budgeting techniques such as zero-based budgeting.
D) increase in social service expenditures and decline in defense spending.
E) elimination of tax expenditures.

D

46) The military industrial complex refers to
A) the global network of bases that the Department of Defense maintains.
B) the close relationship between defense officials and the corporations that supply theirhardware needs.
C) the competition between the military and civilian industries for government dollars.
D) the government-owned industries that manufacture military weapons and largeequipment.
E) the Pentagon and the buildings that surround it.

B

47) The budget of the Department of Defense
A) decreased in the 1990s.
B) constitutes the bulk of the "uncontrollable" expenditures of the United States budget.
C) constitutes over half of all federal expenditures.
D) is the driving force in the expansion of the federal budget.
E) has increased despite the end of the Cold War.

A

48) The purchasing of military hardware is known as
A) regalia.
B) procurement.
C) requisitioning.
D) appropriations.
E) mobilization.

B

49) The biggest expenditure in the federal budget today is
A) foreign aid programs.
B) welfare programs for the poor.
C) interest on the debt.
D) income security programs.
E) defense.

D

50) The Social Security Act, which set up the Social Security system, was passed in
A) 1935.
B) 1913.
C) 1865.
D) 1962.
E) 1929.

A

51) The Social Security Act was passed under the administration of President
A) Franklin D. Roosevelt.
B) Dwight D. Eisenhower.
C) Herbert Hoover.
D) Lyndon Johnson.
E) Abraham Lincoln.

A

52) In 1965, \________ was added to the Social Security program to provide hospital and physiciancoverage to the elderly.
A) Medplan
B) Healthmark
C) Medicare
D) Medicaid
E) disability

C

53) Medicare
A) is given only to those who do not have private insurance.
B) is administered separately from the social security system.
C) provides only hospital coverage to the poor.
D) is the most expensive of all the welfare programs, providing basic medical care for thepoor.
E) provides both hospital and physician coverage to the elderly.

E

54) The biggest slice of the federal budget pie belongs to
A) law enforcement.
B) national defense.
C) education aid.
D) income security expenditures.
E) health expenditures.

D

55) By 1990, the Social Security system was financed by a payroll tax of
A) 2 percent.
B) 5 percent.
C) 7.5 percent.
D) over 15 percent.
E) 10 percent.

D

56) A major feature of incremental budgeting is that it
A) provides small increases in the current budget over the previous year's budget.
B) greatly inflates government spending each year.
C) fragments the budget into many small items, making it hard to plan a unified budget.
D) reduces current budgets by small amounts over successive years.
E) reevaluates the budgetary base on which past budgets were built.

A

57) An example of incremental budgeting is
A) reviewing an agency's budget to establish a lower base.
B) Carter's zero-based budgeting.
C) reducing an agency's budget a little each year.
D) giving an agency a little more than it had last year.
E) breaking a budget into its component parts and reviewing each part individually.

D

58) Which of the following is not a feature of incremental budgeting?
A) Most of the debate and attention are focused on the proposed increment.
B) Agencies must justify their entire budget request.
C) Very little attention is focused on the budgetary base.
D) The budget for any given agency tends to grow by a little bit every year.

B

59) \________ refers to the concept that in the spending appropriations process, the best predictorof this year's budget is last year's budget plus a little bit more.
A) Inflation-plus budgeting
B) Indexing
C) Program Planning-Budgeting Systems
D) Incrementalism
E) Minimalist Budgeting

D

60) The most prevalent model of budgetary decision making in practice is
A) program-planning budgeting.
B) incrementalism.
C) zero-based budgeting.
D) line-item budgeting.
E) rational party bargaining.

B

61) Which of the following is NOT associated with incremental budgeting?
A) An agency or program must prove it still merits its very existence every year.
B) Most of the budget debate and attention is over an increase in the agency's funding.
C) Agencies and programs tend to safely assume they will receive at least what they hadlast year.
D) The budget for any given agency tends to grow a bit every year.
E) Agencies often pad their budgets a little bit.

A

62) Budget items mandated by law or by a previous obligation are known as
A) uncontrollable expenditures.
B) increments.
C) fiscal mandates.
D) bearer bonds.
E) procurements.

A

63) Social Security payments are an example of a(n)
A) increment.
B) indexing.
C) apportionment.
D) controllable expenditure.
E) entitlement.

E

64) An "uncontrollable" expenditure in the federal budget is defined as
A) expenditures exceeding revenues so as to require borrowing to cover the difference.
B) an expenditure that is required by current law or a previous government obligation topeople automatically eligible for some benefit.
C) an annual incremental increase in the cost of a program.
D) one in which more money must be appropriated to handle a national crisis.
E) the government's allowance for meeting budget requests.

B

65) Social Security programs, interest on the national debt, and military pensions are examples of
A) tax expenditures.
B) uncontrollable expenditures.
C) revenue sources.
D) tax loopholes.
E) incremental expenditures.

B

66) The biggest uncontrollable expenditure in the federal budget is
A) government retirement benefits.
B) interest on the national debt.
C) veterans aid.
D) national defense spending.
E) the Social Security system.

E

67) An estimated \________ of the federal budget is considered uncontrollable, unless Congresschanges a law or existing benefit levels.
A) two-thirds
B) 80 percent
C) one-half
D) one-third
E) one-fifth

A

68) Approximately what percentage of the federal budget is uncontrollable?
A) one-fourth
B) two-thirds
C) almost all of it
D) one-half
E) one-third

B

69) The ultimate power to determine how much the government will tax and spend, and what itwill spend taxes for, lies with
A) the Treasury Department.
B) the courts.
C) the president.
D) Congress.
E) the bureaucracy.

D

70) In the House of Representatives, it is the \________ Committee that writes tax codes, subject tothe approval of Congress as a whole.
A) Ways and Means
B) Appropriations
C) Budget
D) Revenue
E) Finance

A

71) Agencies invariably pad their budget requests because
A) they want the almost inevitable budget cuts to be bearable.
B) Congress would view a lower request as a sign of weakness.
C) it is an accepted part of zero-based budgeting.
D) their constituencies expect more benefits.
E) cost overruns almost always put them over budget.

A

72) In the Senate, the \________ Committee is responsible for writing tax codes, subject to theapproval of Congress as a whole.
A) Revenue
B) Budget
C) Appropriations
D) Ways and Means
E) Finance

E

73) The budget cycle begins in the executive branch \________ months before the fiscal year begins.
A) 11
B) 19
C) three
D) seven
E) 24 or more

B

74) The Director of the Office of Management and Budget
A) is a career official.
B) is elected by the Council of Economic Advisors.
C) is a congressional appointee.
D) is a presidential appointee requiring approval of the Senate.
E) is appointed by the Senate Finance Committee.

D

75) The \________ is responsible for supervising preparation of the federal budget and advising thepresident on budgetary matters.
A) Treasury Department
B) Office of Management and Budget
C) Senate Finance Committee
D) General Accounting Office
E) Bureau of the Budget

B

76) Until Congress passed the Budget and Accounting Act of 1921,
A) agencies of the executive branch sent their budget requests directly to the president, whoalone had the authority to approve and fund the bureaucracy.
B) agencies of the executive branch sent their budget requests to the secretary of thetreasury, who forwarded them on to Congress, with the president playing little or no rolein the entire process.
C) there was no federal income tax in the United States.
D) the United States had no formalized budget process.
E) the federal budget had to be balanced, by law.

B

77) Before the president submits her budget to Congress, the Office of Management and Budget(OMB) coordinates the requests of
A) the governors.
B) individual legislators.
C) the subject matter committees of Congress.
D) executive agencies.
E) interest groups.

D

78) The heads of executive agencies send their budget requests to the
A) Office of Management and Budget.
B) Congressional tax committees.
C) president.
D) Treasury Department.
E) Congressional Budget Office.

A

79) Agencies' behavior and budgets are audited, monitored, and evaluated for Congress by the
A) Congressional Budget Office.
B) president.
C) Internal Revenue Service.
D) Office of Management and Budget.
E) General Accounting Office.

E

80) The Office of Management and Budget parcels out money to government agencies and isaccountable to
A) the Internal Revenue Service.
B) Congress.
C) the secretary of the treasury.
D) the president.
E) the Congressional Budget Office.

D

81) Which of the following statements about the Office of Management and Budget (OMB) isFALSE?
A) The OMB advises the president on budgetary matters.
B) The OMB is one of the few government agencies created by the Constitution.
C) The OMB supervises preparation of the federal budget.
D) Government agencies send their budget estimates to the OMB.
E) none of the above

B

82) Once the Office of Management and Budget has prepared the federal budget,
A) it is sent to the Treasury Department for implementation.
B) the president makes revisions and submits it to Congress.
C) it is either signed into law or vetoed by the president.
D) Congress must vote it up or down as a package within ten days.
E) it immediately becomes law.

B

83) According to the Constitution, all federal appropriations must be authorized by
A) the General Accounting Office.
B) the Office of Management and Budget.
C) the president.
D) Congress.
E) the secretary of the treasury.

D

84) The Congressional Budget and Impoundment Control Act of 1974 set up all of the followingEXCEPT
A) a Budget Committee in each house of Congress.
B) the Congressional Budget Office.
C) the Office of Management and Budget.
D) a fixed budget calendar mandated by law.
E) both A and B

C

85) The Congressional Budget and Impoundment Act of 1974 requires that
A) the president impound those moneys appropriated by Congress which exceed federalrevenues.
B) Congress develop a budget on the basis of the president's budget, through coordinatedefforts of the CBO and the OMB.
C) Congress develop a budget by adding up the requests of all the government agencies.
D) Congress impound that portion of the president's budget in excess of governmentrevenues.
E) Congress agree on a budget according to a fixed schedule, with target figures for the totalbudget size.

E

86) The congressional equivalent of the Office of Management and Budget is the
A) Congressional Office of Finance.
B) Joint Committee on Ways and Means.
C) Joint Committee on the Budget.
D) General Accounting Office.
E) Congressional Budget Office.

E

87) One of the important purposes of the Congressional Budget Act of 1974 is to
A) require the federal government to balance its budget.
B) force Congress to consider the budget as a whole rather than in terms of individualappropriations.
C) restore budgetary control to the appropriations committees and subcommittees.
D) delegate effective budgetary authority to the president.
E) give Congress almost exclusive control over the federal budget.

B

88) The main purpose of the Congressional Budget Office is to
A) advise Congress on the consequences of its budget decisions.
B) act as a liaison with interest groups.
C) prepare Congress' own operating budget for salaries and supplies.
D) receive reports and recommendations from committees.
E) advise the president on congressional priorities in the budget.

A

89) To set a limit on total government spending, both houses of Congress are required to pass a(n)\________ every April, binding Congress to a total expenditure level, or bottom line, of allfederal spending for all programs.
A) budget
B) budget resolution
C) omnibus appropriations package
D) circumscription bill
E) authorization bill

B

90) A budget resolution
A) revises program authorizations to achieve required savings.
B) resolves the differences between House and Senate versions of the budget.
C) is an act of Congress that establishes a discretionary government program or anentitlement.
D) must be passed to actually fund programs established by authorization bills.
E) sets limits on expenditures based on revenue projections.

E

91) Congress attempts to bind itself to a total expenditure level that should form the bottom line ofall federal spending for all programs by passing
A) a zero-based binding resolution.
B) a budget reconciliation.
C) a budget resolution.
D) an appropriations bill.
E) an authorization bill.

C

92) Budget \________ revises program authorizations to achieve required savings.
A) impoundment
B) realignment
C) closure
D) appropriation
E) reconciliation

E

93) A budget reconciliation
A) reconciles the differences between House and Senate versions of the budget.
B) revises program authorizations to achieve required savings.
C) is an act of Congress that establishes a discretionary government program or anentitlement.
D) must be passed to actually fund programs established by authorization bills.
E) sets limits on expenditures based on revenue projections.

B

94) An \________ bill is an act of Congress that establishes a discretionary government program oran entitlement, or that continues or changes such programs.
A) omnibus
B) authorization
C) impoundment
D) appropriations
E) enabling

B

95) To actually fund a program, Congress must pass an \________ bill.
A) authorization
B) expenditure
C) appropriations
D) omnibus
E) impoundment

C

96) Which of the following would be a specific example of an appropriations bill?
A) Congress voting to discontinue the federal income tax
B) a budget resolution passed by both Houses of Congress
C) a bill funding the Department of the Interior for the fiscal year
D) a bill to continue the space shuttle program for another five years
E) a bill establishing a national health insurance system

C

97) Failing to meet its own budget timetable, Congress has frequently resorted to \________, whichare laws that allow agencies to spend at the previous year's level.
A) reconciliations
B) revenue extensions
C) appropriations
D) continuing resolutions
E) retrenchments

D

98) An authorization bill
A) provides the funding for discretionary programs.
B) authorizes the president to spend specific line-item amounts in the final budget.
C) covers only one year at a time.
D) sets the maximum amount that may be spent for entitlement programs.
E) establishes, continues, or changes a discretionary program or an entitlement.

E

99) In order to actually fund programs established by authorization bills, Congress must pass
A) a budget resolution.
B) a budget reconciliation.
C) an appropriations bill.
D) authorization vouchers.
E) a continuing resolution.

C

100) The Balanced Budget and Emergency Deficit Control Act called for the president to order\________, if Congress failed to meet specific deficit-reduction goals.
A) reconciliations
B) defunding directives
C) re-authorizations
D) continuing resolutions
E) sequestrations

E