question

A budget deficit occurs when expenditures exceed

answer

revenues

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Most of today?s federal debt was run up by government borrowing during

answer

the 1980s.

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Approximately what percentage of the annual federal budget pays interest on the national debt?

answer

9

question

Which of the following is NOT currently one of the major sources of federal revenue?

answer

excise taxes

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In Pollock v. Farmer?s Loan and Trust Co. (1895), the United States Supreme Court ruled that

answer

the income tax was unconstitutional.

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The Sixteenth Amendment, ratified in 1913,

answer

explicitly permitted Congress to levy an income tax.

question

A(n) ________ is a policy document allocating taxes and expenditures, or a series of goals with price tags attached.

answer

budget

question

A budget is

answer

a policy document allocating burdens (taxes) and benefits (expenditures).

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Congress was officially given the power to levy an income tax through the

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Sixteenth Amendment.

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The federal government?s budget is mainly

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a policy statement that allocates burdens and benefits by attaching price tags to policy goals.

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According to Aaron Wildavsky, budgeting is a process most concerned with

answer

translating financial resources into human purposes.

question

Which of the following is NOT the responsibility of the Internal Revenue Service?

answer

establishing the annual tax rates that Americans of different incomes must pay

question

Income taxes

answer

provide the largest source of federal revenue.

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In order of decreasing amounts, the sources of federal revenue include

answer

individual income tax, social insurance receipts, borrowing and corporate income tax.

question

Corporations today pay

answer

income taxes which account for much less federal revenue than individual income taxes

question

The income tax is generally progressive, meaning that

answer

those with more income pay higher rates of tax on their income.

question

Social Security taxes are

answer

paid for by employees and employers.

question

Social insurance taxes

answer

are earmarked for a specific purpose.

question

The fastest growing source of federal revenue has been

answer

Social Security taxes.

question

The government borrows money principally by

answer

selling bonds.

question

Who can purchase United States government bonds?

answer

) financial institutions B) citizens C) corporations D) mutual funds

question

The federal debt

answer

consists of all the money borrowed over the years by the national government and still outstanding.

question

The federal debt in the United States

answer

has increased due to the budget deficit caused by the difference between revenues and expenditures.

question

Unlike state and local governments, the federal government is borrowing primarily for

answer

its day-to-day expenses.

question

________ are revenue losses attributable to provisions of the federal tax laws which allow a special exemption, exclusion, or deduction.

answer

Tax expenditures

question

Tax expenditures consist of

answer

tax exemptions, deductions, and exclusions.

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The federal income tax deduction for mortgage interest on an owner-occupied home is an example of a

answer

tax expenditure.

question

An example of a tax expenditure is

answer

a tax deduction for the mortgage interest paid by homeowners.

question

The Office of Management and Budget estimates that the total tax expenditures is more than ________ of the federal government?s total receipts.

answer

30 percent

question

Tax expenditures tend to most benefit

answer

middle- and upper-income people and corporations.

question

Which of the following statements about President Reagan?s 1981 tax cut is FALSE?

answer

Corporate taxes were increased.

question

Which of the following statements about President Reagan?s 1981 tax cut is TRUE?

answer

It provided new tax incentives for personal saving and investment.

question

Which of the following was NOT a provision of President Reagan?s 1985 tax simplification program?

answer

It increased the number of tax expenditures available to businesses.

question

Beginning in 1985, federal income taxes were ________ to the cost of living, so that government no longer got a larger percentage when inflation pushed incomes into higher brackets while the tax rates stayed the same.

answer

indexed

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President Reagan?s 1981 tax cuts were most beneficial to

answer

high-income families.

question

In 1993, Congress agreed to President Clinton?s proposal to

answer

raise the income tax rate for families in the highest income brackets

question

The United States government?s annual budget is now approximately

answer

$2.75 trillion.

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Compared to most other countries with developed economies, the national, state, and local governments in the United States tax

answer

less.

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Compared to other Western nations, America?s total government expenditure as a percentage of the Gross Domestic Product (GDP) is

answer

one of the smallest.

question

Which of the following countries have the smallest total tax revenues as a percentage of their gross domestic product?

answer

United States

question

The federal budget consumes ________ of America?s gross domestic product.

answer

50 percent

question

America?s national, state and local governments spend an amount equal to ________ of the GDP.

answer

20 percent.

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During the 1950s and early 1960s, over half the federal budget was spent every year on A) agricultural subsidies and programs.

answer

the Department of Defense.

question

From the mid-1960s to the early 1980s, the biggest change in government spending was the

answer

increase in social service expenditures and decline in defense spending.

question

The military industrial complex refers to

answer

the close relationship between defense officials and the corporations that supply their hardware needs.

question

The budget of the Department of Defense

answer

decreased in the 1990s.

question

The purchasing of military hardware is known as

answer

procurement.

question

The biggest expenditure in the federal budget today is

answer

income security programs

question

The Social Security Act, which set up the Social Security system, was passed in

answer

1935

question

The Social Security Act was passed under the administration of President

answer

Franklin D. Roosevelt.

question

In 1965, ________ was added to the Social Security program to provide hospital and physician coverage to the elderly.

answer

Medicare

question

Medicare

answer

provides both hospital and physician coverage to the elderly.

question

The biggest slice of the federal budget pie belongs to

answer

income security expenditures.

question

By 1990, the Social Security system was financed by a payroll tax of

answer

over 15 percent.

question

A major feature of incremental budgeting is that it

answer

provides small increases in the current budget over the previous year?s budget.

question

An example of incremental budgeting is

answer

giving an agency a little more than it had last year

question

Which of the following is not a feature of incremental budgeting?

answer

Agencies must justify their entire budget request.

question

________ refers to the concept that in the spending appropriations process, the best predictor of this year?s budget is last year?s budget plus a little bit more.

answer

Incrementalism

question

The most prevalent model of budgetary decision making in practice is

answer

incrementalism.

question

Which of the following is NOT associated with incremental budgeting?

answer

An agency or program must prove it still merits its very existence every year.

question

Budget items mandated by law or by a previous obligation are known as

answer

uncontrollable expenditures

question

Social Security payments are an example of a(n)

answer

entitlement.

question

An ?uncontrollable? expenditure in the federal budget is defined as

answer

an expenditure that is required by current law or a previous government obligation to people automatically eligible for some benefit.

question

Social Security programs, interest on the national debt, and military pensions are examples of

answer

uncontrollable expenditures.

question

The biggest uncontrollable expenditure in the federal budget is

answer

the Social Security system.

question

An estimated ________ of the federal budget is considered uncontrollable, unless Congress changes a law or existing benefit levels.

answer

two-thirds

question

The ultimate power to determine how much the government will tax and spend, and what it will spend taxes for, lies with

answer

Congress.

question

In the House of Representatives, it is the ________ Committee that writes tax codes, subject to the approval of Congress as a whole.

answer

Ways and Means

question

Agencies invariably pad their budget requests because

answer

they want the almost inevitable budget cuts to be bearable

question

In the Senate, the ________ Committee is responsible for writing tax codes, subject to the approval of Congress as a whole.

answer

Finance

question

The budget cycle begins in the executive branch ________ months before the fiscal year begins

answer

19

question

The Director of the Office of Management and Budget

answer

is a presidential appointee requiring approval of the Senate.

question

The ________ is responsible for supervising preparation of the federal budget and advising the president on budgetary matters.

answer

Office of Management and Budget

question

Until Congress passed the Budget and Accounting Act of 1921,

answer

agencies of the executive branch sent their budget requests to the secretary of the treasury, who forwarded them on to Congress, with the president playing little or no role in the entire process.

question

Before the president submits her budget to Congress, the Office of Management and Budget (OMB) coordinates the requests of

answer

executive agencies.

question

The heads of executive agencies send their budget requests to the

answer

Office of Management and Budget

question

Agencies? behavior and budgets are audited, monitored, and evaluated for Congress by the

answer

General Accounting Office.

question

The Office of Management and Budget parcels out money to government agencies and is accountable to

answer

the president.

question

Which of the following statements about the Office of Management and Budget (OMB) is FALSE?

answer

The OMB is one of the few government agencies created by the Constitution.

question

Once the Office of Management and Budget has prepared the federal budget,

answer

the president makes revisions and submits it to Congress.

question

According to the Constitution, all federal appropriations must be authorized by

answer

Congress.

question

The Congressional Budget and Impoundment Control Act of 1974 set up all of the following EXCEPT

answer

the Office of Management and Budget.

question

The Congressional Budget and Impoundment Act of 1974 requires that

answer

Congress agree on a budget according to a fixed schedule, with target figures for the total budget size

question

The congressional equivalent of the Office of Management and Budget is the

answer

Congressional Budget Office.

question

One of the important purposes of the Congressional Budget Act of 1974 is to

answer

force Congress to consider the budget as a whole rather than in terms of individual appropriations.

question

The main purpose of the Congressional Budget Office is to

answer

advise Congress on the consequences of its budget decisions.

question

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 all federal spending for all programs.

answer

budget resolution

question

A budget resolution

answer

sets limits on expenditures based on revenue projections.

question

Congress attempts to bind itself to a total expenditure level that should form the bottom line of all federal spending for all programs by passing

answer

a budget resolution.

question

Budget ________ revises program authorizations to achieve required savings

answer

reconciliation

question

A budget reconciliation

answer

revises program authorizations to achieve required savings.

question

An ________ bill is an act of Congress that establishes a discretionary government program or an entitlement, or that continues or changes such programs.

answer

authorization

question

To actually fund a program, Congress must pass an ________ bill.

answer

appropriations

question

Which of the following would be a specific example of an appropriations bill?

answer

a bill funding the Department of the Interior for the fiscal year

question

Failing to meet its own budget timetable, Congress has frequently resorted to ________, which are laws that allow agencies to spend at the previous year?s level.

answer

continuing resolutions

question

An authorization bill

answer

establishes, continues, or changes a discretionary program or an entitlement.

question

In order to actually fund programs established by authorization bills, Congress must pass

answer

an appropriations bill.

question

The Balanced Budget and Emergency Deficit Control Act called for the president to order ________, if Congress failed to meet specific deficit-reduction goals.

answer

sequestrations

question

The Gramm-Rudman-Hollings Act

answer

mandated maximum allowable deficit levels for each year until 1993, when the budget was to be balanced.

question

In 1990, Congress split discretionary spending into three categories. Which of the following was NOT one of the three categories?

answer

debt service

question

Near the end of 1990, Congress approved a major change in the making of budget policy that shifted the focus from cutting spending to

answer

controlling increases in spending.

question

By 2002, the budget deficit had increased again due to

answer

the first Iraq war.

question

Some economists argue that less affluent voters will always use their votes to support public policies that

answer

redistribute benefits from the rich to the poor.

question

________ are not unwilling victims of big government and its big taxes in a democracy, they are at least its co-conspirators.

answer

Citizens

question

Research has found that the public sector expands principally

answer

in response to changes in economic and social conditions that affect the public?s preferences for government activity.

question

Economists Allen Meltzer and Scott Richard argue that the cost of government grows because

answer

people in a democracy use the government to secure benefits.

Chapter 14 The Congress, The President, and the Budget: – Flashcards

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