When did the US government last borrow an amount
equal to GDP?
p. 3 WWII
What is another term for output?
p. 3 efficiency
What is another term for outcome or impact?
p. 3 effectiveness
What are the two properties of public goods?
p. 5 non-excludability and non-rivalry
What is another term for spillovers?
p. 5 externalities
What important budgeting legislation was passed in
p. 10 Budget and Accounting Act
In 1939, the Bureau of the Budget was moved from the Treasury Department to where?
p. 10 Executive Office of the President
What is another term for long-lasting assets?
p. 13 fixed assets
The argument can be made that funds should diverted from social welfare programs in order to stimulate what?
p. 14 economic development
The responsibility to use the budget as an
instrument of economic policy dates back to what act of Congress?
p. 14 Employment Act of 1946
Whereas an accounting operating statement is
retrospective, a budget is what?
p. 15 prospective
Instead of a single budget, what three types may be used in a series?
p. 15 operating, capital, and special fund
Generally speaking, budgets can be conceived in what three ways?
Surprise Question (Chapter 1)
Basically speaking, what are the two types of
p. 18 program and resource
Budgets traditionally deal with what two resources?
p. 18 money and personnel
What are the three basic approaches to decision making?
- p. 18 pure rationality, muddling through, and
- limited rationality
What is another terms for muddling through?
p. 18 incrementalism
What is the major assumption involving the pure rationality approach?
p. 19 perfect information
Keeping government small has been advocated as a means of protecting individuals from what?
p. 26 tyranny
What type of expenditure occurs when government consumes resources that might otherwise be used by the private sector?
p. 28 exhaustive
What type of expenditure occurs when government transfers resources instead of consuming them?
- What type of expenditure occurs when government
- transfers resources instead of consuming them?
What President complained about the
p. 28 Eisenhower
In the distant past, government expenditures rose during wartime and fell during peacetime but, in the recent past, they have only risen since what war?
p. 35 Vietnam
What type of programs resulted in the continued high spending since the 1960s?
p. 35 entitlement
What level of government accounted for the bulk of government spending prior to 1900?
p. 36 local
What level of government accounted for the bulk of government spending after the Great Depression?
p. 36 federal
From 1926 to 2010, the cost of government rose from 12% of GDP to what?
p. 37 36%
The previous decline in the number of local governments was attributable to what?
p. 38 school district consolidation
The present increase in the number of local
governments is attributable to what?
p. 38 special districts
What is the major source of revenue for the federal government?
p. 38 individual income tax
What is the second major source of revenue for the federal government?
p. 38 social insurance
What are the two main types of federal spending?
p. 39 discretionary and mandatory
What are the three largest entitlement programs?
p. 39 Social Security, Medicare, and Medicaid
Which two states have neither an individual income
tax nor a sales tax?
p. 40 Alaska and New Hampshire
What is the largest category of local expenditure?
p. 40 education
How much are total government expenditures as a percent of GDP?
p. 47 36
What is the basic measure of economic output, the
value of the total goods and services produced, excluding US earnings abroad
and foreign earnings in the US?
p. 48 GDP
What is the basic measure of economic output, the
value of the total goods and services produced, including US earnings abroad
and foreign earnings in the US?
p. 48 GNP
What is the measure of capital investment net of
p. 48 NNP
What year was the Yom Kipper War and the first OPEC oil shock?
p. 50 1973
What are the four BRIC countries?
p. 50 Brazil, Russia, India, and China
What does FDI stand for?
p. 51 foreign direct investment
In what year did the US become a net debtor nation,
meaning the value of foreign investments in the US exceeded the value of US investments
p. 52 1985
What rate is too low to finance the demand for
investments, leaving the economy dependent upon foreign investors?
p. 52 savings rate
What foreign currency is on the verge of collapse?
p. 54 Euro
After the Democrats won the midterm Congressional elections of 2006, the Great Recession began in 2007 and official unemployment reached what percent?
p. 55 9%
What were the three main goals of the Employment Act of 1946?
p. 56 full employment, price stability, and steady growth
A person must be seeking employment to be officially
counted as what?
p. 57 unemployed
Due to onerous labor regulations, companies often
resort to hiring what two types of workers?
p. 58 part-time and temporary
The Phillips Curve indicates a negative relationship
between unemployment and inflation but a positive relationship was seen in what
p. 59 1970s
By 2012, what percentage of Americans had been
unemployed longer than six months?
p. 60 40%
What measure normalizes GDP for population
differences between countries?
p. 61 GDP per capita
What adjective applies to a measure such as GDP when
adjusted for inflation?
p. 62 real
What adjective applies to a measure such as GDP when not adjusted for inflation?
p. 62 nominal
What is the
net balance or simple trade balance of goods imported and exported?
p. 65 current account
In 2010, what statistic was at an all-time high of
p. 65 current account deficit
By definition, if there is a current account deficit
reflecting trade flows, there must be an offsetting surplus in what other account reflecting financial flows?
p. 66 capital
What four countries are sometimes called, in a most unflattering way, PIGS?
p. 67 Portugal, Italy, Greece, and Spain
What two deficits are sometimes called the twin
p. 67 trade and budget
The national savings rate ranged from a record high in 1965 to a record low in what year?
p. 68 2009
What are the four main factors that combine to
produce goods and services?
p. 70 land, labor, capital, and technology
What super-committee agreed to automatic cuts
divided equally between defense and Medicare beginning in 2013?
p. 73 Joint Select Committee on Deficit Reduction
What are the three broad types of cyclical
This is a surprise question
What indicator is used to adjust benefit programs
for the effects of inflation?
p. 76 CPI
What are the two major stock exchanges in the US?
p. 78 NYSE and NASDAQ
What are the two most notable composite indexes of
stock exchange transactions?
p. 78 DJIA and S&P
The DJIA hit a low of $7500 in what year?
p. 79 2009
Government economic policy is divided into what two categories?
p. 81 fiscal and monetary
Government actions to achieve economic policy are
divided into what two categories?
p. 81 discretionary and automatic
What entitlement program is a good example of an
p. 82 unemployment insurance
It was not the New Deal that ended the Great
Depression but what?
p. 83 WWII
What side of economics is associated with von Mises (1881-1973), Hayek (1899-1992), and tax cuts?
p. 83 supply
What three response lags affect fiscal policy?
p. 85 perception, reaction, and implementation
What procedure allows a President to defer or
p. 85 impoundment
What economist is most associated with a focus on monetary as opposed to fiscal policy?
p. 86 Friedman
The quaint ridges found on the edges of dimes serve as reminders that governments create inflation through a process known as what?
p. 87 seignorage
More than half of circulating money consists not of
currency or coins but of what?
p. 87 checkable deposits
Currency and coins account for what percentage of
total money in circulation?
p. 87 10
The Federal Reserve System manipulates what
- p. 88 federal funds rate, discount rate, and reserve
In what year did the federal funds rate drop to
p. 89 2011
Describe the operations used by the Fed to
manipulate the federal funds rate by buying and selling government bonds initially sold by the Treasury Department?
p. 89 Open Market
The purchase of long-term securities by the Fed to
inflate the money supply is known as what?
p. 89 quantitative easing
According to an investigations subcommittee of the Senate Committee on Homeland Security and Governmental Affairs, the recent collapse of financial markets was caused by the lack of what?
p. 95 regulatory oversight
What two federally sponsored enterprises contributed to the collapse of financial markets through a lack of regulatory oversight?
p. 95 Fannie Mae and Freddie Mac
What does NBER stand for?
p. 96 National Bureau of Economic Research
What type of bank collapsed and disappeared during the Great Recession?
p. 97 investment
What two GSEs were bailed out by the Fed and taken into conservatorship by the Federal Housing Finance Authority?
This is a surprise question
Which US auto company survived the Great Recession without an infusion of government support?
p. 97 Ford
What does TARP stand for?
p. 99 Troubled Assets Relief Program
What program in 2009 allocated $100 billion in TARP funds for low-interest loans to financial institutions to purchase troubled assets?
p. 99 Toxic Asset Purchase Program
What act in 2009 provided $787 billion in grants to state and local governments for shovel ready projects?
p. 99 American Recovery and Reinvestment Act
What insurance company was bailed out with an $85 billion line of credit?
p. 101 AIG
What does AIG stand for?
p. 101 American International Group
Whereas capitalists focus on the production of
wealth, socialists focus on what?
p. 105 distribution of wealth
Whereas capitalists focus on equal opportunities, socialists focus on what?
p. 105 equal outcomes
Does inflation hurt borrowers or lenders?
p. 106 lenders
Has inequality in income distribution increased or decreased since the introduction of LBJs Great Society welfare programs in the 1960s?
p. 106 increased
What index is commonly used to measure income inequality?
p. 107 Gini
What are the four phases of the budget cycle?
- Preparing the Budget
- Approving the Budget
- Executing the Budget
- Evaluating the Budget
In 1970, the old BOB was reorganized into what?
p. 118 OMB
What does OMB stand for?
p. 118 Office of Management and Budget
Following passage of an appropriations bill, where do federal agencies submit their plans for apportionment?
p. 123 OMB
What process follows the apportionment process at the federal level?
p. 123 allotment
What does GAO stand for now?
p. 124 Government Accountability Office
How is demand characterized when it does not respond to price?
p. 134 inelastic
What are the two general principles of tax equity?
p. 135 ability to pay and benefit
What type of equity refers to charging the same amount to taxpayers whose ability to pay is the same?
p. 135 horizontal
What type of equity refers to treating different
p. 135 vertical
What are the three broad types of taxes based upon the treatment of different income groups?
p. 136 progressive, proportional, and regressive
Households in the top quintile paid what percent of all federal income taxes in 2007?
p. 136 86
Non-resident state income taxes are also called what?
p. 137 commuter taxes
What authorized the national income tax in 1913?
p. 139 16th Amendment
What are the two main ways to reduce the base when computing the federal income tax?
p. 140 deductions and exemptions
What is the name for dollar-for-dollar reductions in federal income taxes due?
p. 140 credits
What are the two main types of federal income tax deductions?
This is a surprise question
In 2011, what was the marginal rate of federal income tax in the highest income bracket for married taxpayers?
The EITC is an annual welfare payment that behaves like what?
p. 144 negative income tax
So-called “wealthy” taxpayers are required to figure their federal income taxes twice,
once to calculate the regular tax and once to calculate what else?
p. 144 AMT
What does AMT stand for?
p. 144 Alternate Minimum Tax
What process does the federal government use to adjust income tax brackets for changes in price levels?
p. 145 indexing
The informal economy or black market is also known as what?
p. 145 underground economy
Exclusions, exemptions, deductions, credits, and deferrals are examples of what?
p. 146 tax expenditures
Taxing companies is generally futile since they pass along the cost of doing business in what two ways?
p. 147 lower wages and higher prices
In 2010, Social Security benefited 52.5 million people broken down into what three categories?
In 2007, Social Security benefited an additional 7.7 million people with what program?
p. 148 SSI
What does SSI stand for?
p. 148 Supplemental Security Income
Medicare covers what two groups of people?
p. 150 elderly and disabled
Medicaid covers what group of people?
p. 151 poor
What are the two most important “insurance trusts” set up as employee benefits at the state level?
- p. 151-152 unemployment insurance and workers
What tax is least susceptible to tax avoidance?
p. 152 property
What are the two major components of real property?
p. 153 land and improvements
Many states use what type of exemption to reduce property taxes?
p. 153 homestead
What is the most common approach to property assessment?
p. 155 market data
With respect to property taxes, what is a percentage
or fraction of full market value called?
p. 155 assessment ratio
A tax rate of one tenth of a percent is called what?
p. 157 mill
Besides real property, some jurisdictions tax what
other tangible type of property?
p. 158 personal
What are two examples of intangible personal
p. 158 stocks and bonds
In addition to general sales taxes, there are what
two main types of specific sales taxes?
p. 165 luxury and sin
What is taxed using a benefit-based excise tax?
p. 165 fuel
What are the two varieties of sales tax besides general and specific?
This is a surprise question p. 165-167?
States are losing sales tax revenues on what three
types of sales?
p. 167 mail, phone, and internet
The US is one of the few industrialized countries
without what kind of tax?
p. 171 VAT
What does VAT stand for?
p. 171 value added tax
What type of tax is levied on addictive products
like alcohol and tobacco to discourage their use?
p. 171 sumptuary
What are the two basic types of user charges or fees?
p. 175 voluntary and mandatory
What type of fee is a special assessment for roads,
sewers, or schools?
p. 176 impact
Most states now “earn” money by engaging in what
formerly illegal activity known as bookmaking?
p. 178 lottery
The “muddling through” model of decision making is attributable to whom?
p. 189 Lindblom
Operations research, economic analysis, general
systems theory, cybernetics, information technology, and systems analysis serve
as the foundation for what budgeting system?
p. 189 Planning Programming Budgeting
What does PPB stand for?
p. 189 planning programming budgeting
What is another name for budgeting feedback?
p. 193 passback
What is the umbrella term for the overall field of program information?
- p. 194 performance
What are the four basic mission types?
- This is a surprise question
- p. 194-199?
Governments are at a disadvantage compared to businesses when it comes to making decisions since they lack what?
p. 199 profit motive
What type of budgeting system assumes that there
will be no change in programs?
p. 200 current services
What type of budgeting system works with an overall dollar limit factored into limits for subunits?
p. 201 fixed ceiling
What type of budgeting system is also known as blue
p. 201 open ended
What type of budgeting system depends upon measures
for workload and unit cost?
p. 202 performance budgeting
What type of budgeting system does PPB now stand
p. 202 planning programming budgeting
What type of budgeting system asks: What if this program were eliminated?
p. 202 ZBB- zero based budgeting
What does ZBB stand for?
p. 205 zero based budgeting
budgeting systems make the most unrealistic assumptions?
p. 205 ZBB and open ended
What type of planning focuses on missions, goals, and objectives?
p. 207 strategic
What is the primary focus of MBO?
p. 208 workload
What does MBO stand for?
p. 208 management by objectives
What is also known as continuous quality
p. 208 TQM
What does TQM stand for?
p. 208 total quality management
What system is associated with both the
accountability and authority of managers?
p. 208 MFR
What does MFR stand for?
p. 208 managing for results
What type of budgeting system asks agencies to
prepare fixed ceiling budgets then propose increases?
p. 208-209 Target Based Budgeting
What does TBB stand for?
p. 208-209 target based budgeting
The National Performance Review of 1993 became known
- p. 210 National Partnership for Reinventing
Coincident with passage of the NPR in 1993 was what
p. 210 Government Performance Review Act
What does GPRA stand for?
p. 210 Government Performance and Results Act
What does BPI stand for?
p. 212 budget performance integration
What does PART stand for?
p. 213 Program Assessment Rating Tool
What does RMO stand for?
p. 214 resource management office
The federal government is currently trying to reduce the number of what three types of contracts?
- p. 218
- no-bid, sole-source, and task order
What does GASB stand for?
p. 221 Governmental Accounting Standards Board
What does the federal government use to achieve its
policy at the state and local level without paying for it?
p. 237 unfunded mandates
What predictive technique fits a straight line over a
series of data points?
p. 239 linear regression
What method of trend extrapolation relies upon data smoothing in order to plot a straight line?
p. 239 moving averages
What modeling technique uses a single equation to
illustrate a linear relationship between one dependent variable and several
p. 240 multiple regression
What market imposes some discipline on state and
local governments with respect to capital budgets?
p. 241 bond
Expenditures can be reduced in what two ways?
p. 245 across the board cuts and prioritization
Ideally, what is the appropriate role for a budget
p. 248 neutral competence
The Budget of the United States is backed up by what
much larger document?
p. 253 Budget Appendix
What is another term for non-budgetary transactions?
What agency of the federal government was moved off
budget since it was expected to operate like a business?
p. 258-259 US Postal Service
Contingent liabilities are reported publicly but
remain off budget except in the case of what?
p. 259 default
What are the four broad types of government
liabilities in terms of instrument?
This is a surprise question 259-262?
Sallie Mae deals with what type of loans?
Connie Lee deals with what type of loans?
p. 262 college construction
OMB treats the receipt of user fees by an agency not
as revenue but as what?
p. 264 offsetting collection
Which branch of government is said to have the power
of the purse?
p. 273 legislative
Besides the referendum, cite two other examples of
direct democracy at the state or local level.
p. 274 initiative and recall
The US Supreme Court ruled that state legislatures
must draw district lines that are proportional to what?
p. 275 population
At the local level, there is a movement from
representation in terms of small districts to representation in terms of what?
p. 275 at-large seats
What reform would likely result in more citizen
legislators and fewer careerist politicians?
p. 276 term limits
Independents or moderates are also known as what?
p. 277 swing voters
In a congressional/presidential system, political
parties are usually weak compared to what other system?
p. 278 parliamentary/prime ministerial
When one party controls the Presidency and another party controls the Congress, the situation is often described as gridlock or
p. 279 divided government
Besides separation of powers, what other principle
frequently results in gridlock?
p. 279 checks and balances
A large number of representatives in a legislature
typically results in what type of structure?
p. 279 committee
What type of joint committee is usually required in
a bicameral legislature?
p. 279 conference
A permanent committee is also referred to as what type of committee?
p. 279 standing
A temporary committee is also referred to as what
type of committee?
p. 279 ad hoc
What legislation in 1974 created Congressional
- p. 286 Congressional Budget and Impoundment Control
Name the report that addresses the current and
future costs of implementing a proposed bill being reported out of committee?
p. 289 fiscal note
What agency prepares fiscal notes for bills being
reported out of a Congressional committee?
p. 289 CBO
According to Article I Section7 of the Constitution,
tax bills originate where?
p. 290 House of Representatives
In what committee do tax bills originate in the
House of Representatives?
p. 290 Ways and Means
When Congress passes a bill, what office distributes
copies to the affected agencies for comment?
p. 291 OMB
What Act was declared unconstitutional by the US
Supreme Court in 1998?
p. 292 Line Item Veto
What type of legislation authorizes programs for a
given period after which they expire?
p. 295 sunset
What type of veto did the US Supreme Court strike
down at the federal level in 1983?
p. 296 legislative
Every federal agency must deal with which three
committees in each chamber of Congress?
p. 297 substantive, Appropriations, and Budget