Title: The Federal Budget
Course: TEST Course

Q: Which of the following does NOT affect aggregate demand?
- Federal government spending.
- Tax rates on corporate investment.
- Crop failures due to weather events.
A: Crop failures due to weather events.

Q: Which of the following affects aggregate demand?
- Crop failures due to weather events.
- Corporate investment in infrastructure to boost productivity.
- Federal government spending.
A: Federal government spending.

Q: Which of the following is a concern of fiscal policy?
- Changes in interest rates.
- Changes in the money supply.
- Changes in taxes.
A: Changes in taxes.

Q: Fiscal policy is concerned with which of the following?
- Interest rate changes.
- Money supply changes.
- Government expenditure changes.
A: Government expenditure changes.

Q: A major concern of fiscal policy is
- how changes to the money supply affect aggregate demand.
- how changes to the budget affect the money supply.
- how federal government taxing and spending affects aggregate demand.
A: how federal government taxing and spending affects aggregate demand.

Q: How federal government taxing and spending affects aggregate demand is
- a major concern of international policy.
- a major concern of corporate policies.
- a major concern of fiscal policy.
A: a major concern of fiscal policy.

Q: Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?
- financial policies
- monetary policies
- fiscal policies
A: fiscal policies

Q: When the government increases its spending, it is conducting
- monetary policy.
- supply-side policy.
- fiscal policy.
A: fiscal policy.

Q: Assuming that income tax is the only source of revenue for the government, with tax revenue of $50 billion and government spending totaling $70 billion, which of the following is true of the government’s budget?
- The government has a budget surplus of $20 billion.
- The government has a balanced budget of $70 billion.
- The government has a budget deficit of $20 billion.
A: The government has a budget deficit of $20 billion.

Q: Assume that the only source of revenue for the government is income tax. With government spending totaling $93 and a total of $127 collected in tax revenue, which of the following correctly states the position of the government’s budget?
- The government has a budget deficit of $34 billion.
- The government has a balanced budget of $93 billion.
- The government has a budget surplus of $34 billion.
A: The government has a budget surplus of $34 billion.

Q: When does a balanced budget occur?
- When government spending exceeds government tax revenues.
- When the rate of increase in government spending equals the rate of increase in government tax revenue collections.
- When government spending equals government tax revenues.
A: When government spending equals government tax revenues.

Q: When does a budget surplus occur?
- When government spending exceeds government tax collections.
- When government spending equals government tax revenues.
- When the increase in the rate of government spending is smaller than the rate for government tax collections.
- When government tax revenues exceed government spending.
A: When government tax revenues exceed government spending.

Q: Which of the following are major components of US federal government spending?
- Foreign aid
- Education
- Medicare and social security expenditures
A: Medicare and social security expenditures

Q: Which of the following are NOT major components of US federal government spending?
- National Defense
- Social Security
- Community and regional development
A: Community and regional development

Q: Which of the following statements about government spending is true?
- The share of defense spending in GDP has increased substantially since the 1960’s.
- Interest payments on government debt are not counted as part of government spending.
- The shares of social security and health care spending in GDP have grown steadily since the 1960’s.
A: The shares of social security and health care spending in GDP have grown steadily since the 1960’s.

Q: Which of the following statements about government spending is true?
- Total government spending as a percentage of GDP has increased every year since the 1960’s.
- Interest payments on government debt as a percentage of GDP have steadily increased.
- The share of healthcare spending in GDP has increased substantially since the 1960’s.
A: The share of healthcare spending in GDP has increased substantially since the 1960’s.

Q: A government annually collects $320 billion in tax revenue and allocates $80 billion to education spending. What percentage of this government's budget is spent on education?
- 12%
- 30%
- 1%
- 25%
A: 25%

Q: A government annually collects $210 billion in tax revenue and allocates $70 billion to military spending. What percentage of this government's budget is spent on its military?
- 27%
- 36%
- 41%
- 33%
A: 33%

Q: State and local government spending goes predominantly towards
- national defense.
- Social Security.
- education.
A: education.

Q: Which category accounts for most of the the spending by state and local governments?
- national defense
- Social Security
- education
A: education

Q: Most spending on K-12, college, and universities is provided by:
- federal spending.
- federal, state, and local spending equally.
- state and local spending.
A: state and local spending.

Q: State and local governments provide ________ of the spending on education
- about 50%
- about 25%
- about 90%
A: about 90%

Q: If a state with a balanced budget law runs a budget surplus, its options include
- a tax increase.
- drawdown of previous budgetary savings.
- a spending increase.
A: a spending increase.

Q: The state of Montana has a balanced budget law runs a budget deficit. What are the state’s options to correct a deficit?
- an increasing in spending
- taking out a loan from state banks
- an increase in taxes
A: an increase in taxes

Q: Besides education, what other areas within its borders is a state responsible for funding?
- federal highways and parkes and religious organizations
- banks, weather mitigation equipment, stadiums and their security
- roads, parks, police and fire protection, libraries
A: roads, parks, police and fire protection, libraries

Q: Looking at a list of where tax revenue is being used for funding, it includes libraries, parks, police and fire protection, hospitals and roads. From this list, it can be accurately concluded that the funding entity for these services is
- the Federal government.
- from foreign and a state government.
- a State government.
A: a State government.

Q: The smaller share of federal tax revenues comes from
- individual income taxes.
- payroll taxes (for Social Security & Medicare).
- corporate income taxes.
A: corporate income taxes.

Q: Which of the following makes up the largest share of federal tax revenues comes?
- excise taxes
- estate taxes
- payroll taxes (for Social Security & Medicare)
A: payroll taxes (for Social Security & Medicare)

Q: What do goods like gasoline, tobacco, and alcohol typically have in common?
- A proportional tax is imposed on each of them.
- A regressive tax is imposed on each of them.
- They are all subject to government excise taxes.
A: They are all subject to government excise taxes.

Q: Tad just filled his truck with gas, grabbed a pack of cigarettes and a case of beer on his way to his fishing cabin. When looking at his receipts, what does Tad notice that all three of these goods have in common?
- Each of them have imposed on them a proportional tax.
- Each have an imposed regressive tax.
- All of them are subject to government excise taxes.
A: All of them are subject to government excise taxes.

Q: In 2010, Microsoft will pay corporate income tax to the federal government based on the company's ________.
- proportional tax rate
- progressive tax rate
- profits
A: profits

Q: Google runs a lucrative business and will pay corporate income tax to the federal government. On what is the corporate tax based?
- A proportional tax rate for Google.
- A progressive tax rate for Google.
- Google’s profits.
A: Google’s profits.

Q: State and local tax revenue sources do NOT include
- sales taxes.
- income taxes.
- revenues from the federal government.
- social security taxes.
A: social security taxes.

Q: The main sources of state and local revenue include property tax,
- social security tax, and federal funding.
- income tax, and taxes on interest.
- sales tax, and federal government assistance.
A: sales tax, and federal government assistance.

Q: An increase in corporate income tax from 20% to 24% would have the most impact on
- state governments’ budgets.
- the budgets for cities and counties.
- the federal government budget.
A: the federal government budget.

Q: If corporate income taxes increased from 23% to 28%, which of the following would be most impacted?
- state governments’ budgets
- cities and counties’ budgets
- the Federal government budget
A: the Federal government budget

Q: Which of the following examples describe a progressive tax?
- Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.
- Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.
- Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.
A: Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.

Q: An example of a progressive tax would be
- a Social Security tax rate of 5% on earned income below $100,000 and 0% on income earned above $100,000.
- the Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.
- an income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.
A: an income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.

Q: Which of the following example(s) describe a regressive tax?
- Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households
- Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn
- Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000
A: Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000

Q: An example of a regressive tax is a/an
- Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.
- Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.
- Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.
A: Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.

Q: Which of the following example(s) describe a proportional tax?
- Social Security tax rate of 6.2% on earned income below $117,000 and 0% on income earned above $117,000.
- Income tax with a 10% tax rate on low income households and 20-30% tax rates on higher income households.
- Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.
A: Medicare payroll tax of 2.9% of income for everyone, regardless of how much they earn.

Q: A tax that is a flat percentage of all wages earned is a
- regressive tax.
- progressive tax.
- proportional tax.
A: proportional tax.

Q: Ari’s income and federal income tax contributions are in the table below. What is the federal income tax in Ari’s country?

 | Taxable Income | Federal Income Tax Payment
2016 | $80,000 | $10,000
2017 | $94,000 | $11,750
- regressive.
- progressive.
- proportional.
A: proportional.

Q: Astor’s income and federal income tax contributions are in the table below. What is the federal income tax in Astor’s country?

 | Taxable Income | Federal Income Tax Payment
2016 | $75,000 | $9,000
2017 | $84,000 | $10,750
- regressive.
- progressive.
- proportional.
A: proportional.

Q: Property taxes are
- generally considered to be regressive.
- generally considered to be flat.
- imposed based on ownership of assets such as real estate and autos.
A: imposed based on ownership of assets such as real estate and autos.

Q: Property taxes are
- imposed based on income.
- generally considered to be progressive.
- generally considered to be regressive.
A: generally considered to be regressive.

Q: Sales taxes are
- generally considered to be progressive.
- a tax burden that is entirely paid by consumers.
- imposed as a percentage of the value of the purchase.
A: imposed as a percentage of the value of the purchase.

Q: Sales taxes are
- imposed based on ownership of assets.
- a tax burden that is entirely paid by consumers.
- generally considered to be regressive.
A: generally considered to be regressive.

Q: The ability to pay principle of taxation holds that
- people who receive more of the benefit of government spending should pay more taxes.
- taxes should be a flat rate regardless of income.
- people with more income should pay more taxes.
A: people with more income should pay more taxes.

Q: A flat tax
- imposes a regressive tax decreases with income.
- is a progressive tax.
- imposes a single, identical tax rate on the income of all taxpayers.
A: imposes a single, identical tax rate on the income of all taxpayers.

Q: Tom earns $33,000 per year. The income tax rate on incomes below $20,000 is 10 percent. The rate on income between $20,001 and $35,000 is 15 percent. Which of the following is true?
- The income tax is flat.
- The income tax is regressive.
- Tom’s marginal income tax rate is 15 percent.
A: Tom’s marginal income tax rate is 15 percent.

Q: Gloria earns $30,000 per year. The income tax rate on incomes below $20,000 is 10 percent. The rate on income between $20,001 and $35,000 is 15 percent. Which of the following is true?
- Gloria’s marginal income tax rate is 12 percent.
- The income tax is regressive.
- Gloria’s marginal income tax rate is 15 percent.
A: Gloria’s marginal income tax rate is 15 percent.

Q: A ________ is created each time the federal government spends more than it collects in taxes in a given year.
- budget surplus
- regressive tax
- budget deficit
A: budget deficit

Q: If in 2017, the government spent over $650 billion more from its budget than it brought in during that year. This is called the
- federal debt.
- budget surplus.
- budget deficit.
A: budget deficit.

Q: Which number is higher?
- U.S. budget deficit.
- U.S. budget surplus.
- U.S. federal debt.
A: U.S. federal debt.

Q: The U.S. ________ is higher than the ________.
- deficit; debt
- surplus; budget
- debt; deficit
A: debt; deficit

Q: If the federal government spends more than it collects in taxes in a given year, then there is a ________.
- budget surplus
- corporate tax
- budget deficit
A: budget deficit

Q: A ________ means that government spending and tax revenues are equal.
- fiscal budget
- discretionary fiscal policy
- balanced budget
A: balanced budget

Q: In 2016, the federal government spent $200 billion but collected $180 billion in taxes, therefore in 2016, the government accumulated
- a budget surplus of $20 billion.
- a federal debt of $666 billion.
- a budget deficit of $20 billion.
A: a budget deficit of $20 billion.

Q: In 2016, the government of Ostentia experienced a budget deficit of $40 billion and as a result
- the government of Ostentia’s debt would be $40 billion.
- the government of Ostentia’s debt would decrease by $40 billion.
- the government of Ostentia’s debt would increase by $40 billion.
A: the government of Ostentia’s debt would increase by $40 billion.

Q: Assume the government has a balanced budget and that the economy is experiencing a period of growth higher than predicted, tax receipts (collected) by the government are likely to
- increase and result in a budget deficit.
- decrease and result in a budget deficit.
- increase and result in a budget surplus.
A: increase and result in a budget surplus.

Q: Assume the government has a budget deficit and that the economy is experiencing a period of growth higher than predicted, tax receipts (collected) by the government are likely to
- increase and increase the budget deficit.
- decrease and increase the budget deficit.
- increase and reduce the budget deficit.
A: increase and reduce the budget deficit.

Q: Assume the government has a budget deficit and that the economy is experiencing a recession, tax receipts (collected) by the government are likely to
- increase and reduce the budget deficit.
- decrease and decrease the budget deficit.
- decrease and increase the budget deficit.
A: decrease and increase the budget deficit.

Q: Assume the government has a balanced budget and that the economy is experiencing a recession, the tax receipts (collected) of the government are likely to
- increase and lead to a budget deficit.
- decrease and lead to a budget surplus.
- decrease and lead to a budget deficit.
A: decrease and lead to a budget deficit.

Q: Assume that the government of country of Ostentia for its current budget plans to collect taxes in the amount of $10 billion and to spend $9 billion. A civil war breaks out and the government spends an additional $1 billion and tax collection is down by $1 billion. What is the result?
- The expected budget deficit turns in to a $1 billion surplus.
- The expected budget surplus turns in to a $2 billion deficit.
- The expected budget surplus turns in to a $1 billion deficit.
A: The expected budget surplus turns in to a $1 billion deficit.

Q: In the country of Ovriolio the government has a budget plan to collect taxes in the amount of $15 billion and to spend $12 billion. A surge in production boosts the economy and the government spends $2 billion less than planned and tax collection is up by $1 billion. What are the results of these actions?
- Ovriolio’s expected budget surplus becomes a $6 billion deficit.
- Ovriolio’s expected budget surplus becomes a $3 billion deficit.
- Ovriolio’s expected budget surplus becomes a $6 billion surplus.
A: Ovriolio’s expected budget surplus becomes a $6 billion surplus.

Q: What are some of the unexpected events in a economy that can contribute moving toward a national surplus rather than a deficit?
- The number of exported products from a country fall as imports increase.
- Personal income decreases and income taxes decline.
- An economy has unexpected growth that increases national payroll tax revenues.
A: An economy has unexpected growth that increases national payroll tax revenues.

Q: What are some of the unexpected events in a economy that can contribute moving toward a national deficit rather than a surplus?
- An economy has unexpected growth that increases national payroll tax revenues.
- The number of exported products from a country increase as imports decrease.
- Personal income decreases and income taxes decline.
A: Personal income decreases and income taxes decline.

Q: How would a balanced budget amendment affect a decision by Congress to grant a tax cut during a recession?
- The government would have to make up the revenue by either cutting taxes or increasing spending.
- The government would have to increase automatic stabilizers in the economy and reduce discretionary fiscal policy.
- The government would have to make up the revenue either by raising taxes in a different area or cutting spending.
A: The government would have to make up the revenue either by raising taxes in a different area or cutting spending.

Q: If Congress wanted to implement a tax cut during a recession but had to keep a balanced budget, what would need to do?
- The government would have to cut taxes in another area.
- The government would have to increase spending.
- The government would have to reduce spending.
A: The government would have to reduce spending.

Q: How would a balanced budget amendment change the effect of automatic stabilizer programs?
- They would increase in flexibility because they could kick in before Congress has time to adjust the budget.
- They could no longer exist because the government would not have a way to pay for these programs.
- They would lose flexibility because spending could not increase unless funds were there.
A: They would lose flexibility because spending could not increase unless funds were there.

Q: How would automatic stabilizer programs, such as unemployment benefits, be affected by a balanced budget amendments?
- They would increase in flexibility because they could kick in before Congress has time to adjust the budget.
- They could no longer exist because the government would not have a way to pay for these programs.
- They would lose flexibility because spending could not increase unless funds were there.
A: They would lose flexibility because spending could not increase unless funds were there.

Q: Assuming the government of country Balistan has a balanced budget requirement and collects $100 million more in taxes than expected in 2016. As a result, the government would have to
- reduce spending by $100 million.
- increase taxes by $100 million.
- increase spending by $100 million.
A: increase spending by $100 million.

Q: Swazilialand is a country where the government mandate is to have a balanced budget each year. This year the government’s tax collections brought in $50 million more than expected. Because of the balanced budget mandate, the government has to
- reduce spending by $50 million.
- increase taxes by $50 million.
- increase spending by $50 million.
A: increase spending by $50 million.

Q: The congress of the country of Delta is debating budget issues and decides to cancel $5 billion worth of tax cuts in order to balance the budget. An argument against a balanced budget rule would be
- the fact that the government of Delta should have reduced spending instead.
- that the budget deficits and debt do not have any impact on the economy.
- that benefits from the tax cut were forgone.
A: that benefits from the tax cut were forgone.

Q: In the country of Memphis, in order to balance the budget this year it’s parliament decides to cancel $7 million worth of planned spending on improving highways and national infrastructure. One reason that can be argued against a balanced budget law is
- that building for the future requires only accumulating debt today.
- budget deficits and debt have little impact on an economy.
- that the benefits from improved infrastructure were forgone.
A: that the benefits from improved infrastructure were forgone.