Chapter Two
Questions and Exercises
.
2. a. Defense outlay change: (693,586 / 294,362) – 1 = 135.6
Nondefense outlay change: (658.2 / 319.7) – 1 = 105.9
Defense prices: (1.1327 / 0.8147) – 1 = 39.0
Nondefense prices: (1.1256 / 0.89) – 1 = 26.5
Defense real: [(693,586 / 1.1327)/(294,362 / 0.8147)] – 1 = 69.5
Nondefense real: [(658.2 / 1.1256) / (319.7 / 0.89)] – 1 = 62.8
b. Deflator: 2000 = 1.00; 2010 = 1.1256 / 0.89 = 1.2647
Nondefense outlay, real: 2000 = 319.7
Nondefense outlay, real: 2010 = 658.2 / 1.2647 = 520.4
Change (2005 = 1.00): 584.8 – 359.2 = 225.6
Change (2000 = 1.00): 520.4 – 319.7 = 200.7
Percent change (2000 = 1.00): (520.4 / 319.7) – 1 = 62.8
3. Strategies:
a. Spend to save
b. All or nothing
c. Matching the competition
d. Cut the popular program
e. Spend to save
f. It’s the local economy
g. It’s so small
h. Spend to save
i. Washington Monument
j. Crisis
k. You pick
l. Dire consequences
m. Washington Monument
n. Cut the popular programs
o. Dire consequences
4. Hurricane damage, adjusted with GDP deflator:
Damage,
Current
Dollars
Deflator,
2005 =
100
Constant
(Real)
Damage
Category
Katrina
81000
100
81,000.00
3
Andrew
26500
76.598
34,596.20
5
Wilma
20600
100
20,600.00
3
Charley
15000
96.786
15,498.11
4
Ivan
15000
96.786
15,498.11
4
Rita
11300
100
11,300.00
3
Hugo
7000
69.577
10,060.80
4
Frances
8900
96.786
9,195.54
2
Agnes
2100
26.657
7,877.86
1
Jeanne
6900
96.786
7,129.13
3
Betsy
1421
19.936
7,127.81
3
Camille
1421
23.119
6,146.46
5
Allison
5000
90.727
5,511.04
0
Frederick
2300
43.798
5,251.38
3
Floyd
4500
86.842
5,181.82
2
Diane
832
16.601
5,011.75
1
Fran
3200
83.159
3,848.05
3
Opal
3000
81.606
3,676.20
3
Isabel
3370
94.135
3,579.96
2
Alicia
2000
57.652
3,469.09
3
Juan
1500
61.628
2,433.96
1
Dennis
2230
100
2,230.00
3
Elena
1250
61.628
2,028.30
3
Bob
1500
74.824
2,004.70
2
Gloria
900
61.628
1,460.38
3
Georges
1155
85.584
1,349.55
2
Lili
860
92.196
932.80
1
Bonnie
720
85.584
841.28
0
Erin
700
85.584
817.91
0
Allison
500
69.577
718.63
0
Alberto
500
79.94
625.47
0
Frances
500
85.584
584.22
0
Ernesto
500
103.231
484.35
0
Examination Questions
1. Which of the following is an accurate statement about the relative size of government
purchases and government spending?
2. Place these stages in the budget cycle in the order in which they normally occur.
3. Choose the best way to complete the statement: “A budget is…”
4. The purpose of a financial audit includes all of the following EXCEPT:
5. Agency X had an appropriation of $10 million in 2013 and of $11.5 million in
2014 (an increase of $1.5 million or 15%). According to the incrementalist view,
what is the 2014 budget base for the agency?
6. Ubiquitous strategies for supporting budget proposals include:
7. Use of modified accrual accounting:
8. Which of the following would not be a concern of a financial audit?