Chapter 11
Federal Spending
Multiple Choice
1. Federal Spending in 2013 was
A) $3.8 trillion.
B) $3.8 billion.
C) $38 trillion.
D) $380 trillion.
2. Prior to 2009, Federal Spending as a percentage of GDP had peaked in
A) 1973.
B) 1976.
C) 1982.
D) 2005.
3. Between 1955 and 2006, Federal Spending as a percentage of GDP ranged between
A) 16% and 22%.
B) 22% and 30%.
C) 35% and 45%.
D) 47% and 61%.
4. Between 2009 and 2011, Federal Spending as a percentage of GDP ranged between
A) 16% and 22%.
B) 22% and 25%.
C) 35% and 45%.
D) 47% and 61%.
5. The United States Constitution states that
A) Congress and the President must agree on spending.
B) a law must be passed to approve spending for a government activity.
C) the President may spend money according to his/her own priorities.
D) a law must be passed to approve spending for a government activity that Congress and
the President agree on.
6. Federal tax dollars can be spent only if
A) Congress passes a law that the President signs.
B) Congress passes a law and overrides a veto.
C) Congress passes a law and fails to override the veto.
D) Congress passes a law that the President signs and overrides a veto.
7. A continuing resolution allows
A) spending to continue as it has been for a specified period of time.
B) spending on Presidential priorities without Congressional approval.
C) Congress to spend money directly without Presidential signature.
D) spending to continue a program forever.
8. A continuing resolution allows spending to go on
A) as long as the resolution states.
B) for no longer than a week.
C) for no longer than a year.
D) for no longer than a day.
9. In planning for a Fiscal year which of the following is supposed to happen first
A) an appropriations bill.
B) a continuing resolution.
C) a budget bill.
D) a Presidential veto.
10. Laws that change the tax code must begin
A) in the House of Representatives.
B) in the Senate.
C) with the President.
D) none of these, they may begin anywhere.
11. The fiscal year for the Federal government begins
A) January 1.
B) July 1.
C) October 1.
D) December 1.
12. Programs such as Social Security and Medicare
A) have to be re-authorized every year.
B) do not require re-authorization.
C) can be cut by the President without congressional approval.
D) have to be re-authorized every year and can be cut by the President without congressional
approval.
13. Logrolling occurs when
A) budget deficits snowball out of control.
B) members of Congress trade votes to get their programs passed.
C) forest companies use their political muscle.
D) members of Congress doctor their expense logs.
14. If logrolling occurs during the creation of a highway construction bill, this means that
A) members of Congress are taking bribes.
B) members of Congress are agreeing to support someone else’s highway so that other
members will support their own projects.
C) the total costs are being trimmed.
D) the bill is moved so fast through the process that no member of Congress can get their
project included.
15. The large budget deficits of 2003 and 2006 meant that the federal government was borrowing
upwards of $1.7 trillion over this four-year period. If that borrowing limits the ability of the
private sector to get financial capital for its purposes economists would call this
A) crowding in.
B) forcing in.
C) crowding out.
D) forcing aside.
16. The enormous budget deficits of 2009 through 2011 meant that the federal government was
borrowing upwards of $1.5 trillion per year. If that borrowing had limited the ability of the
private sector to get financial capital for its purposes economists would call this
A) crowding in.
B) forcing in.
C) crowding out.
D) forcing aside.
17. The enormous budget deficits of 2009 through 2011 meant that the federal government was
borrowing upwards of $1.5 trillion per year. If that borrowing had limited the ability of the
private sector to get financial capital for its purposes economists would call this crowding
out. There was
A) significant evidence this was a problem because interest rates were very high.
B) little evidence this was a problem because interest rates were very low.
C) significant evidence this was a problem because interest rates were very low.
D) little evidence this was a problem because interest rates were very high.
18. In 2014, the largest item in the Federal Budget was
A) national defense & homeland security.
B) Medicaid.
C) welfare.
D) international aid.
19. In 2014, the largest item in the Federal Budget was
A) Social Security.
B) Medicaid.
C) welfare.
D) international aid.
20. In 2014, the largest item in the Federal Budget was
A) national defense & homeland security.
B) interest on the national debt.
C) welfare.
D) international aid.
21. Projections of the trajectory of discretionary relative to mandatory spending made in 2014
had
A) mandatory spending’s portion growing.
B) discretionary spending’s portion growing.
C) both mandatory and discretionary spending remaining relatively constant.
D) The two remaining equal for the next decade
22. Projections of the trajectory inflation adjusted health spending made in 2014 had
A) it growing.
B) it falling.
C) it remaining relatively constant.
D) it acting like a sin wave
23. In 2011, national defense spending as a proportion of GDP was highest in
A) Japan.
B) the United Kingdom.
C) the United States.
D) Germany.
24. The trends in the share of mandatory and discretionary spending suggest that the percentage
attributable to
A) mandatory spending is rising but so is the percentage attributable to discretionary
spending.
B) mandatory spending is falling but so is the percentage attributable to discretionary
spending.
C) mandatory spending rose from the late 1960s through the middle 1990s stabilized for a
few years and then began to rise again.
D) discretionary spending rose from the late 1960s through the middle 1990s but has
stabilized.
25. When Congressional decision makers chose not to raise taxes to fight the war on terrorism
they
A) showed that there is no opportunity cost to defense spending when you are required to
spend it.
B) showed opportunity cost exists by eliminating Social Security.
C) showed that borrowed money has no opportunity cost.
D) borrowed the money but the opportunity cost still existed in the form of higher interest
rates and/or crowding out.
26. When Congressional decision makers chose not to raise taxes to fight the war on terrorism
they
A) eliminated the opportunity cost of war.
B) borrowed the money, moving the opportunity cost into higher interest rates and/or
crowding out.
C) exploited the fact that borrowed money has no opportunity cost.
D) printed all of the money required to fight the war on terrorism.
27. Crowding out is the idea that when
A) government spending is increased private spending must decrease.
B) government spending is increased in one area it must be decreased in another.
C) private spending is increased it must be decreased in another.
D) one entitlement recipient enters a program, another must leave.
28. Crowding out is an example of
A) opportunity cost.
B) correlation is not necessarily causation.
C) fallacy of composition.
D) a lost cause.
29. Generally, economists believe that crowding out is
A) complete; one extra dollar in government spending decreases private spending by a
dollar.
B) complete fiction.
C) important but less than complete; one extra dollar of government spending decreases
private spending by less than a dollar.
D) actually reversed; one extra dollar of government spending increases private spending.
30. Spending on programs for which there is an existing legal obligation is labeled
A) discretionary.
B) entitlement spending.
C) mandatory.
D) obligatory.
31. Spending on programs for which there is no existing legal obligation to continue is called
A) discretionary.
B) entitlement spending.
C) mandatory.
D) non-obligatory.
32. Mandatory spending makes up
A) well under half of all spending.
B) just over half of all spending.
C) just under exactly half of all spending.
D) well over half of all spending.
33. Discretionary Spending makes up
A) just over 30% of all federal spending.
B) just over 50% of all federal spending.
C) exactly half of all federal spending.
D) well over 65% of all federal spending.
34. The largest single item in the Federal Budget is
A) defense.
B) interest on the debt.
C) Social Security.
D) foreign aid.
35. The percentage of the federal budget devoted to Social Security has
A) increased dramatically over the last decade.
B) decreased dramatically over the last decade.
C) remained steady over the last decade.
D) has always been negligibly small.
36. Which of the following is part of non-defense discretionary spending?
A) Medicare.
B) Interest on the debt.
C) Social Security.
D) Education and training.
37. The portion of Federal Spending devoted to national defense has
A) risen constantly since 1960.
B) remained constant since 1960.
C) decreased markedly with small increases during Vietnam, the early 1980’s and 2001.
D) bounced around with no apparent pattern.
38. Real federal spending on Health Care functions has
A) risen constantly since 1960.
B) remained constant since 1960.
C) decreased markedly with small increases in early 1980’s.
D) bounced around with no apparent pattern.
39. Compared to other industrialized nations around the globe, defense spending as a percentage
of GDP is
A) substantially higher than that of the next highest nation.
B) somewhat higher than France and the United Kingdom but much less than Germany and
Japan.
C) somewhat higher than France and the United Kingdom and much higher than Germany
and Japan.
D) lower than France, the United Kingdom, Germany or Japan.
40. In advising Congress and the President on how much to increase defense spending in
response to security concerns, economists would suggest that they evaluate the
A) total cost of defense versus its total benefit.
B) average cost per citizen of defense versus its average benefit.
C) marginal cost of each additional dollar spent on defense versus its marginal benefit.
D) median cost per citizen of defense versus its median benefit.
41. Suppose Congress and the President are negotiating over whether to increase spending on
defense or higher education, economists would suggest that they set the amount of spending
A) must be held constant.
B) where the total benefit to each is equal.
C) where the average amount spent per student equals the average amount spent per soldier.
D) on each program so that the marginal benefit of the last dollar spent on each area is equal.
42. Using marginal analysis, an economist would judge the proper size of government by
comparing
A) whether the last dollar spent on one program would have been better spent on another.
B) whether the last dollar spent would have been better left in private hands.
C) whether the last dollar spent garnered any value to society.
D) the amount spent with the amount spent in the previous year.
43. Using marginal analysis, an economist would judge the proper distribution of government
spending by comparing
A) whether the last dollar spent on one program would have been better spent on another.
B) whether the last dollar spent would have been better left in private hands.
C) whether the last dollar spent garnered any value to society.
D) the amount spent with the amount spent in the previous year.
44. A policymaker that wants to make sure that the services of the government continue to be
provided during a time when there are a growing number of people that rely on them is likely
to argue for the use of
A) baseline budgeting.
B) current services budgeting.
C) crowding out.
D) regressive taxes.
45. Using baseline budgeting,
A) an increase in spending is spending greater than last year’s spending.
B) an increase in spending is spending greater than that needed to keep up with inflation.
C) an increase in spending is spending greater than that needed to provide an unchanged
level of services.
D) all budgets revert to zero at the beginning of each fiscal year.
46. Using current services budgeting
A) an increase in spending is spending greater than last year’s spending.
B) an increase in spending is spending greater than that needed to keep up with inflation.
C) an increase in spending is spending greater than that needed to provide an unchanged
level of services.
D) all budgets revert to zero at the beginning of each fiscal year.
47. If $20 billion was spent on a program last year and $21 billion would be required to maintain
services at the same level, then a budgeted figure of $20.5 billion would represent
A) an increase using current services budgeting and a cut using baseline budgeting.
B) an increase using either current services or baseline budgeting.
C) a cut using either current services or baseline budgeting.
D) an increase using baseline budgeting and a cut using current services budgeting.
48. Prior to September 11, 2001, defense spending had ______ in inflation adjusted terms over
the past 10 years and was at its ________ by that measure since WWII.
A) risen; highest
B) risen; lowest
C) fallen; highest
D) fallen; lowest
49. After the September 11, 2001 terrorist attacks federal government spending
A) was cut.
B) increased, but at a rate much slower than it had before the attacks.
C) increased, but at a rate almost exactly the same as it had before the attacks.
D) increased at a rate much faster than it had before the attacks.
50. After the September 11, 2001 terrorist attacks, non-defense, non-homeland security
government spending
A) was cut.
B) increased, but at a rate much slower than it had before the attacks.
C) increased, but at a rate almost exactly the same as it had before the attacks.
D) increased at a rate much faster than it had before the attacks.
51. Foreign aid represents
A) less than a billion dollars in spending.
B) between 20 and 30 billion dollars.
C) is more than we spend on education loans, grants and work study combined.
D) no longer exists.
52. The increases in defense and federal law enforcement after the September 11, 2001 terrorist
attacks was
A) in line with the increases before the attacks.
B) less than the increases that were slated before the attacks.
C) greater than the increases that preceded them but less than increases in spending in the
other parts of the government.
D) greater than the increases that preceded them and greater than the increases in spending in
the other parts of the government.
53. Federal spending as a percentage of GDP is currently expected to
A) increase dramatically between 2014 and 2018.
B) remain constant at 40% between 2014 and 2018.
C) remain constant at 20% between 2014 and 2018.
D) decrease between 2014 and 2018.
54. Promises to quell logrolling for pet projects that were made by Democrats during the 2006
election
A) have been faithfully honored.
B) have not been honored, so that pet projects could be used to induce support for other
priorities.
C) were thoroughly repudiated once the election was over.
D) have been declared unconstitutional by the U.S. Supreme Court.
55. The appropriations process is
A) always smooth, regardless of the political landscape.
B) always rough, especially when the same political party controls both Congress and the
White House.
C) seldom smooth, especially when different parties control Congress and the White House.
D) characterized by brief and dignified budget debates.
56. The federal spending appropriation for Transportation projects in Fiscal Year 2014 was
A) $103 billion.
B) $179 billion.
C) $979 billion.
D) $1,979 billion.
57. The federal spending appropriation for Education and Training in Fiscal Year 2014 was
A) $3 billion.
B) $13 billion.
C) $129 billion.
D) $183 billion.
58. The federal spending appropriation for Agriculture in Fiscal Year 2014 was
A) $2 billion.
B) $23 billion.
C) $200 billion.
D) $283 billion.
59. The opportunity cost of rebuilding the Gulf Coast after hurricanes Katrina and Rita could be
the
A) delay in availability of up-armored vehicles for use by U.S. troops in Iraq.
B) delay in rebuilding of highway bridges in Minnesota.
C) decrease in available Federal Student Loan funds.
D) all of the options are correct.
60. The initial effect of the Troubled Asset Relief Program (TARP) upon the federal budget was
to
A) allow federal spending to increase by as much as $750 billion.
B) eliminate the corporate income tax liabilities of major oil companies.
C) eliminate all opportunities for “logrolling” in the Congress.
D) all of the options are correct.
61. The initial effect of the 2009 Obama Stimulus Plan upon the federal budget was to
A) eliminate all opportunities for “logrolling” in the Congress.
B) eliminate the corporate income tax liabilities of major oil companies.
C) increase the federal budget deficit by as much as $750 billion.
D) all of the options are correct.
62. The infamous “bridge to nowhere” was tucked into emergency spending intended for
A) the new lunar landing mission.
B) rebuilding after Hurricane Katrina.
C) the war in Iraq.
D) elimination of Medicare entitlements.
63. The impending retirement of aging Baby Boomers is quite likely to re-establish the trend of
A) discretionary spending becoming an ever-larger share of total federal spending.
B) mandatory spending becoming an ever-smaller share of total federal spending.
C) mandatory spending becoming an ever-larger share of total federal spending.
D) discretionary and mandatory spending becoming virtually indistinguishable.
64. The long-established trend toward increasing mandatory federal spending was interrupted by
the
A) new lunar landing mission.
B) Medicare prescription drug plan.
C) retirement of aging baby boomers.
D) Obama Stimulus Plan of 2009.
65. As the federal budget deficit increases,
A) increased interest obligations become more likely.
B) tax cuts become more likely.
C) federal borrowing is likely to decrease.
D) all of the options are correct.
66. The Obama Stimulus Plan of 2009 consisted of
A) $787 billion in tax cuts.
B) tax cuts, federal spending increases and aid to states.
C) $787 billion in immediate federal spending increases.
D) income tax rebate checks delivered to households in key states.