Question 1

Typically, the average tax rate for a person is______ his or her marginal tax rate, because the marginal tax rate applies to ______.

Accepted Answer

A)   below; all income
B)   below; the first dollars taxed but not to all income
C)   below; the last dollars taxed but not to all income
D)   above; the last dollars taxed but not to all income
E)   above; the first dollars taxed but not to all income

Question 2

The U.S. government could reduce its budget deficit by

Accepted Answer

A)   borrowing funds from abroad.
B)   raising the eligible retirement age to receive Social Security benefits.
C)   expanding the income assistance programs.
D)   lowering income tax rates.
E)   decreasing the level of means-testing for Medicare eligibility.

Question 3

The part of the government budget that includes both spending and transfer payments is known as _____outlays.

Accepted Answer

A)   mandatory
B)   discretionary
C)   perpetual
D)   government
E)   indiscriminate

Question 4

One proposed solution to the funding problems faced by Social Security and Medicare is to implement means-testing, so that only those with limited retirement funds would qualify for the government benefits. An unintended consequence of such a requirement may be

Accepted Answer

A)   an increase in private saving.
B)   a decrease in the incentive to save for retirement.
C)   improved solvency for Social Security and Medicare.
D)   fewer elderly people receiving benefits.
E)   that some workers paying into the programs never receive any benefits from the programs.

Question 5

The failure to make required payments on a debt is known as

Accepted Answer

A)   austerity.
B)   defiance.
C)   refinancing.
D)   defaulting.
E)   deferring.

Question 6

Which of the following is NOT a revenue source for the U.S. federal government?

Accepted Answer

A)   sales taxes
B)   federal gasoline taxes
C)   federal income taxes
D)   payroll taxes
E)   admission fees for national parks

Question 7

The reason that a worker's net pay will differ from his or her gross pay is due to ______ taxes that are withheld from periodic earnings.

Accepted Answer

A)   excise
B)   progressive
C)   inheritance
D)   marginal
E)   payroll

Question 8

Even though Social Security and Medicare are popular and well-meaning programs, explain why they may distort economic incentives.

Accepted Answer

Any system in which a portion of income ...

Question 9

The federal government started running a budget surplus in 1998. By 2002, the budget surplus had turned into a budget deficit. Why do you think the budget deficit returned in 2002?

Accepted Answer

A)   There were spending increases to reduce the impacts of the Great Recession.
B)   Entitlement programs were expanded in 2002, causing outlays to exceed revenues.
C)   There was increased military spending in response to the September 11, 2001, terrorist attacks.
D)   There were large decreases in tax rates, which reduced total tax revenues.
E)   Politicians were spending the surplus too quickly on projects that would benefit their home districts.

Question 10

Assuming all of the following are in your personal monthly budget, your _________payment is considered a discretionary outlay.

Accepted Answer

A)   mortgage or rent, if you do not own a home) 
B)   car loan
C)   student loan
D)   electric bill
E)   boat loan

Question 11

As a result of the 2007 global financial crisis,______ is a topic that has vaulted to the forefront of everyday political and economic discussions.

Accepted Answer

A)   debt
B)   taxes
C)   financial deregulation
D)   government instability
E)   civic participation

Question 12

_______is/are a government-administered retirement program.

Accepted Answer

A)   Medicare
B)   Medicaid
C)   Unemployment compensation
D)   Social Security
E)   Food stamps

Question 13

The largest portion of the federal budget is dedicated to

Accepted Answer

A)   discretionary spending.
B)   mandatory outlays.
C)   interest payments.
D)   tax collection.
E)   defense spending.

Question 14

As a proposed solution to entitlement reform,_____ would decrease the benefits paid to wealthier recipients who can afford to pay for their own retirement and medical care.

Accepted Answer

A)   increasing the retirement age
B)   progressive taxation
C)   means-testing
D)   redistributive payments
E)   the lifetime income index

Question 15

Why may a budget deficit be considered undesirable?

Accepted Answer

A budget deficit means that a country is...

Question 16

Discretionary government spending includes payments made for

Accepted Answer

A)   children's health insurance programs.
B)   deposit insurance payments.
C)   unemployment compensation.
D)   the Department of Education.
E)   pension payments for retired Coast Guard officers.

Question 17

The wealthiest 20 percent of households in the United States

Accepted Answer

A)   do not contribute their fair share of federal income taxes.
B)   contribute the vast majority of all federal income taxes.
C)   are forced to pay too much in federal income taxes.
D)   pay zero federal income taxes because of tax loopholes.
E)   contribute less than 50 percent of all federal income taxes because of tax loopholes.

Question 18

Why is a budget deficit not necessarily a bad thing?

Accepted Answer

A)   Governments should always spend more than they collect in revenue to encourage economic growth.
B)   Saving money is not something a government should do.
C)   As long as the government is paying for things it needs, it is appropriate to spend more than is collected in tax revenue.
D)   Deficits may allow for tax rate stability during recessions.
E)   Future generations will always be better equipped to pay back any accumulated deficits.

Question 19

Which federal budget category's portion of total government outlays has decreased since 1960?

Accepted Answer

A)   Social Security
B)   Medicare
C)   Medicaid
D)   defense
E)   food stamps

Question 20

Why are interest payments considered mandatory spending in the federal budget?

Accepted Answer

A)   They are considered mandatory spending because such payments are fixed at the time of borrowing and cannot be altered.
B)   They are considered mandatory spending because the interest rates on federal debt are extremely high, and failing to pay accumulated interest would dramatically increase the total debt.
C)   They are considered mandatory spending because not making such payments could endanger the government's credit rating, which could make it harder to borrow going forward.
D)   They are considered mandatory spending because interest payments constitute the largest part of yearly government spending.
E)   They are considered mandatory spending because most interest payments go to American households, and those citizens depend on the interest payments for their livelihoods.

Exam 15: Federal Budgets: the Tools of Fiscal Policy

Typically, the average tax rate for a person is______ his or her marginal tax rate, because the marginal tax rate applies to ______.

Correct AnswerverifiedShow Answer

Why are interest payments considered mandatory spending in the federal budget?

Correct AnswerverifiedShow Answer

Which of the following is NOT a revenue source for the U.S. federal government?

Correct AnswerverifiedShow Answer

The largest portion of the federal budget is dedicated to

Correct AnswerverifiedShow Answer

The reason that a worker's net pay will differ from his or her gross pay is due to ______ taxes that are withheld from periodic earnings.

Correct AnswerverifiedShow Answer

As a proposed solution to entitlement reform,_____ would decrease the benefits paid to wealthier recipients who can afford to pay for their own retirement and medical care.

Correct AnswerverifiedShow Answer

Why may a budget deficit be considered undesirable?

Correct AnswerverifiedA budget deficit means that a country is...View AnswerShow Answer

Why is a budget deficit not necessarily a bad thing?

Correct AnswerverifiedShow Answer

The failure to make required payments on a debt is known as

Correct AnswerverifiedShow Answer

_______is/are a government-administered retirement program.

Correct AnswerverifiedShow Answer

The part of the government budget that includes both spending and transfer payments is known as _____outlays.

Correct AnswerverifiedShow Answer

Discretionary government spending includes payments made for

Correct AnswerverifiedShow Answer

The U.S. government could reduce its budget deficit by

Correct AnswerverifiedShow Answer

The federal government started running a budget surplus in 1998. By 2002, the budget surplus had turned into a budget deficit. Why do you think the budget deficit returned in 2002?

Correct AnswerverifiedShow Answer

The wealthiest 20 percent of households in the United States

Correct AnswerverifiedShow Answer

Even though Social Security and Medicare are popular and well-meaning programs, explain why they may distort economic incentives.

Correct AnswerverifiedAny system in which a portion of income ...View AnswerShow Answer

Which federal budget category's portion of total government outlays has decreased since 1960?

Correct AnswerverifiedShow Answer

As a result of the 2007 global financial crisis,______ is a topic that has vaulted to the forefront of everyday political and economic discussions.

Correct AnswerverifiedShow Answer

One proposed solution to the funding problems faced by Social Security and Medicare is to implement means-testing, so that only those with limited retirement funds would qualify for the government benefits. An unintended consequence of such a requirement may be

Correct AnswerverifiedShow Answer

Assuming all of the following are in your personal monthly budget, your _________payment is considered a discretionary outlay.

Correct AnswerverifiedShow Answer

Typically, the average tax rate for a person is his or her marginal tax rate, because the marginal tax rate applies to .

Correct Answer
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A budget deficit means that a country is...
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Any system in which a portion of income ...
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