Question 1

A budget deficit occurs when the federal government raises less money than it spends in a year.

Accepted Answer

A budget deficit occurs when the government spends more money than it brings in through revenue (taxes, tariffs, fees, etc.), resulting in a shortfall in funding for programs and services.

Question 2

A value-added tax is a tax on increased value of a product at each stage of production and distribution rather than just at the point of sale.

Accepted Answer

A value-added tax is based on the value added to a product at each stage of its production and distribution. This means that it is a tax on the difference between the sale price of a product and the cost of materials and services used to produce it.

Question 3

The primary source of revenue in the federal budget is corporation taxes.

Accepted Answer

The primary source of revenue in the federal budget is not corporation taxes, but rather individual income taxes. Other important sources of revenue include payroll taxes, excise taxes, and customs duties.

Question 4

A recession is a general decline in the level of economic activity.

Accepted Answer

A recession is defined as a period of significant decline in economic activity, typically characterized by a decrease in employment, production, and trade. It is usually accompanied by a fall in stock prices and a decrease in consumer and business confidence. Therefore, the statement "a recession is a general decline in the level of economic activity" is true.

Question 5

Members of the Federal Reserve Board are appointed to 14-year terms by the vice president.

Accepted Answer

Members of the Federal Reserve Board are appointed by the president and confirmed by the Senate for staggered, non-renewable 14-year terms.

Question 6

Monetary policy is handled primarily by the Federal Reserve System.

Accepted Answer

Monetary policy is indeed primarily handled by the Federal Reserve System or the "Fed," which is the central bank of the United States. Its main responsibility is to regulate the nation's money supply and credit conditions to achieve specific macroeconomic goals, such as price stability, full employment, and sustainable economic growth. The Federal Reserve System is an independent agency that operates under the supervision of Congress, but it has considerable autonomy in carrying out its monetary policy decisions.

Question 7

Most federal government spending is discretionary.

Accepted Answer

Most federal government spending is mandatory, with the largest portions going to entitlement programs such as Social Security, Medicare, and Medicaid. Discretionary spending, which includes defense and education, makes up a smaller portion of the budget.

Question 8

The U.S.government levies excise taxes on real estate.

Accepted Answer

The U.S. government does not levy excise taxes on real estate. Excise taxes are typically levied on specific goods or activities such as alcohol, tobacco, or gasoline. Real estate is generally subject to property taxes and transfer taxes, but not excise taxes.

Question 9

Before Congress enacted the Budget and Accounting Act of 1921, each executive agency dealt with Congress on its own, requesting that the legislature appropriate funds for its activities with little or no presidential coordination.

Accepted Answer

The statement accurately describes the situation before the Budget and Accounting Act of 1921 was passed.

Question 10

The fiscal year for the federal government begins on April 15.

Accepted Answer

The fiscal year for the federal government begins on October 1 and ends on September 30. April 15 is the deadline for individuals to file their income taxes.

Question 11

Defense spending is an example of mandatory spending.

Accepted Answer

Defense spending is an example of discretionary spending because it is determined through annual budget appropriations by Congress and is not required by existing laws or entitlement programs.

Question 12

The amount of interest banks charge for loans to each other is known as the federal reserve requirement.

Accepted Answer

The amount of interest banks charge each other for loans is known as the federal funds rate, not the federal reserve requirement. The federal reserve requirement refers to the amount of reserves that banks are required to hold in order to meet reserve requirements set by the Federal Reserve.

Question 13

The national debt refers to the amount of money the federal government gives state governments.

Accepted Answer

The national debt refers to the total amount of money that the federal government owes to its creditors, including foreign countries, individuals, and institutions that hold government bonds. It is not related to the amount of money given to state governments.

Question 14

In the end, Congress has the last word on the president's budget proposal.

Accepted Answer

According to the U.S. Constitution, Congress holds the power of the purse and has the authority to approve or reject the president's budget proposal.

Question 15

Most sales taxes in the United States are considered regressive.

Accepted Answer

Sales taxes are regressive because they impose the same tax rate on all consumers regardless of their income level. This means that lower-income earners end up paying a larger percentage of their income towards sales tax than higher-income earners.

Question 16

The Constitution places all taxing, borrowing, and spending powers in the hands of Congress and the legislative branch.

Accepted Answer

Article I, Section 8 of the U.S. Constitution grants Congress the power to tax, borrow, and spend money. This places these powers in the hands of the legislative branch.

Question 17

The core element of monetary policy is the idea that prices, incomes, and economic stability reflect growth in the amount of money that circulates through the economy at any one time.

Accepted Answer

This is a correct statement about the core element of monetary policy. The central bank adjusts the money supply to achieve its inflation and growth targets, which affect prices, incomes, and economic stability.

Question 18

The federal government spends more money annually than all state and local governments combined.

Accepted Answer

According to the National Association of State Budget Officers, in 2018 the total expenditures for state and local governments in the United States amounted to approximately $3.1 trillion, whereas the federal government's total expenditures exceeded $4.1 trillion. Therefore, the federal government spends more money annually than all state and local governments combined.

Question 19

The Office of Management and Budget is a presidential staff agency that serves as a clearinghouse for budgetary requests and management improvements for government agencies.

Accepted Answer

The Office of Management and Budget (OMB) is indeed a presidential staff agency that plays a crucial role in managing the executive branch's budget and overseeing the implementation of government policies and programs. As the chief fiscal officer of the federal government, the OMB collaborates with other agencies and departments to set budgetary priorities and allocate resources according to the president's budget proposal. Additionally, the OMB is responsible for reviewing and evaluating agency performance and efficiency and recommending policy changes to improve government operations.

Question 20

A progressive tax is designed so that people with higher incomes pay a larger fraction of their income than people with lower incomes.

Accepted Answer

This is the basic characteristic of a progressive tax system.

Quiz 18: Making Economic Policy