Sample Questions and Answers
What is the primary purpose of a public budget?
A) To ensure political accountability
B) To allocate resources to achieve public goals
C) To increase government revenues
D) To monitor inflation rates
Answer: B) To allocate resources to achieve public goals
Which budget format focuses on inputs rather than outputs?
A) Performance budget
B) Line-item budget
C) Zero-based budget
D) Program budget
Answer: B) Line-item budget
The primary revenue source for most local governments is:
A) Sales taxes
B) Property taxes
C) Income taxes
D) Corporate taxes
Answer: B) Property taxes
What does the term “fiscal year” refer to?
A) A calendar year from January to December
B) Any 12-month period used for budgeting and accounting
C) The period from July to June
D) The period set by the federal government
Answer: B) Any 12-month period used for budgeting and accounting
In public budgeting, “mandatory spending” refers to:
A) Discretionary programs chosen annually
B) Spending determined by existing laws
C) Funds allocated for emergencies
D) Additional spending approved by Congress
Answer: B) Spending determined by existing laws
A deficit occurs when:
A) Government spending equals revenue
B) Government revenue exceeds spending
C) Government spending exceeds revenue
D) There is no government borrowing
Answer: C) Government spending exceeds revenue
A balanced budget requires that:
A) Revenues equal expenditures
B) Debt is reduced to zero
C) All capital projects are funded
D) Tax rates remain stable
Answer: A) Revenues equal expenditures
Which of the following is an example of capital expenditure?
A) Salaries for public employees
B) Construction of a public hospital
C) Procurement of office supplies
D) Payment of interest on public debt
Answer: B) Construction of a public hospital
The primary focus of performance-based budgeting is on:
A) Resource allocation
B) Inputs and outputs
C) Efficiency and effectiveness of programs
D) Compliance with legal requirements
Answer: C) Efficiency and effectiveness of programs
Which act requires the U.S. president to submit a budget proposal to Congress annually?
A) Budget Enforcement Act
B) Congressional Budget and Impoundment Control Act
C) Government Accountability Act
D) Federal Budget Reform Act
Answer: B) Congressional Budget and Impoundment Control Act
The term “contingency fund” in public budgeting refers to:
A) A fund used to pay off public debt
B) Emergency funds for unforeseen expenditures
C) Additional funding for overspending
D) Savings used for future projects
Answer: B) Emergency funds for unforeseen expenditures
Zero-based budgeting (ZBB) requires:
A) Incremental increases in budgets
B) Starting from a base of zero for all expenditures
C) Only new projects to be justified
D) Budget cuts for existing programs
Answer: B) Starting from a base of zero for all expenditures
Which of the following is NOT a principle of public financial management?
A) Transparency
B) Equity
C) Centralization
D) Accountability
Answer: C) Centralization
The “General Fund” in government budgets is primarily used for:
A) Long-term investments
B) Daily operations and basic government services
C) Paying off public debt
D) Emergency relief programs
Answer: B) Daily operations and basic government services
Debt service includes:
A) Salaries for government employees
B) Payments of principal and interest on debt
C) Investments in infrastructure
D) Revenue from bond sales
Answer: B) Payments of principal and interest on debt
What is a major disadvantage of incremental budgeting?
A) It promotes inefficiency
B) It is too time-consuming
C) It lacks flexibility
D) It requires extensive analysis
Answer: A) It promotes inefficiency
A “rainy day fund” is designed to:
A) Finance emergency operations
B) Cover recurring expenses
C) Mitigate budget cuts during economic downturns
D) Increase tax revenues
Answer: C) Mitigate budget cuts during economic downturns
In public budgeting, “appropriation” refers to:
A) The process of collecting taxes
B) Legally authorizing expenditure of funds
C) Monitoring government spending
D) Allocating surplus revenue
Answer: B) Legally authorizing expenditure of funds
The primary role of the Government Accountability Office (GAO) is to:
A) Create the federal budget
B) Audit and oversee government spending
C) Enforce tax policies
D) Approve budget proposals
Answer: B) Audit and oversee government spending
Which type of tax is considered regressive?
A) Property tax
B) Sales tax
C) Income tax
D) Estate tax
Answer: B) Sales tax
Public budgeting systems typically aim to achieve:
A) Economic stabilization, redistribution, and resource allocation
B) Maximum revenue collection
C) Minimum government intervention
D) Full privatization
Answer: A) Economic stabilization, redistribution, and resource allocation
What is the primary tool for fiscal policy?
A) Public-private partnerships
B) Taxation and government spending
C) Monetary policy
D) Market regulation
Answer: B) Taxation and government spending
Which of the following is a non-tax revenue source for governments?
A) Income tax
B) User fees
C) Sales tax
D) Corporate tax
Answer: B) User fees
Which organization sets accounting standards for state and local governments in the U.S.?
A) Financial Accounting Standards Board (FASB)
B) Governmental Accounting Standards Board (GASB)
C) Securities and Exchange Commission (SEC)
D) Federal Reserve Board
Answer: B) Governmental Accounting Standards Board (GASB)
The budget process typically starts with:
A) Legislative approval
B) Revenue collection
C) Executive branch proposal
D) Public hearings
Answer: C) Executive branch proposal
What is a “structural deficit”?
A) A short-term revenue shortfall
B) A long-term gap between revenue and spending commitments
C) Excessive government borrowing
D) Overspending on infrastructure
Answer: B) A long-term gap between revenue and spending commitments
Which budgeting approach is most focused on future economic trends?
A) Incremental budgeting
B) Program budgeting
C) Forecast-based budgeting
D) Zero-based budgeting
Answer: C) Forecast-based budgeting
A “bond” is a:
A) Tax on capital gains
B) Loan issued by the government to finance projects
C) Permanent increase in taxes
D) Donation to the government
Answer: B) Loan issued by the government to finance projects
What does “cash basis” accounting recognize?
A) Revenue when earned, expenses when incurred
B) Revenue and expenses when cash changes hands
C) Only expenses when incurred
D) None of the above
Answer: B) Revenue and expenses when cash changes hands
The term “fiscal policy” relates to:
A) Central bank interest rates
B) Government taxation and spending decisions
C) International trade policies
D) Regulation of financial institutions
Answer: B) Government taxation and spending decisions
What is the primary goal of participatory budgeting?
A) To reduce government spending
B) To involve citizens in decision-making
C) To ensure budget surpluses
D) To increase tax revenues
Answer: B) To involve citizens in decision-making
The federal budget is divided into which two major categories?
A) Revenue and expenditures
B) Mandatory and discretionary spending
C) Capital and operational budgets
D) Taxes and subsidies
Answer: B) Mandatory and discretionary spending
The “continuing resolution” in federal budgeting is used to:
A) Approve new taxes
B) Authorize government spending when the budget is not passed
C) Reduce the national deficit
D) Fund emergency operations
Answer: B) Authorize government spending when the budget is not passed
The term “earmark” in budgeting refers to:
A) Funds set aside for specific purposes
B) Emergency funding requests
C) Tax deductions
D) Budget reserves
Answer: A) Funds set aside for specific purposes
Which of the following is a characteristic of a capital budget?
A) Covers long-term investments like infrastructure
B) Focuses on day-to-day operations
C) Includes mandatory spending
D) Funded entirely by user fees
Answer: A) Covers long-term investments like infrastructure
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