Economics: Principles and Practices © 2008

Chapter 10: Government Spending

Multiple Choice Quiz

Which of the following terms is correctly defined?
A)public sector – composed of state governments and state-licensed businesses
B)transfer payment – government receives no goods or services in exchange for the payment
C)subsidy – a transfer payment to state or local governments.
D)private sector – composed of local governments and businesses
An example of the transfer payment called a grant-in-aid is ______.
A)aid for people with disabilities
B)construction programs for public school
C)capital goods for schools and laboratories
D)salaries paid to people in government agencies
Which of the following would be an example of "pork" spending?
A)funds to improve the Father Damian Museum in Hawaii.
B)funds to improve the interstate highway system.
C)payments to Social Security recipients
D)payments to military personnel
Which of the following is an example of a subsidy?
A)payments to wheat farmers that make up the difference between a target price and the market price.
B)payments to construction companies to renovate the White House
C)Social Security and unemployment benefits payments
D)payments to medical personnel who work at the Veterans Administration hospitals.
The largest expenditure in the federal budget for fiscal year 2007 was _____.
A)national defense
C)Social Security
D)interest on the national debt
Some state governments are limited in their spending by _____.
A)the refusal of county judges to approve spending
B)the limited revenues collected from property taxes
C)a balanced budget amendment in their constitution
D)an increase in sales taxes and state income taxes
A category that local governments spend on but state governments do not is _____.
A)correction facilities
B)fire protection
C)police protection
The total amount borrowed from investors to finance government spending is known as _______.
A)deficit spending
B)discretionary spending
C)the national debt
D)the budget deficit
What effect does the national debt have on the nation?
A)Lower debt levels reduce private sector purchasing power.
B)Government borrowing can lead to higher interest rates for businesses and individuals.
C)Current taxpayers will have to finance anticipated future debt.
D)The government sacrifices purchasing power when it borrows.
What is the difference between the national debt and the federal deficit?
A)Both the federal deficit is the national debt relate to one years borrowing to cover excess spending.
B)The national debt is composed of all borrowing to cover the annual federal deficits.
C)The federal deficit consists of public sector debt while the national debt includes both public and private sector debt.
D)The national debt includes all funds owed by all levels of government while the federal deficit reflects only what the federal government owes.
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