Public Budgeting and Financial Management Practice Exam Quiz
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
Which budget format focuses on inputs rather than outputs?
A) Performance budget
B) Line-item budget
C) Zero-based budget
D) Program budget
The primary revenue source for most local governments is:
A) Sales taxes
B) Property taxes
C) Income taxes
D) Corporate 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
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
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
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
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
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
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
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
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
Which of the following is NOT a principle of public financial management?
A) Transparency
B) Equity
C) Centralization
D) Accountability
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
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
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
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
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
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
Which type of tax is considered regressive?
A) Property tax
B) Sales tax
C) Income tax
D) Estate 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
What is the primary tool for fiscal policy?
A) Public-private partnerships
B) Taxation and government spending
C) Monetary policy
D) Market regulation
Which of the following is a non-tax revenue source for governments?
A) Income tax
B) User fees
C) Sales tax
D) Corporate tax
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
The budget process typically starts with:
A) Legislative approval
B) Revenue collection
C) Executive branch proposal
D) Public hearings
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
Which budgeting approach is most focused on future economic trends?
A) Incremental budgeting
B) Program budgeting
C) Forecast-based budgeting
D) Zero-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
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
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
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
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
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
The term “earmark” in budgeting refers to:
A) Funds set aside for specific purposes
B) Emergency funding requests
C) Tax deductions
D) Budget reserves
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
The term “budget surplus” indicates:
A) Government spending exceeds revenues
B) Revenues exceed government spending
C) Government borrowing is increasing
D) Taxes are too high
What is “incremental budgeting”?
A) Creating a new budget from scratch annually
B) Adjusting the previous year’s budget by small increments
C) Focusing on outcomes instead of inputs
D) Allocating funds based on citizen feedback
Which entity reviews the U.S. president’s budget proposal?
A) Office of Management and Budget (OMB)
B) Government Accountability Office (GAO)
C) Congressional Budget Office (CBO)
D) Federal Reserve
What is the primary purpose of a performance audit?
A) To ensure financial compliance
B) To evaluate efficiency and effectiveness of programs
C) To analyze tax collection methods
D) To identify new revenue sources
What does the “Pay-As-You-Go” (PAYGO) rule require?
A) New spending must be offset by budget cuts or new revenue
B) All budgets must be balanced annually
C) States must use cash basis accounting
D) Governments cannot issue bonds
A “budget variance” occurs when:
A) Actual spending or revenue differs from the budgeted amount
B) Taxes are lower than expected
C) The budget is balanced
D) The government runs a surplus
What is the “crowding out” effect in public finance?
A) Excessive government borrowing reduces private sector investment
B) High taxes discourage consumer spending
C) Government services replace private services
D) Inflation caused by government spending
What is a “special revenue fund”?
A) A fund for general government operations
B) A fund dedicated to a specific revenue source and purpose
C) A fund for long-term debt service
D) A fund for emergencies
Which type of budget includes future-oriented financial plans?
A) Operating budget
B) Capital budget
C) Rolling budget
D) Zero-based budget
The term “baseline budgeting” refers to:
A) Setting all expenditures to zero initially
B) Using the previous year’s budget as a starting point
C) Focusing only on new initiatives
D) Adjusting for inflation only
What is the primary role of the appropriations committee in Congress?
A) To set tax policy
B) To allocate funds to government programs
C) To enforce fiscal policy
D) To audit government spending
What is “fund accounting”?
A) Tracking expenditures by program type
B) A system used by governments to segregate resources by purpose
C) A method to measure financial performance
D) Accounting for capital projects
The main purpose of a budget stabilization fund is to:
A) Provide funding for capital projects
B) Mitigate revenue volatility during economic downturns
C) Cover mandatory expenditures
D) Fund emergency relief efforts
What is the primary purpose of an enterprise fund?
A) To account for business-like activities funded by user fees
B) To manage general government operations
C) To support education programs
D) To fund federal tax cuts
An audit that focuses on compliance with laws and regulations is called a:
A) Financial audit
B) Compliance audit
C) Performance audit
D) Operational audit
Which of the following is a characteristic of zero-based budgeting?
A) Automatic increases in funding for existing programs
B) Each activity must be justified annually
C) Focuses only on new initiatives
D) Only used for capital projects
A supplemental appropriation is:
A) An addition to an existing budget during the fiscal year
B) A mandatory expenditure
C) A reserve fund for emergencies
D) A deduction from the original budget
“Encumbrances” in government budgeting refer to:
A) Commitments to spend funds that have not yet been paid
B) Unused funds carried over to the next year
C) Emergency expenditures
D) Borrowed funds
The primary role of the Office of Management and Budget (OMB) is to:
A) Prepare the president’s budget proposal
B) Set monetary policy
C) Enforce tax laws
D) Audit federal programs
A government bond used to fund a specific project is called a:
A) General obligation bond
B) Revenue bond
C) Corporate bond
D) Municipal bond
The primary purpose of a line-item budget is:
A) To detail expenditures by category
B) To evaluate program performance
C) To allocate funds to outcomes
D) To reduce tax rates
The “rainy day fund” is used for:
A) Routine government expenditures
B) Capital improvements
C) Addressing unexpected budget shortfalls
D) Funding public education
What is the main feature of program budgeting?
A) Allocates funds to specific departments
B) Focuses on outcomes and objectives
C) Uses historical expenditure data
D) Prioritizes tax reductions
The budgetary process typically begins with:
A) Legislative approval
B) Revenue collection
C) Executive proposal
D) Performance evaluation
“Fiscal federalism” refers to:
A) The division of spending authority between levels of government
B) Tax policy across federal agencies
C) Federal oversight of state budgets
D) Financial management of federal projects
What is an example of non-tax revenue for governments?
A) Income taxes
B) Corporate taxes
C) User fees
D) Property taxes
Which of the following is a characteristic of performance-based budgeting?
A) Uses historical spending patterns
B) Focuses on achieving measurable results
C) Relies on incremental changes
D) Reduces the need for audits
A balanced budget requires:
A) Revenue to equal or exceed expenditures
B) Capital outlays to be deferred
C) Spending reductions across all programs
D) Borrowing to cover deficits
In public budgeting, what does the “fund balance” represent?
A) Total government debt
B) Unspent funds at the end of a fiscal year
C) Projected revenues for the next fiscal year
D) Amount borrowed for capital projects
Which document summarizes government financial performance over a fiscal year?
A) Budget proposal
B) Annual financial report
C) Appropriations bill
D) Audit report
What is the primary purpose of a general obligation bond?
A) To fund specific projects with dedicated revenue streams
B) To fund public projects backed by the government’s credit
C) To finance private infrastructure projects
D) To reduce government debt
Which government body approves the federal budget in the U.S.?
A) The President
B) Congress
C) Supreme Court
D) Federal Reserve
What is the purpose of a budget “reserve”?
A) To fund long-term investments
B) To cover unexpected expenses or revenue shortfalls
C) To repay debt
D) To finance mandatory programs
“Tax expenditures” refer to:
A) Government spending on infrastructure
B) Revenue losses from tax exemptions and deductions
C) Funds collected through taxes
D) Subsidies provided to taxpayers
What is “cost-benefit analysis” used for in budgeting?
A) To justify program expenses with measurable outcomes
B) To determine tax rates
C) To identify sources of funding
D) To evaluate tax compliance
Which type of budgeting requires a complete justification of all expenses?
A) Line-item budgeting
B) Zero-based budgeting
C) Incremental budgeting
D) Performance budgeting
“Encumbrances” are used in governmental accounting to:
A) Track future spending commitments
B) Allocate unspent funds to reserves
C) Eliminate budget variances
D) Record debt payments
What is the main goal of deficit financing?
A) To reduce government spending
B) To stimulate economic growth during downturns
C) To increase tax revenues
D) To eliminate public debt
Which agency is primarily responsible for auditing federal expenditures in the U.S.?
A) Government Accountability Office (GAO)
B) Office of Management and Budget (OMB)
C) Congressional Budget Office (CBO)
D) Internal Revenue Service (IRS)
A “tax levy” is:
A) A type of government spending
B) The amount of tax imposed on citizens or businesses
C) A tax refund program
D) A tax exemption for public agencies
What is a “rolling budget”?
A) A static budget for a specific time frame
B) A budget continuously updated as time passes
C) A budget used only for emergencies
D) A budget for long-term projects
What is “debt service”?
A) The cost of repaying government debt and interest
B) The total amount of outstanding government loans
C) Revenue generated from public investments
D) Expenditures on new capital projects
In public finance, “pay-as-you-go” policies require:
A) Immediate payment for all government projects
B) Borrowing to fund large projects
C) New expenditures to be offset by budget cuts or revenue increases
D) Annual tax reviews
What is “intergenerational equity” in budgeting?
A) Allocating resources equally across government agencies
B) Ensuring future generations are not burdened by excessive debt
C) Distributing tax burdens fairly among income groups
D) Funding programs with high public support
A government’s fiscal year typically refers to:
A) The calendar year
B) A 12-month period for budget planning and financial reporting
C) The duration of a government project
D) A legislative session
Capital budgets are primarily concerned with:
A) Long-term investments in physical assets
B) Day-to-day operational expenses
C) Revenue forecasts for tax collection
D) Debt reduction strategies
The largest source of revenue for most local governments in the U.S. is:
A) Property taxes
B) Sales taxes
C) Federal grants
D) Income taxes
What is the primary goal of an enterprise fund?
A) To finance general government operations
B) To support self-sustaining activities through user fees
C) To allocate funds for emergency relief
D) To track grant expenditures
A budget variance occurs when:
A) Revenues exceed expenditures
B) Actual results differ from budgeted amounts
C) Expenses are allocated to the wrong category
D) The fiscal year ends with a surplus
What distinguishes incremental budgeting?
A) Emphasizes performance and outcomes
B) Builds upon the previous year’s budget with minor adjustments
C) Requires justification for all expenses
D) Relies on zero-based cost analysis
What is the primary purpose of an appropriation?
A) To forecast future revenues
B) To authorize government spending
C) To collect taxes
D) To track expenditures
Which type of bond is repaid from specific revenue sources like tolls or fees?
A) General obligation bond
B) Revenue bond
C) Treasury bond
D) Corporate bond
Which of the following is a characteristic of a balanced scorecard approach in budgeting?
A) Focuses solely on financial metrics
B) Includes multiple performance perspectives
C) Allocates funds based on political priorities
D) Uses historical spending data exclusively
A “contingency fund” in a public budget is used for:
A) Long-term investment projects
B) Unexpected expenses or emergencies
C) Reducing government debt
D) Increasing tax revenues
The term “mandatory spending” refers to:
A) Discretionary programs approved annually
B) Government expenditures required by law
C) Spending on defense programs
D) Emergency budget allocations
A major disadvantage of incremental budgeting is:
A) Complexity of implementation
B) Focus on outcomes rather than inputs
C) Perpetuation of inefficiencies from previous budgets
D) Lack of legislative approval
Which of the following is an example of a dedicated revenue source?
A) General sales tax
B) Property tax
C) Gas tax for highway maintenance
D) Federal income tax
What is the primary function of a debt ceiling?
A) To limit government borrowing
B) To forecast future revenues
C) To authorize spending increases
D) To balance the budget
What does “fund accounting” emphasize in public financial management?
A) Transparency in tax collection
B) Allocation of resources by purpose or function
C) Profitability of government agencies
D) Compliance with federal standards
A primary objective of participatory budgeting is to:
A) Reduce overall government expenditures
B) Increase public engagement in budget decisions
C) Centralize financial decision-making
D) Streamline the budgeting process
The term “budget reconciliation” in U.S. federal budgeting refers to:
A) Negotiating tax policy changes with states
B) Adjusting spending levels to meet fiscal targets
C) Resolving conflicts between the House and Senate budgets
D) Reconciling financial statements
A “structural deficit” occurs when:
A) Revenue temporarily drops below expenditures
B) A government’s long-term revenue does not cover recurring expenses
C) Short-term borrowing is required to balance the budget
D) Debt repayment exceeds annual revenue
The largest component of mandatory spending in the U.S. federal budget is typically:
A) Defense
B) Social Security and Medicare
C) Education
D) Transportation
The Budget Control Act of 2011 was primarily enacted to:
A) Increase military spending
B) Reduce the federal deficit through spending caps
C) Eliminate mandatory spending programs
D) Reform tax policy
A “cash basis” budget records revenues and expenses when:
A) They are earned
B) Payments are received or made
C) They are incurred
D) They are allocated
Which of the following is an advantage of zero-based budgeting?
A) Requires less time to prepare
B) Ensures allocation based on current priorities
C) Focuses on historical trends
D) Simplifies the approval process
A capital improvement plan (CIP) typically spans:
A) One fiscal year
B) 3–5 years
C) 5–10 years
D) Over 20 years
Public-private partnerships (PPPs) in budgeting are primarily used for:
A) Reducing tax burdens
B) Financing large infrastructure projects
C) Increasing government reserves
D) Limiting private sector influence
Which of the following best describes an “audit trail”?
A) Documentation of all budget requests
B) A record of financial transactions for accountability
C) A forecast of future revenue sources
D) A summary of budget variances
A budget surplus occurs when:
A) Revenues exceed expenditures
B) Expenditures exceed revenues
C) Borrowing covers deficits
D) Taxes are reduced
Which is a key principle of “performance-based budgeting”?
A) Historical spending data determines allocations
B) Financial decisions are linked to measurable outcomes
C) Funding is distributed equally across departments
D) Emphasis is on short-term goals
“Earmarked funds” refer to:
A) Unallocated budget surpluses
B) Revenue set aside for specific purposes
C) Debt repayments
D) Emergency reserves
The “Golden Rule” of public finance states that:
A) Current expenses should match current revenues
B) Borrowing should only finance investments that benefit future generations
C) Debt should not exceed 10% of GDP
D) Taxes must fund all government spending
Which of the following is a primary focus of cost accounting in public budgeting?
A) Tracking external investments
B) Measuring the cost-efficiency of government programs
C) Reducing budgetary surpluses
D) Evaluating tax compliance
A government’s “operating budget” focuses on:
A) Long-term investments
B) Day-to-day revenues and expenditures
C) Reserves for future spending
D) Debt repayment plans
What is the primary purpose of a fiscal policy?
A) Manage government debt
B) Influence economic activity through taxation and spending
C) Ensure accurate financial reporting
D) Establish budget transparency
Which budgeting approach emphasizes allocating resources based on goals and objectives?
A) Incremental budgeting
B) Zero-based budgeting
C) Performance-based budgeting
D) Line-item budgeting
Which of the following is a characteristic of a capital project fund?
A) Accounts for operating expenses
B) Finances long-term infrastructure investments
C) Includes emergency reserves
D) Tracks general tax revenues
A government budget cycle typically includes which of the following phases?
A) Proposal, approval, execution, and evaluation
B) Approval, collection, reporting, and auditing
C) Planning, spending, saving, and closing
D) Allocation, redistribution, collection, and spending
What is the purpose of a rainy-day fund?
A) Provide funding for emergency situations or unexpected deficits
B) Support long-term infrastructure investments
C) Fund research and development projects
D) Ensure mandatory spending requirements are met
The term “debt service” refers to:
A) The process of borrowing funds
B) The repayment of principal and interest on debt
C) Allocating funds for future investment
D) Reducing taxes to balance the budget
A budget “reprogramming” refers to:
A) Shifting funds within an approved budget
B) Delaying expenditures to future fiscal years
C) Allocating additional funds for a program
D) Re-evaluating funding priorities
A balanced budget requires that:
A) Revenues equal or exceed expenditures
B) All expenditures are reduced by 10%
C) Debt is fully repaid
D) Emergency funds are utilized
The term “intergovernmental revenue” refers to:
A) Revenue generated by state-owned enterprises
B) Taxes collected from multiple jurisdictions
C) Funds transferred from one level of government to another
D) Revenue from international trade agreements
The “pay-as-you-go” principle in budgeting emphasizes:
A) Paying off all debts before approving new spending
B) Avoiding borrowing by using current revenues for expenditures
C) Prioritizing high-return investments
D) Allocating funds based on performance
Which tool is commonly used for forecasting revenue in public budgeting?
A) Regression analysis
B) Capital budgeting techniques
C) Cash flow analysis
D) Cost-benefit analysis
Which of the following best defines “tax incidence”?
A) The process of collecting taxes
B) The economic burden of taxation on individuals or groups
C) The overall amount of taxes collected in a fiscal year
D) The rate at which taxes are levied
What does the term “structural balance” refer to in budgeting?
A) The balance achieved by borrowing
B) Long-term balance between recurring revenues and expenditures
C) Adjustments made to fund emergency programs
D) Eliminating all discretionary spending
Which of the following is an example of a regressive tax?
A) Income tax
B) Property tax
C) Sales tax
D) Capital gains tax
What is a “budget resolution”?
A) A formal decision to approve a budget proposal
B) A plan to address overspending in a specific fiscal year
C) A non-binding agreement that sets spending limits for Congress
D) A detailed report on budget performance
What is the key purpose of program evaluation in budgeting?
A) To identify overspending
B) To assess the effectiveness and efficiency of programs
C) To ensure compliance with tax laws
D) To improve accounting practices
Which term refers to government spending aimed at stimulating economic growth during a recession?
A) Structural spending
B) Counter-cyclical spending
C) Pro-cyclical spending
D) Stabilization spending
What is an “encumbrance” in government accounting?
A) A revenue surplus
B) Funds that are committed for future spending
C) A type of debt instrument
D) An unanticipated expense
A special assessment tax is typically levied to:
A) Fund general government operations
B) Pay for specific local improvements benefiting property owners
C) Reduce overall government debt
D) Increase emergency reserves
What is the primary function of financial audits in public budgeting?
A) Reduce tax burdens
B) Ensure compliance with laws and regulations
C) Allocate funds to high-priority projects
D) Assess the economic impact of programs
“Budgetary slack” is a term used to describe:
A) A surplus of unallocated funds
B) Underestimating revenues or overestimating expenses to create flexibility
C) Spending cuts due to revenue shortfalls
D) Emergency funding reserves
What is the purpose of “performance audits” in budgeting?
A) To review tax compliance
B) To evaluate the outcomes and efficiency of programs
C) To reconcile financial discrepancies
D) To reduce administrative expenses
Which of the following is an advantage of accrual-based budgeting?
A) It simplifies financial reporting
B) It accounts for revenues and expenses when they are incurred
C) It focuses only on cash flow
D) It reduces the need for long-term planning
What is a major drawback of line-item budgeting?
A) Lack of detail in spending categories
B) Focus on costs rather than outcomes
C) Excessive flexibility in reallocating funds
D) Complex reporting requirements
Which of the following is a limitation of a continuing resolution?
A) It allows funding to lapse during negotiations
B) It provides only temporary funding at existing levels
C) It requires unanimous legislative approval
D) It delays tax collection
What distinguishes a deficit from debt in public finance?
A) A deficit is annual; debt is cumulative
B) A deficit includes all expenditures; debt excludes borrowing
C) A deficit is future-oriented; debt is past-oriented
D) They are synonymous terms
What is the purpose of a mid-year budget review?
A) To reallocate funds based on changes in priorities
B) To extend the fiscal year
C) To audit completed expenditures
D) To reduce approved funding
What is the main characteristic of zero-based budgeting?
A) Focuses on prior year’s expenditures
B) Starts from zero and requires justification for all expenses
C) Emphasizes incremental adjustments to the budget
D) Prioritizes capital expenditures
Which financial tool is used to manage short-term cash flow needs?
A) Bonds
B) Commercial paper
C) Tax anticipation notes
D) Certificates of deposit
What is the primary objective of cost-benefit analysis in public budgeting?
A) Maximizing revenue generation
B) Balancing the budget
C) Evaluating the economic efficiency of projects
D) Reducing operating expenses
In government accounting, “enterprise funds” are used for:
A) Programs funded exclusively by taxes
B) Activities that provide goods or services for a fee
C) Emergency expenditures
D) Federal grant programs
Which term refers to the practice of spending all allocated funds to avoid budget reductions in the next fiscal year?
A) Budget hoarding
B) Year-end rush
C) Spend-down
D) Fund mismanagement
What is the difference between mandatory and discretionary spending?
A) Mandatory spending is fixed by law, while discretionary spending is flexible
B) Mandatory spending is based on budget priorities, while discretionary spending is not
C) Mandatory spending occurs only during emergencies, while discretionary spending is regular
D) Mandatory spending includes capital projects, while discretionary spending does not
What is a common feature of a program budget?
A) Focuses on individual line items
B) Groups expenditures by program objectives
C) Relies heavily on historical spending patterns
D) Separates capital and operating costs
The term “fiscal year” refers to:
A) The calendar year used for budgeting
B) Any 12-month period chosen for financial reporting
C) The period from January 1 to December 31
D) The timeframe for tax collection
Which budgetary approach is designed to prevent overspending by setting firm spending limits?
A) Incremental budgeting
B) Top-down budgeting
C) Flexible budgeting
D) Base budgeting
What does “revenue diversification” refer to in public finance?
A) Increasing the number of taxes collected
B) Reducing reliance on a single source of revenue
C) Increasing debt to fund projects
D) Allocating revenue across different funds
What is the primary role of the Government Accountability Office (GAO)?
A) Collect federal taxes
B) Audit government spending and ensure accountability
C) Allocate budgets for federal agencies
D) Approve new government programs
What is “performance budgeting” primarily focused on?
A) Reducing spending
B) Achieving measurable outcomes
C) Simplifying budget preparation
D) Increasing revenue
In a government budget, what does the term “expenditure ceiling” mean?
A) The maximum amount of spending allowed in a specific category
B) The total budget allocated to a department
C) The limit of borrowing permitted by law
D) The minimum reserve required for emergencies
Which of the following is considered a “user fee”?
A) Sales tax on goods
B) Toll charges for using a highway
C) Property tax
D) Corporate income tax
The term “operating budget” refers to:
A) Budget for routine and recurring expenses
B) Budget for long-term investments
C) Emergency fund allocation
D) Tax revenue projections
Which type of budget focuses on anticipated costs and revenues for specific projects?
A) Line-item budget
B) Capital budget
C) Zero-based budget
D) Incremental budget
What does “fund accounting” emphasize in public finance?
A) Tracking overall profits and losses
B) Segregating financial resources for specific purposes
C) Reducing the cost of operations
D) Simplifying tax reporting
What is “fiscal stress” in public budgeting?
A) Difficulty in achieving budget transparency
B) Challenges in meeting revenue and expenditure targets
C) Problems in monitoring financial performance
D) Delays in approving the budget
The “golden rule” in public finance refers to:
A) Spending only what is necessary
B) Borrowing only to fund capital investments
C) Maintaining a balanced budget
D) Allocating funds equally among programs
What does “cash-based accounting” primarily record?
A) Revenues when earned and expenses when incurred
B) Revenues and expenses when cash is exchanged
C) Only non-operating expenses
D) Future revenue and expense projections
What is a “fiscal cliff”?
A) A sudden increase in government revenue
B) A situation where tax increases and spending cuts occur simultaneously
C) A sharp decline in economic growth
D) A government decision to eliminate all debt
What does “appropriation” mean in the context of public budgeting?
A) Setting aside funds for specific use by law
B) Collecting revenue through taxes
C) Borrowing funds for government projects
D) Reducing expenditures to balance the budget
Which document outlines a government’s financial priorities for the coming year?
A) Financial statement
B) Annual budget
C) Comprehensive audit report
D) Tax revenue summary
What is the purpose of a contingency fund in a public budget?
A) To finance large-scale projects
B) To cover unexpected expenses
C) To allocate funds for employee pensions
D) To repay long-term debt
“Economic stabilization” is an objective of which type of budgetary policy?
A) Fiscal policy
B) Monetary policy
C) Emergency policy
D) Incremental policy
A “structural deficit” occurs when:
A) A temporary drop in revenue leads to shortfalls
B) Long-term revenues are insufficient to cover recurring expenditures
C) Debt servicing exceeds operating revenue
D) The government fails to approve a budget
Which type of tax is typically progressive?
A) Sales tax
B) Income tax
C) Property tax
D) Excise tax
What does “budget reconciliation” involve in the legislative process?
A) Amending a budget to resolve discrepancies
B) Aligning spending and revenue policies to meet fiscal targets
C) Approving emergency funding
D) Allocating funds for long-term projects