Question

1. Which of the following would decrease the size of a federal budget deficit? ?A recession...

1. Which of the following would decrease the size of a federal budget deficit?

?A recession
?An increase in defense spending
?An increase in the use of automatic stabilizers
?An increase in taxes

?An increase in transfer payments

2. Which of the following is true of the federal budget process in the U.S.?

Congress must approve a budget with at least a two-thirds majority vote.
The federal budget must be balanced each year because the volume of international trade reduces if the government has a surplus or a deficit.
Most federal outlays are determined by existing laws.
Congress approves a budget that separates the capital budget from the operating budget.

Detailed budgeting allows the party in power to reward its supporters.

3. When a budget is not approved in time, _____.

agencies operate on the basis of continuing resolutions
agencies operate on the basis of a budget resolution developed by budget committees
agencies tend to shut down
the President can force Congress to act

agencies borrow from the Federal Reserve

?4. Which of the following categories constitutes the majority of federal outlays in 2016?

?National defense
?Interest on the federal debt
?Social Security, Medicare, and welfare
?Grants to states and localities

?Capital expenditures

5. Which of the following is true of an annually balanced federal budget?

Most economists agree that the federal government should balance its budget just as each household does.
Such a policy would require the government to increase its spending when tax receipts decrease.
Such a policy became popular between the 1930s and 1960s.
Such a policy guarantees that an economy is its potential level.
Such a policy could worsen a contractionary gap.

Homework Answers

Answer #1
  1. An increase in taxes. This adds to public revenue and deficit = expenditure - revenue. Increase in revenue will decrease deficit/.
  2. The federal budget must be balanced each year because the volume of international trade reduces if the government has a surplus or a deficit.
  3. agencies tend to shut down
  4. Social Security, Medicare, and welfare

Federal Budget is an annual financial statement that states where is money to be spent in the coming financial year. It is prepared by President and submitted to Congress. It should be balanced that is public revenue should be same as public expenditure. Approx 50% of the expenditure is on medicare and social security.

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