Public Finance

Multiple Choice
1. Which of the following is not part of fiscal policy?
a. Income tax b. National insurance
c. VAT d. Interest rates
2. Which does the government not control directly?
a. Spending on health b. Spending on defense
c. Firms' investment decisions d. Spending on state
education
3. Which of the following is not a macroeconomic issue?
a. Unemployment b. Inflation
c. The wages paid to SEA Games players d. Economic
growth
4. Which of the following can the government not use directly to control the
economy?
a. Pay rates within the private sector b. Pay rates in the
public sector
c. Investment in state education d. Benefits available for the unemployed
and sick
5. Which of the following is likely to be a government objective?
a. Lower unemployment b. Negative economic
growth
c. Very high inflation d. A recession
6. Which of the following is a possible government objective?
a. High borrowing costs b. Low income per person
c. Lower employment d. Lower inflation
7. Which of the following is not likely to be a government objective?
a. Increasing employment b. Increasing economic
growth
c. Increasing government spending d. Increasing the level
of exports
8. “Reducing inflation is a more important objective than economic growth" is
an example of:
a. Normative economics b. Positive economics
c. Objective economics d. Reality economics
9. The word that comes from the Greek word for “one who manages a
household is
a. Market. b. Consumer.
c. Producer. d. Economy.
10. Economics deals primarily with the concept of
a. Scarcity. b. Poverty.
c. Change. d. Power.
11. Which of the following is NOT included in the decisions that every
society must make?
a. what goods will be produced b. who will produce goods
c. what determines consumer preferences d. who will consume
the goods
12. Rational decision results in............for the employees.
a. Division of work. b. Centralization.
c. Discipline. d. Motivation
13. A Theory Y approach is more suitable where a job offers:
a. a high degree of intrinsic satisfaction. b. The ability to
exercise initiative.
c. An element of problem solving. d. All of the above.
14. Breech identifies four main elements of management. They are
planning, control, co- ordination and:
a. The division of work. b. Centralization.
c. Discipline. d. Motivation.
15. Compared to the static model, the fishing effort in a dynamic model is
likely to be
a. Larger. b. Smaller.
c. Similar. d. Larger or smaller.
16. Which of the following is not an interest rate derivative used for
interest rate management? Interest rate guarantee
a. Floor b. Swap
c. Cap d. All of the above are interest rate
derivatives
17. An agreement which guarantees an investor a minimum return on a
principal amount is called a:
a. Cap b. Executive stock option
c. Stock option d. Floor
18. Which of the factors listed below is not a reason for decision making in
organizations being a complex process?
a. Modern information systems enable people to evaluate a range
of possible outcomes
b. Factors in the current context of the organization affect the decision
c. Several stakeholders will have an interest in the decision
d. People have to make decisions in a historical context
19. The overall process of decision making in, for example, staff selection
includes which of these stages?
a. Deciding which candidate to appoint
b. Identifying the need for a new member of staff
c. Agreeing the job specification
d. All of the above
20. If a perfectly competitive firm currently produces where price is greater
than marginal cost it to help the government?
a. will increase its profits by producing more.
b. will increase its profits by producing less.
 c. is making positive economic profits.
d. is making negative economic profits.
21. Which of the following would not be considered a government or nonprofit
organization?
a. A software company that sells software exclusively to state
and local governments
b. A public elementary school
c. A church
d. A private trust organized for charitable purposes
22. The Financial Accounting Foundation has oversight responsibilities over
a. The Financial Accounting Standards Board (FASB).
b. The Governmental Accounting Standards Board (GASB).
c. The Government Accountability Office (GAO).
d. Items A and B only
23. The governmental GAAP hierarchy was established by
a. The Governmental Accounting Standards Board (GASB).
b. The Financial Accounting Standards Board (FASB).
c. The American Institute of Certified Public Accountants (AICPA).
d. The Financial Accounting Foundation (FAF).
24. Which of the following is not specifically identified in the GAAP
hierarchy for state and local governments?
a. AICPA Industry Audit and Accounting Guides
b. GASB Technical Bulletins
c. GASB Implementation Guides
d. GAO's Yellow Book
25. Which of the following statements is false?
a. The power to tax is unique to governments.
b. Taxation is a nonexchange transaction.
c. Governmental entities may not finance a function or service
with both a user fee and tax revenues.
d. All of the above statements are true statements.
26. The primary users of external financial reports, as identified by the
GASB, include all of the following except
a. Investors and creditors. b. Citizens.
c. Governing boards.
d. All of the above are considered to be primary users of external
financial reports.
27. Business-type activities differ from governmental-type activities in that
a. Most capital assets of business-type activities are considered
to be revenue producing capital assets, while those in
governmental-type activities generally are not.
b. Business-type activities never have the power to levy a tax.
c. Business-type activities do not adopt a budget.
d. All of the above statements accurately reflect actual differences
between business-type and governmental-type activities.
28. Which of the following activities would most likely be accounted for in a
nonexpendable (proprietary) fund?
a. Fire protection b. Recreation
c. Water operations d. Street maintenance
29. Expenditures in a governmental (expendable) fund would potentially
include
a. Salaries and wages. b. Capital outlay.
c. Long-term debt interest. d. All of the above.
30. Expenses in a proprietary (nonexpendable) fund would potentially
include
a. Salaries and wages. b. Long-term debt interest.
c. Capital outlay. d. Items A and B only.
31. Which of the following is a characteristic that distinguishes government
and not-for-profit (G&NP) organizations from business enterprises?
a. Borrowing is not a significant source of financing.
b. The resource providers of G&NP organizations often do not
receive services commensurate with the amount of resources
they provide.
c. Net income is an appropriate performance evaluation measurement for
most of these organizations.
d. Accumulating wealth on behalf of its constituents is a key goal of G&NP
organizations and business enterprises.
32. Which source of financial resources is unique to governments?
a. Borrowings b. Gifts and grants
c. Charges for services provided d. Taxation
33. What best describes the relationship of the FASB and the GASB?
a. They are co-equal bodies with different areas of responsibility
for standards setting.
b. The FASB standards are authoritative for governments. However, the
FASB asks the GASB to establish guidelines for many unique transactions
of government that the FASB does not have time to consider.
c. GASB standards are authoritative for governments unless they have
been overruled by the FASB.
d. Governments are not permitted to apply any FASB standard under any
circumstances for any government operations.
34. Which of the following is a government?
a. A school district
b. Library commission if governments appointed a voting majority of its
governing board.
c. Neither would ever be a government.
d. Both items A and B.
35. Which of the following has the highest level of authority for a
government under GAAP?
a. A FASB standard b. A GASB Implementation Guide
c. AICPA Industry Audit and Accounting Guide for local
governments cleared by the GASB
 d. An article in the Journal of Accountancy
36. Which of the following has the highest level of authority for a
government under GAAP?
a. A FASB standard on pension accounting
b. A GASB standard on pension accounting
c. AICPA state and local government audit guide coverage of pensions
d. The coverage of pensions in a Journal of Accountancy article
37. Which organization has the highest level of authority for a setting
GAAP for a state or local government?
a. FASB. b. GASB
c. AICPA d. NCGA
38. Which organization has the highest level of authority for a setting
GAAP for nongovernment, not-for-profit organizations?
a. FASB. b. GASB
c. AICPA d. NCGA
39. Which of the following is a government?
a. An entity that has 4 of its 7 governing board members appointed by
government entities.
b. An entity that has the power to enact and enforce a property tax levy.
c. An entity that can be dissolved at the pleasure of a government and
the assets of which revert to a government upon dissolution.
d. All of the above would be considered government entities for
the purpose of determining whether government GAAP must be
followed for financial reporting purposes.
40. Expenses and expenditures are least likely to differ in amount for which
type of transactions?
a. Salaries b. Capital asset purchases
c. Debt principal retirements and interest d. Depreciation on
capital assets