MPA Public Budgeting and Finance 1 — Questions and Answers
Question 1: Which budgeting approach starts from zero each fiscal year and requires justification for every line item?
- Incremental budgeting
- Zero-based budgeting (Correct answer)
- Performance budgeting
- Program budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting (ZBB) requires agencies to justify all expenditures from scratch each budget cycle rather than building on prior-year allocations.
Question 2: What is the primary purpose of the Congressional Budget Office (CBO) in the U.S. federal budget process?
- To approve the president's budget
- To provide nonpartisan economic and budget analysis to Congress (Correct answer)
- To audit federal agency spending
- To enforce appropriations limits
Correct answer: To provide nonpartisan economic and budget analysis to Congress
The CBO provides independent, nonpartisan scoring and economic analysis to help Congress make informed budgetary decisions.
Question 3: Which principle states that government expenditures must not exceed revenues over the business cycle?
- Principle of annuality
- Principle of balance (Correct answer)
- Principle of unity
- Principle of specificity
Correct answer: Principle of balance
The principle of balance (or balanced budget) requires that total government spending not exceed total revenues over a defined period.
Question 4: What does 'PAYGO' stand for in U.S. federal budget law?
- Pay as you go (Correct answer)
- Payment authorization yearly government obligation
- Public accounting yield guidelines operations
- Payroll accounting yearly government outlay
Correct answer: Pay as you go
PAYGO (Pay-As-You-Go) requires that new mandatory spending increases or tax cuts be offset by equivalent savings or tax increases.
Question 5: A continuing resolution (CR) in the federal budget context is used to:
- Permanently fund a new agency
- Temporarily fund the government when appropriations bills have not been enacted (Correct answer)
- Authorize a new spending program
- Rescind previously appropriated funds
Correct answer: Temporarily fund the government when appropriations bills have not been enacted
A continuing resolution allows the federal government to operate temporarily at prior-year funding levels when new appropriations legislation has not been passed.
Question 6: Which type of government bond is backed by the full faith and credit of the issuing government?
- Revenue bond
- General obligation bond (Correct answer)
- Industrial development bond
- Municipal note
Correct answer: General obligation bond
General obligation bonds are backed by the taxing authority and full faith and credit of the issuing government, not by a specific revenue stream.
MPA Public Budgeting and Finance 1
Which budgeting approach starts from zero each fiscal year and requires justification for every line item?