Q1 (4 pts). Which of the following actions would reduce the accumulative (total) amount of the

federal governments net debt?

(A) Cut expenditure and raise revenue to reduce the deficit from $400 billion to $100 billion.

(B) Balance the federal budget.

(C) Run an annual surplus.

(D) Increase the spending on elementary and secondary education.

Q2 (4 pts). Which of the following statements is correct about the Pay-as-you-go (deficit

neutral) budget requirement for the federal government?

(A) Only programs generating revenues may be included in the presidential budget message.

(B) Any legislation that would increase entitlement spending must be accompanied with an

increase in federal revenue or a reduction in federal spending. The increase in revenue or

the reduction in spending needs to be sufficient to cover the new entitlement spending.

(C) Debt refinancing must be approved by Congress.

(D) No tax reductions are permitted at the federal level.

Q3 (4 pts). The Congressional Budget and Impoundment Control Act of 1974 had which of the

following consequences?

(A) It eliminated the impoundment power of the president, substituting it with a process

whereby the president could defer or rescind appropriation with congressional approval.

(B) It strengthened the role of the president in the budget cycle.

(C) It shortened the time between the release of the presidential budget message and the start

of the fiscal year.

(D) It established the General Accounting Office (now the Government Accountability

Office, GAO) as the watch-dog of Congress.