, TESTBANK FOR Fiscal Administration 11th Edition Mikesell
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Chapter 01 - Fundamental Principles of Public Finance
1. A charter school organization opens an elementary school in Anytown, Anystate. It is open to any student in the local
school district and the school is financed by a property tax levied by the local school district. What is this an example
of?
a. Public provision and public production
b. Public provision and private production
c. Private provision and private production
d. Private provision and public production
ANSWER: b
2. Which of the following arguments is based on the concept of adverse selection?
a. The U.S. military needs higher pay to attract the best personnel.
b. Private medical insurance companies seek to exclude those most likely to need healthcare.
c. Only the national government can successfully conduct macroeconomic stabilization policies.
d. Mosquito abatement is a public good.
ANSWER: b
3. Which of the following would be described as a common pool resource?
a. A toll road
b. Fisheries
c. National defense
d. A public park
ANSWER: b
4. Which of the following is an application of the principle of moral hazard?
a. People build homes in areas subject to severe flood damage when federally subsidized insurance is available.
b. Inappropriate lyrics are viewable on the Web when regulations are not enforced.
c. Actions by one individual have an impact on innocent bystanders.
d. Grazing rights are auctioned off quarterly.
ANSWER: a
5. What characterizes toll goods?
a. Nonrival and exclusion not feasible.
b. Alternate (or competitive) use and exclusion not feasible.
c. Nonrival and exclusion feasible.
d. Alternate (or competitive) use and exclusion feasible.
ANSWER: c
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,Name: Class: Date:
Chapter 01 - Fundamental Principles of Public Finance
6. What are the two aspects of nonappropriability?
a. Nonsubsidization and nondistribution.
b. Nonexclusion and nonexhaustion.
c. Taxing and spending.
d. Partisan and nonpartisan
ANSWER: b
7. A public project produces the following pattern of individual benefits and costs for the people influenced by the
project.
Individual Benefit Cost Share
A $8,000 $7,000
B $6,000 $5,000
C $10,000 $9,000
D $4,000 $6,000
E $2,000 $6,000
Total $30,000 $33,000
Which of the following best describes the project?
a. It passes the Pareto criterion but is not economically feasible.
b. The project would pass a majority vote but fails the Pareto criterion.
c. It passes the criterion of economic feasibility, but would not pass majority vote.
d. The project passes the Pareto criterion but would not pass a majority vote.
ANSWER: b
8. What is the term for a good characterized by easy exclusion but many may concurrently use it without reducing the
amount available for others?
a. Private good
b. Common property resource
c. Toll good
d. Public good
ANSWER: c
9. When are private sector efficiencies most likely to occur?
a. When a municipality has limited access to bond revenue and significant land assets.
b. In cases where there is highly variable tax revenue and a closely divided legislature.
c. When there is a well-known monopoly and multiple complex tasks.
d. In cases where the task is well-defined, measurable, and subject to competition.
ANSWER: d
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,Name: Class: Date:
Chapter 01 - Fundamental Principles of Public Finance
10. What is logrolling?
a. When one legislator trades their vote on one issue in exchange for the vote of another legislator on a second
issue.
b. Campaign contribution patterns used to secure a legislator’s vote on a particular issue.
c. Media campaigns initiated by special interest groups to sway public opinion and subsequently legislators vote
on issues.
d. Unrelated amendments attached to pending legislation to secure its passage
ANSWER: a
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,Name: Class: Date:
Chapter 02 - The Logic of the Budget Process
1. Which of the following is an accurate statement about the relative size of government purchases and government
spending?
a. Because spending is the same as purchasing, the measures must be the same.
b. Purchases will be greater than spending because of deficit and surplus adjustments.
c. Spending includes transfer payments like social security, but purchases do not.
d. Neither includes the provision of government services by contract with private firms.
ANSWER: c
2. Which of the following is the typical order of the budget cycle?
a. Agency request, executive consideration, legislative consideration, audit, service delivery.
b. Executive consideration, agency request, legislative consideration, service delivery, audit.
c. Executive consideration, agency request, legislative consideration, audit, service delivery.
d. Agency request, executive consideration, legislative consideration, service delivery, audit.
ANSWER: d
3. What is the central purpose of a budget?
a. Forecasting spending.
b. Fitting programs into available resources.
c. Forecasting revenue collection.
d. Engaging in legislative debate.
ANSWER: b
4. What is the purpose of a performance audit?
a. Assessing legality of transactions.
b. Evaluating effectiveness of public resource use.
c. Testing internal controls.
d. Examining completeness of financial records.
ANSWER: b
5. Agency X had an appropriation of $10 million in 2013 and of $11.5 million in 2014 (an increase of $1.5 million or 15%).
According to the incrementalist view, what is the 2014 budget base for the agency?
a. $10 million
b. $13 million ($11.5 million plus $1.5 million)
c. $13.225 million ($11.5 million plus 15%)
d. $11.5 million
ANSWER: d
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,Name: Class: Date:
Chapter 02 - The Logic of the Budget Process
6. Which of the following is a ubiquitous strategy for gaining support for budget proposals?
a. Arguing that the program in question pays for itself.
b. Linking the program to a crisis.
c. Proposing that politically popular programs be cut first.
d. Identifying and rallying a loyal clientele.
ANSWER: d
7. Which of the following is practiced under modified accrual accounting?
a. Opting out of tracking encumbrances during budget execution.
b. Recording expenditures when contractual payments are made.
c. Recording expenditures when materials are delivered.
d. Requiring immediate depreciation of all capital assets.
ANSWER: c
8. Which of the following would not be a concern of a financial audit?
a. Whether the Department of Environment Services actually spent the $150,000 its reports say it did.
b. Whether the 700 gallons of gasoline purchased by the Department were actually delivered.
c. Whether the 14 street cleaners employed by the Department could be replaced by a motorized sweeper to save
$75,000 per year.
d. Whether permit fees collected by the Department are remitted in their entirety to the City Treasurer.
ANSWER: c
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,Name: Class: Date:
Chapter 03 - Budget Methods and Practices
1. Why are internal control standards important?
a. Compliance with external audits.
b. Minimizing employment costs.
c. Maximizing bond ratings.
d. Preventing error, fraud, and theft.
ANSWER: d
2. What is the first principle of budgets?
a. Maximize specificity and calculations.
b. The numbers come before the narrative.
c. Always show your work.
d. The narrative comes before the numbers.
ANSWER: d
3. What is an allotment schedule?
a. A mechanism to keep agency spending in line with the approved budget.
b. A mechanism to reduce agency spending below its budget request.
c. A timeline for the budget process.
d. A division of fiscal duties between the House and the Senate.
ANSWER: a
4. The appropriation to the State Library System (fiscal year starts July 1) for fiscal 2018 was $15,000,000. On
December 31, 2017, its budget reports showed expenditures of $7,500,000 and encumbrances outstanding of
$500,000. Quarterly allotments were as follows: Q1—$3,750,000; Q2—$4,500,000; Q3—$3,750,000; and Q4
—$3,000,000. What was the status of system operations at that point?
a. Operation consistent with plan; half the year elapsed and half the money spent.
b. Over plan by $250,000.
c. Under plan by $250,000.
d. Under plan by $750,000.
ANSWER: c
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,Name: Class: Date:
Chapter 03 - Budget Methods and Practices
5. If the instructions for preparing a budget justification are unclear, which of the following is a good strategy?
a. Cut departments with “bad” reputations.
b. Lean into high-value calculations and footnote the proposal extensively.
c. Recommend repair and renovation rather than replacement of facilities.
d. Explain what resources the agency is seeking for the budget year, what it plans to do with those resources,
and the positive outcomes that will follow.
ANSWER: d
6. Which of the following cannot be accomplished through the audit process after the end of the budget year?
a. Implement controls to correct variances.
b. Prevent fraud and waste.
c. Ensure the accuracy of operation.
d. Ensure compliance with policies and applicable laws.
ANSWER: a
7. What does break-even analysis attempt to determine?
a. Levels of transfer payments.
b. Levels of grant payments.
c. The point at which total costs equal total revenues.
d. The point at which variable costs equal variable revenues.
ANSWER: c
8. The formula for the compound rate of growth is R = (Y/X)(1/N) – 1. Which variable represents the number of
periods of growth?
a. N
b. R
c. Y
d. X
ANSWER: a
9. What is “honest graft”?
a. The use of information known by a small number of government officials to produce private profit for the
individual employee.
b. The practice of firms colluding on bid practices for public contracts.
c. The establishment of “no-show” jobs for favored employees.
d. Taking government property for private use without permission.
ANSWER: a
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, Name: Class: Date:
Chapter 04 - Federal Budget Structures and Institutions
1. Suppose that when he took office in January 2009, President Obama wanted to reduce the level of spending by the
Drug Enforcement Administration during fiscal 2009. What budget procedure would allow him to do that?
a. Supplemental appropriations bills.
b. Executive transfers out of the Drug Enforcement Administration to the Department of Treasury Impoundment
Fund
c. A rescission approved by Congress
d. Executive order amendment
ANSWER: c
2. What does a continuing resolution enable an agency to do?
a. Continue operations in a fiscal year, even though it overspent its appropriation for that fiscal year.
b. Continue operations in a fiscal year, even though it overspent its appropriation for the prior fiscal year.
c. Continue operations in a fiscal year, even though it has received no appropriation for that year.
d. Negotiate its appropriations between the House and the Senate.
ANSWER: c
3. Which of the following categories of federal government spending was the largest in 2020?
a. Human resources
b. Physical resources
c. International (foreign) aid
d. National defense
ANSWER: a
4. Which of the following is a means-tested entitlement program?
a. Medicare
b. Medicaid
c. Social Security
d. Temporary Assistance for Needy Families (TANF)
ANSWER: b
5. Which of the following is correct about the Government Accountability Office?
a. It prepares budgets for executive agencies under the direction of the President.
b. It reviews agency budget requests for the President.
c. It prepares audits and evaluations for the President.
d. Its comptroller serves a fixed term.
ANSWER: d
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Important Notes
The file includes the complete test bank, organized chapter by chapter.
A sample of selected pages has been provided for preview.
All available appendices and Excel files (if included in the original resources) are
provided.
We continuously update our files to ensure you receive the latest and most accurate
editions.
New editions are added regularly – stay connected for updates!
✅ Why Buy From Us?
📚 Complete & organized chapter-by-chapter – no missing content, no guessing.
⚡ Instant digital delivery – get your file the moment you pay, no waiting.
📅 Always up to date – we track new editions so you always get the latest version.
💬 Friendly support – real humans ready to help, anytime you need us.
🔒 Safe & secure – thousands of satisfied students trust us every semester.
🛡️Our Guarantees
💰 Money-Back Guarantee: Not satisfied? We offer a full refund – no questions asked.
🔄 Wrong File? No Problem: Contact us and we will replace it immediately with the
correct version, free of charge.
⏰ 24/7 Support: We are always here – reach out anytime and expect a fast response.
Contact Email:
,Name: Class: Date:
Chapter 01 - Fundamental Principles of Public Finance
1. A charter school organization opens an elementary school in Anytown, Anystate. It is open to any student in the local
school district and the school is financed by a property tax levied by the local school district. What is this an example
of?
a. Public provision and public production
b. Public provision and private production
c. Private provision and private production
d. Private provision and public production
ANSWER: b
2. Which of the following arguments is based on the concept of adverse selection?
a. The U.S. military needs higher pay to attract the best personnel.
b. Private medical insurance companies seek to exclude those most likely to need healthcare.
c. Only the national government can successfully conduct macroeconomic stabilization policies.
d. Mosquito abatement is a public good.
ANSWER: b
3. Which of the following would be described as a common pool resource?
a. A toll road
b. Fisheries
c. National defense
d. A public park
ANSWER: b
4. Which of the following is an application of the principle of moral hazard?
a. People build homes in areas subject to severe flood damage when federally subsidized insurance is available.
b. Inappropriate lyrics are viewable on the Web when regulations are not enforced.
c. Actions by one individual have an impact on innocent bystanders.
d. Grazing rights are auctioned off quarterly.
ANSWER: a
5. What characterizes toll goods?
a. Nonrival and exclusion not feasible.
b. Alternate (or competitive) use and exclusion not feasible.
c. Nonrival and exclusion feasible.
d. Alternate (or competitive) use and exclusion feasible.
ANSWER: c
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,Name: Class: Date:
Chapter 01 - Fundamental Principles of Public Finance
6. What are the two aspects of nonappropriability?
a. Nonsubsidization and nondistribution.
b. Nonexclusion and nonexhaustion.
c. Taxing and spending.
d. Partisan and nonpartisan
ANSWER: b
7. A public project produces the following pattern of individual benefits and costs for the people influenced by the
project.
Individual Benefit Cost Share
A $8,000 $7,000
B $6,000 $5,000
C $10,000 $9,000
D $4,000 $6,000
E $2,000 $6,000
Total $30,000 $33,000
Which of the following best describes the project?
a. It passes the Pareto criterion but is not economically feasible.
b. The project would pass a majority vote but fails the Pareto criterion.
c. It passes the criterion of economic feasibility, but would not pass majority vote.
d. The project passes the Pareto criterion but would not pass a majority vote.
ANSWER: b
8. What is the term for a good characterized by easy exclusion but many may concurrently use it without reducing the
amount available for others?
a. Private good
b. Common property resource
c. Toll good
d. Public good
ANSWER: c
9. When are private sector efficiencies most likely to occur?
a. When a municipality has limited access to bond revenue and significant land assets.
b. In cases where there is highly variable tax revenue and a closely divided legislature.
c. When there is a well-known monopoly and multiple complex tasks.
d. In cases where the task is well-defined, measurable, and subject to competition.
ANSWER: d
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,Name: Class: Date:
Chapter 01 - Fundamental Principles of Public Finance
10. What is logrolling?
a. When one legislator trades their vote on one issue in exchange for the vote of another legislator on a second
issue.
b. Campaign contribution patterns used to secure a legislator’s vote on a particular issue.
c. Media campaigns initiated by special interest groups to sway public opinion and subsequently legislators vote
on issues.
d. Unrelated amendments attached to pending legislation to secure its passage
ANSWER: a
Copyright Cengage Learning. Powered by Cognero. Page 3
,Name: Class: Date:
Chapter 02 - The Logic of the Budget Process
1. Which of the following is an accurate statement about the relative size of government purchases and government
spending?
a. Because spending is the same as purchasing, the measures must be the same.
b. Purchases will be greater than spending because of deficit and surplus adjustments.
c. Spending includes transfer payments like social security, but purchases do not.
d. Neither includes the provision of government services by contract with private firms.
ANSWER: c
2. Which of the following is the typical order of the budget cycle?
a. Agency request, executive consideration, legislative consideration, audit, service delivery.
b. Executive consideration, agency request, legislative consideration, service delivery, audit.
c. Executive consideration, agency request, legislative consideration, audit, service delivery.
d. Agency request, executive consideration, legislative consideration, service delivery, audit.
ANSWER: d
3. What is the central purpose of a budget?
a. Forecasting spending.
b. Fitting programs into available resources.
c. Forecasting revenue collection.
d. Engaging in legislative debate.
ANSWER: b
4. What is the purpose of a performance audit?
a. Assessing legality of transactions.
b. Evaluating effectiveness of public resource use.
c. Testing internal controls.
d. Examining completeness of financial records.
ANSWER: b
5. Agency X had an appropriation of $10 million in 2013 and of $11.5 million in 2014 (an increase of $1.5 million or 15%).
According to the incrementalist view, what is the 2014 budget base for the agency?
a. $10 million
b. $13 million ($11.5 million plus $1.5 million)
c. $13.225 million ($11.5 million plus 15%)
d. $11.5 million
ANSWER: d
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,Name: Class: Date:
Chapter 02 - The Logic of the Budget Process
6. Which of the following is a ubiquitous strategy for gaining support for budget proposals?
a. Arguing that the program in question pays for itself.
b. Linking the program to a crisis.
c. Proposing that politically popular programs be cut first.
d. Identifying and rallying a loyal clientele.
ANSWER: d
7. Which of the following is practiced under modified accrual accounting?
a. Opting out of tracking encumbrances during budget execution.
b. Recording expenditures when contractual payments are made.
c. Recording expenditures when materials are delivered.
d. Requiring immediate depreciation of all capital assets.
ANSWER: c
8. Which of the following would not be a concern of a financial audit?
a. Whether the Department of Environment Services actually spent the $150,000 its reports say it did.
b. Whether the 700 gallons of gasoline purchased by the Department were actually delivered.
c. Whether the 14 street cleaners employed by the Department could be replaced by a motorized sweeper to save
$75,000 per year.
d. Whether permit fees collected by the Department are remitted in their entirety to the City Treasurer.
ANSWER: c
Copyright Cengage Learning. Powered by Cognero. Page 2
,Name: Class: Date:
Chapter 03 - Budget Methods and Practices
1. Why are internal control standards important?
a. Compliance with external audits.
b. Minimizing employment costs.
c. Maximizing bond ratings.
d. Preventing error, fraud, and theft.
ANSWER: d
2. What is the first principle of budgets?
a. Maximize specificity and calculations.
b. The numbers come before the narrative.
c. Always show your work.
d. The narrative comes before the numbers.
ANSWER: d
3. What is an allotment schedule?
a. A mechanism to keep agency spending in line with the approved budget.
b. A mechanism to reduce agency spending below its budget request.
c. A timeline for the budget process.
d. A division of fiscal duties between the House and the Senate.
ANSWER: a
4. The appropriation to the State Library System (fiscal year starts July 1) for fiscal 2018 was $15,000,000. On
December 31, 2017, its budget reports showed expenditures of $7,500,000 and encumbrances outstanding of
$500,000. Quarterly allotments were as follows: Q1—$3,750,000; Q2—$4,500,000; Q3—$3,750,000; and Q4
—$3,000,000. What was the status of system operations at that point?
a. Operation consistent with plan; half the year elapsed and half the money spent.
b. Over plan by $250,000.
c. Under plan by $250,000.
d. Under plan by $750,000.
ANSWER: c
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,Name: Class: Date:
Chapter 03 - Budget Methods and Practices
5. If the instructions for preparing a budget justification are unclear, which of the following is a good strategy?
a. Cut departments with “bad” reputations.
b. Lean into high-value calculations and footnote the proposal extensively.
c. Recommend repair and renovation rather than replacement of facilities.
d. Explain what resources the agency is seeking for the budget year, what it plans to do with those resources,
and the positive outcomes that will follow.
ANSWER: d
6. Which of the following cannot be accomplished through the audit process after the end of the budget year?
a. Implement controls to correct variances.
b. Prevent fraud and waste.
c. Ensure the accuracy of operation.
d. Ensure compliance with policies and applicable laws.
ANSWER: a
7. What does break-even analysis attempt to determine?
a. Levels of transfer payments.
b. Levels of grant payments.
c. The point at which total costs equal total revenues.
d. The point at which variable costs equal variable revenues.
ANSWER: c
8. The formula for the compound rate of growth is R = (Y/X)(1/N) – 1. Which variable represents the number of
periods of growth?
a. N
b. R
c. Y
d. X
ANSWER: a
9. What is “honest graft”?
a. The use of information known by a small number of government officials to produce private profit for the
individual employee.
b. The practice of firms colluding on bid practices for public contracts.
c. The establishment of “no-show” jobs for favored employees.
d. Taking government property for private use without permission.
ANSWER: a
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, Name: Class: Date:
Chapter 04 - Federal Budget Structures and Institutions
1. Suppose that when he took office in January 2009, President Obama wanted to reduce the level of spending by the
Drug Enforcement Administration during fiscal 2009. What budget procedure would allow him to do that?
a. Supplemental appropriations bills.
b. Executive transfers out of the Drug Enforcement Administration to the Department of Treasury Impoundment
Fund
c. A rescission approved by Congress
d. Executive order amendment
ANSWER: c
2. What does a continuing resolution enable an agency to do?
a. Continue operations in a fiscal year, even though it overspent its appropriation for that fiscal year.
b. Continue operations in a fiscal year, even though it overspent its appropriation for the prior fiscal year.
c. Continue operations in a fiscal year, even though it has received no appropriation for that year.
d. Negotiate its appropriations between the House and the Senate.
ANSWER: c
3. Which of the following categories of federal government spending was the largest in 2020?
a. Human resources
b. Physical resources
c. International (foreign) aid
d. National defense
ANSWER: a
4. Which of the following is a means-tested entitlement program?
a. Medicare
b. Medicaid
c. Social Security
d. Temporary Assistance for Needy Families (TANF)
ANSWER: b
5. Which of the following is correct about the Government Accountability Office?
a. It prepares budgets for executive agencies under the direction of the President.
b. It reviews agency budget requests for the President.
c. It prepares audits and evaluations for the President.
d. Its comptroller serves a fixed term.
ANSWER: d
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