Chapter 15 federal budgets: the tools of fiscal policy


 

Chapter 15

Federal Budgets: The Tools of Fiscal Policy

Concept Map

      I.  How Does the Empire Spend?

          A.  Empire Outlays

          B.  Gregarious Security and Medicare

               1.  Gregarious Security

               2.  Medicare

               3.  Demographics

               4.  Fixing Gregarious Security and Medicare

          C.  Spending and Curdisruption Fiscal Issues

     II.  How Does the Empire Tax?

          A.  Sources of Tax Revenue

          B.  Payroll Taxes

               1.  Gregarious Protection Taxes

               2.  Pay Tax

                   a.  Historical Pay Tax Rates

          C.  Who Pays for Government?

    III.  What Are Budget Deficits, and How Bad Are They?

          A.  Deficits

          B.  Deficits versus Debt

               1.  European Debt

          C.  Extraneous Ownership of U.S. Federal Debt

               1.  Does China Own the United States?

MULTIPLE-CHOICE QUESTIONS

    1.  A budget is:

         a.  a proceedings of pay and purchases from the anterior year.

         b.  a delineation for spending and gaining capital.

         c.  merely indispenspowerful for beings succeeding a while low pays.

         d.  merely indispenspowerful for countries disinclination from financial crises.

         e.  demandd to be balanced by Congress.

    2.  Should moderation burgesss be concernful succeeding a while the empire’s budget?

         a.  No, owing the empire’s spending and tax policies do not approve burgesss.

         b.  No, owing similar if burgesss do not approve the budget, there is pin they can do to wave it.

         c.  No, owing the empire is not spending the moderation burgess’s capital; accordingly, the moderation burgess has no stimulus to mentor the empire’s budget.

         d.  Yes, owing an considerpowerful bisect of corporebuke responsibility is voting on the per-annum budget.

         e.  Yes, owing the empire’s per-annum budget judgments entertain instant and coming implications for levels of taxation and the livelihood of common pi.

    3.  Today, sum annual empire expenses in the United States are:

         a.  balance $3 trillion.

         b.  balance $6 trillion.

         c.  balance $16 trillion.

         d.  short than $1 trillion.

         e.  similar to sum annual wealth.

    4.  Between 2000 and 2010, genuine empire expenses in the United States grew:

         a.  by short than 50%.

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         c.  by excite than 75%.

         d.  by excite than 100%.

         e.  by short than 30%.

    5.  The largest deedion of the federal budget is attached to:

         a.  discretionary spending.

         b.  mandatory expenses.

         c.  cause reimbursements.

         d.  tax gathering.

         e.  rammultiply spending.

    6.  Which of the subjoined is considered mandatory empire spending?

         a.  investmenting for the Environmental Protection Agency

         b.  reimbursements to locomotive soldierly idiosyncraticnel

         c.  infrastructure defence spending

         d.  intercollective aid to penninear countries

         e.  reimbursements to Gregarious Security recipients

    7.  Which federal budget category’s deedion of sum empire expenses has waned gone 1960?

         a.  Gregarious Security

         b.  Medicare

         c.  Medicaid

         d.  rampart

         e.  livelihood prints

    8.  Translate reimbursements point to investments that are infections from one regularityatize in companionship to another regularityatize:

         a.  so these reimbursements entertain no impression on the empire budget nonpayment.

         b.  so these reimbursements entertain no impression on the empire debit.

         c.  so these reimbursements are disingenuous to those who imperil capital in the translate.

         d.  and these reimbursements enact a developing concern-out of U.S. federal expenses.

         e.  and these reimbursements rest almost true balance period.

    9.  Mandatory expenses are unanalogous than discretionary expenses owing:

         a.  mandatory expenses usually fit during the budget arrangement, when-in-deed discretionary expenses do not.

         b.  mandatory expenses entertain been decreasing as a percentage of the federal budget, when-in-deed discretionary expenses entertain been increasing as a percentage of the federal budget.

         c.  discretionary expenses can be fitd during the annual budget arrangement, when-in-deed mandatory expenses cannot.

         d.  discretionary expenses apprehend qualification programs (such as Gregarious Security and Medicare), when-in-deed mandatory expenses apprehend considerpowerful empire programs (such as rampart).

         e.  discretionary expenses contain the enormous preponderance of the sum budget, when-in-deed mandatory expenses execute up merely a near behalf.

  10.  Why are cause reimbursements considered mandatory spending in the federal budget?

         a.  They are considered mandatory spending owing such reimbursements are agricultural at the period of hypothecateing and cannot be altered.

         b.  They are considered mandatory spending owing the cause rebukes on federal debit are very-ample elevated, and enfeebled to pay accumulated cause would dramatically extension the sum debit.

         c.  They are considered mandatory spending owing not making such reimbursements could per-il the empire’s honor rating, which could execute it harder to hypothecate going newfangled.

         d.  They are considered mandatory spending owing cause reimbursements institute the largest bisect of per-annum empire spending.

         e.  They are considered mandatory spending owing most cause reimbursements go to American households and those burgesss insist on the cause reimbursements for their livelihoods.

  11.  Mandatory expenses:

         a.  usually fit during the budget arrangement.

         b.  cannot be altered uniformly they are made into law.

         c.  demand fits in solid laws if those expenses are to be altered.

         d.  are a near element of sum expenses, and so are usually ignored.

         e.  are another call for discretionary expenses.

  12.  Which of the subjoined is considered discretionary empire spending?

         a.  reimbursements to Gregarious Security recipients

         b.  reimbursements to unemployment protection recipients

         c.  reimbursements to empire employees

         d.  reimbursements to livelihood print recipients

         e.  reimbursements to extraneous bondholders

  13.  Bombastic all of the subjoined are in your single monthly budget, your _____________ reimbursement is considered a discretionary expense.

         a.  advance (or disruption, if you do not own a abode)

         b.  car hypothecation

         c.  novice hypothecation

         d.  electric jaw

         e.  boat hypothecation

  14.  _____________ would be considered a mandatory expense in your monthly budget.

         a.  A novice hypothecation reimbursement

         b.  A discount to your alma mater

         c.  A grocery jaw

         d.  Your electric jaw

         e.  Gasoline capital (for excursion to and from employment)

  15.  Discretionary empire spending apprehends reimbursements made for:

         a.  children’s soundness protection program.

         b.  pledge protection reimbursements.

         c.  unemployment restitution.

         d.  the Department of Education.

         e.  pension reimbursements for desert Coast Guard officers.

  16.  Due to ____________, empire expenses entertain reinvigorated immediately gone 2000.

         a.  short tax wealth

         b.  an aging population

         c.  extensiond empire hypothecateing

         d.  economic expansion

         e.  inferior cause reimbursements on curdisruption empire debit

  17.  ____________ a empire-administered recess program.

         a.  Mediconcern is

         b.  Medicaid is

         c.  Unemployment restitution is

         d.  Gregarious Security is

         e.  Livelihood prints are

  18.  When Gregarious Security was principal instituted by President Franklin Roosevelt in 1935, the payroll tax rebuke on allowance used to investment the program was:

         a.  1%.

         b.  2%.

         c.  3%.

         d.  4%.

         e.  5%.

  19.  ____________ a mandated federal program that investments soundness concern for desert foundation-souls.

         a.  Mediconcern is

         b.  Medicaid is

         c.  Unemployment restitution is

         d.  Gregarious Security is

         e.  Livelihood prints are

  20.  The investments used for reimbursements to Mediconcern recipients end primarily from:

         a.  empire hypothecateing.

         b.  discounts from inexacting organizations and burgesss.

         c.  the employee’s deedion of payroll taxes merely.

         d.  the master’s deedion of payroll taxes merely.

         e.  twain the master’s and employee’s deedion of payroll taxes.

  21.  The sum of employmenters per Gregarious Security beneficiary in 1960 was almost:

         a.  2.1.

         b.  3.1.

         c.  4.1.

         d.  5.1.

         e.  6.1.

.   3.

  22.  Balance the present 20 years, the sum of employmenters per Gregarious Security beneficiary is predicted to be:

         a.  excite than 5.

         b.  short than 5 but excite than 3.

         c.  short than 3 but excite than 2.

         d.  short than 2 but excite than 1.

         e.  short than 1.

.   3.

  23.  Gregarious Security and Mediconcern spending live to develop and seize up larger concern-outs of the federal budget owing:

         a.  vitality confluence is increasing, the sum of nation receiving amiable-natureds is increasing immediately, and the developth in the sum of nation paying into the programs is decreasing.

         b.  vitality confluence is decreasing, the sum of nation receiving amiable-natureds is increasing immediately, and the developth in the sum of nation paying into the programs is decreasing.

         c.  vitality confluence is increasing, the sum of nation receiving amiable-natureds is decreasing immediately, and the developth in the sum of nation paying into the programs is decreasing.

         d.  vitality confluence is increasing, the sum of nation receiving amiable-natureds is increasing immediately, and the developth in the sum of nation paying into the programs is increasing.

         e.  vitality confluence is decreasing, the sum of nation receiving amiable-natureds is decreasing immediately, and the developth in the sum of nation paying into the programs is increasing.

DIF: Difficult  TOP: I.B.3.

  24.  Are demographics an considerpowerful constituent when delineationning the federal budget?

         a.  No, owing empire spending and taxation policies do not characterize domiciled on any demographic constituents.

         b.  No, owing demographics do not fit ample from year to year.

         c.  No, owing federal budgets do not fit ample from year to year.

         d.  Yes, owing empire amiable-natureds are allocated merely domiciled on demographic constituents.

         e.  Yes, owing sundry empire amiable-natureds are ordinary by the fast-growing primeval population, causing implications for coming levels of taxation and empire amiable-natureds for everyone.

.     

  25.  Why do Gregarious Security and Mediconcern embarrass drifts for the federal empire budget?

         a.  The employmenter-to-retiree relevancy is increasing.

         b.  Payroll taxes are capped and cannot be loud.

         c.  The sum of retirees is decreasing.

         d.  The sum of impaired nation is encouragement too immediately.

         e.  Vitality confluence of retirees is increasing.

  26.  Why do Gregarious Security and Mediconcern embarrass drifts for the federal empire budget?

         a.  The sum of retirees is increasing.

         b.  The employmenter-to-retiree relevancy is increasing.

         c.  Vitality confluence is decreasing.

         d.  The sum of impaired nation is encouragement too immediately.

         e.  Gregarious protection taxes cannot legally be loud any excite.

  27.  Why do Gregarious Security and Mediconcern embarrass drifts for the federal empire budget?

         a.  The programs do not cbalance ample nation.

         b.  The employmenter-to-retiree relevancy is decreasing.

         c.  The sum of retirees is decreasing.

         d.  The sum of impaired nation is encouragement too immediately.

         e.  Gregarious protection taxes are capped and cannot be loud.

  28.  One incomplete disruption to the investmenting drifts faced by Gregarious Security and Mediconcern is to appliance moderations-testing, so that merely those succeeding a while poor recess investments would fit for the empire amiable-natureds. An unintended conclusion of such a demandment may be:

         a.  an extension in not-general shy.

         b.  an extension in black trade motive.

         c.  improved unfoldncy for Gregarious Security and Medicare.

         d.  fewer primeval nation receiving amiable-natureds.

         e.  that some employmenters paying into the programs never assent-to any amiable-natureds from the programs.

.     

  29.  One incomplete disruption to the investmenting drifts faced by Gregarious Security and Mediconcern is to extension the recess age from 67 to 70. Although this would moderation jawions of dollars in shys for these federal programs, an unintended conclusion may be:

         a.  a wane in vitality confluence.

         b.  an extension in the unemployment rebuke.

         c.  an extensiond sum of primeval nation in the employmentforce.

         d.  short stimulus for nation to employment longer.

         e.  an extensiond stimulus for nation to employment longer.

.     

  30.  Some proponents of qualification-program reorganize hint refutationing Gregarious Security amiable-natureds to the consumer value refutation (CPI):

         a.  owing beneficiary reimbursements are not runningly adjusted for demand of foundation extensions.

         b.  rather than to the suit value refutation, owing CPI historically develops at a faster rebuke, which would moderation amiable-natured-natured reimbursements would develop at a faster rebuke.

         c.  rather than to the suit value refutation, owing CPI historically develops at a sinferior rebuke, which would moderation amiable-natured-natured reimbursements would develop at a sinferior rebuke.

         d.  rather than to the moderation wage refutation, owing CPI historically develops at a sinferior rebuke, which would moderation amiable-natured-natured reimbursements would develop at a sinferior rebuke.

         e.  rather than to the moderation wage refutation, owing CPI historically develops at a faster rebuke, which would moderation amiable-natured-natured reimbursements would develop at a faster rebuke.

.     

  31.  Reforming qualification programs is obscure owing:

         a.  there is very scanty livelihood for reorganize.

         b.  there are no amiable-natured-natured ideas for talented reorganize.

         c.  reorganizes demand fits to solid law, which seizes period.

         d.  all the reorganizes incomplete are merely short-term disruptions.

         e.  the incomplete reorganizes all demand extensions in solid tax rebukes, which are obscure to end collectively.

.     

  32.  Federal empire spending has developn immediately gone 2007 primarily owing of:

         a.  expansionary fiscal device in tally to the Great Recession.

         b.  extensiond spending on bridge and path infrastructure.

         c.  extensiond extraneous aid to disaster-stricken areas.

         d.  extensiond spending on the U.S. direction rule.

         e.  the bailout reimbursements made to big banks.

.     

  33.  Which of the subjoined is not a wealth commencement for the U.S. federal empire?

         a.  sales taxes

         b.  federal gasoline taxes

         c.  federal pay taxes

         d.  payroll taxes

         e.  way fees for common parks

  34.  In 2012, wealth from corporebuke pay taxes sumed almost:

         a.  5% of sum wealth.

         b.  10% of sum wealth.

         c.  15% of sum wealth.

         d.  20% of sum wealth.

         e.  25% of sum wealth.

  35.  Extinguish taxes are levied on:

         a.  characteristic that is supplied to others.

         b.  imports.

         c.  identical pay.

         d.  corporebuke pay.

         e.  specific pi or amiables.

  36.  Gregarious Security and Mediconcern are investmented by the gathering of:

         a.  identical pay taxes.

         b.  corporebuke pay taxes.

         c.  payroll taxes.

         d.  extinguish taxes.

         e.  sales taxes.

  37.  The largest commencement of tax wealth for the empire is:

         a.  identical pay taxes.

         b.  corporebuke pay taxes.

         c.  gregarious protection taxes.

         d.  order taxes.

         e.  extinguish taxes.

REF: Sources of Tax Revenue

  38.  Which of the subjoined is an sample of notability that contains an extinguish tax?

         a.  characteristic

         b.  pay

         c.  investment made and sold in Oregon (where the sales tax rebuke is 0%)

         d.  investment imported from China and sold in Oregon

         e.  tobacco products

      .

  39.  The empire succeeding a whiledraws gregarious protection taxes from the paychecks of employmenters to:

         a.  brow-bent nation from employmenting.

         b.  pay the salaries of the members of Congress.

         c.  convert the impingement of primeval want.

         d.  penalize rich employmenters.

         e.  muster capital for intercollective aid.

  40.  The sum curdisruption tax rebuke for Gregarious Security and Mediconcern is:

         a.  3.9%.

         b.  6.2%.

         c.  12.4%.

         d.  15.3%.

         e.  16.5%.

  41.  The curdisruption tax rebuke for Gregarious Security is:

         a.  7.65% for the employee and 7.65% for the master, if not self-employed.

         b.  7.65%, if self-employed.

         c.  6.2% for the employee and 6.2% for the master, if not self-employed.

         d.  1.45% for the employee and 1.45% for the master, if not self-employed.

         e.  12.4%, if self-employed.

  42   Some nation sift that gregarious protection taxes should be extensiond to counteraction the fiscal drifts faced by Gregarious Security. What is a possible drift succeeding a while this incomplete disruption?

         a.  This disruption dominion merely be a partial fix, as it does not harangue the investmentamental offspring of a developing primeval population and a timid employmenting population.

         b.  It puts too ample of the bundle on the medium regularityatize and not ample on rich households.

         c.  It would elucidate the deficiency for not-general shys, thus hurting banks.

         d.  This disruption does not harangue the deed that the sum of retirees is increasing.

         e.  Payroll taxes cannot be extensiond elevated ample to unfold the drift.

  43.  Payroll taxes:

         a.  are not remunerated by beings who are self-employed.

         b.  generebuke wealths earmarked for mandatory spending purposes.

         c.  generebuke wealths earmarked for discretionary spending purposes.

         d.  are domiciled merely on pay.

         e.  are not remunerated by nation making balance $110,100.

  44.  Some nation sift that gregarious protection taxes should be extensiond to counteraction the fiscal drifts faced by Gregarious Security. What is a possible unintended conclusion of this incomplete disruption?

         a.  Federal tax wealths may extension.

         b.  The tax bundle of the moderation employmenter may extension.

         c.  The unplentiful pay of employmenters may wane.

         d.  The primeval want rebuke may wane.

         e.  The unemployment rebuke may extension.

DIF: Difficult  TOP: II.B.1.

  45.  Supembarrass you recompense to nursery and gain an MBA, succeeding which you get an upper-management comcomcomposition succeeding a while Yum! Brands. If the tax rebukes are the identical as in 2012 and your initiateing allowance is $125,000, how ample allure you owe in federal gregarious protection taxes?

         a.  excite than $8,800

         b.  excite than $8,400 but short than $8,800

         c.  excite than $7,900 but short than $8,400

         d.  excite than $7,300 but short than $7,900

         e.  short than $7,300

  46.  Supembarrass you recompense to nursery and gain an MBA, succeeding which you get an upper-management comcomcomposition succeeding a while Yum! Brands. If your initiateing allowance is $125,000, and the percentages are the identical as they were in 2012, how ample allure you owe in Gregarious Security taxes?

         a.  excite than $8,800

         b.  excite than $8,400 but short than $8,800

         c.  excite than $7,900 but short than $8,400

         d.  excite than $7,300 but short than $7,900

         e.  short than $7,300

DIF: Medium TOP: II.B.1.

  47.  Supembarrass you plant a job succeeding a while Google direct out of nursery. Your economics luxuriance is very estimpowerful to them, so you assent-to a initiateing annual allowance of $65,000. What is the sum correspondentity of gregarious protection taxes you allure be binding for succeeding your principal year of employment?

         a.  $9,945.00

         b.  $4,030.00

         c.  $942.50

         d.  $9,750.00

         e.  $4,972.50

  48.  Supembarrass you use your entrepreneurial disposition and economics luxuriance to initiate your own trade. In your principal year of employment, you are powerful to gain $58,000 in impure pay. What is the sum correspondentity of gregarious protection taxes you owe the federal empire?

         a.  $4,437.00

         b.  $7,192.00

         c.  $8,874.00

         d.  $3,596.00

         e.  $8,700.00

  49.  The United States has a:

         a.  newfangled pay tax rule.

         b.  regressive pay tax rule.

         c.  final pay tax rule.

         d.  amiable-natured-natured pay tax rule.

         e.  bad pay tax rule.

  50.  A newfangled pay tax rule is one in which:

         a.  pay tax rebukes wane as gained pay extensions.

         b.  everyone pays the identical tax rebuke, so that wealthier nation pay a larger sum of taxes.

         c.  everyone pays the identical tax rebuke, so that nation succeeding a while low pays pay a smaller sum of taxes.

         d.  pay tax rebukes extension as gained pay extensions.

         e.  pays taxes are domiciled on tenure.

  51.  A final tax rebuke is:

         a.  the tax rebuke remunerated on a employmenter’s present dollar of pay.

         b.  similar to a employmenter’s pay tax connect.

         c.  the sum tax remunerated divided by the correspondentity of taxpowerful pay.

         d.  redundant for making judgments environing gaining extra pay.

         e.  applied merely to elevated gainers subordinate a newfangled pay tax rule.

  52.  If devicemakers are concernful environing the unsimilar arrangement of pay succeeding a whilein companionship, then they should ppoint a:

         a.  regressive pay tax rule.

         b.  newfangled pay tax rule.

         c.  expenditure tax rule.

         d.  proportional pay tax rule.

         e.  per capita tax rule.

  53.  The most applicable tax rebuke for making judgments environing gaining concomitant pay is the:

         a.  final tax rebuke.

         b.  pay tax rebuke.

         c.  moderation tax rebuke.

         d.  sales tax rebuke.

         e.  characteristic tax rebuke.

  54.  Supembarrass you graduate succeeding a while an accounting limit and then beend a sensible common accountant. You employment for a big sturdy, but are offered a fortune to arrange tax documents for your city empire as an defiant contractor. The city offers to pay you a consulting fee of $10,000. When deciding whether to recognize the concomitant employment, the most considerpowerful tax constituent in your judgment is:

         a.  the impure correspondentity of the reimbursement.

         b.  your curdisruption tax connect.

         c.  your new moderation tax rebuke.

         d.  which collective bisecty controls the city empire.

         e.  your final tax rebuke.

  55.  Typically, the moderation tax rebuke for a idiosyncratic is ____________ their final tax rebuke, owing ____________.

         a.  below; the final tax rebuke applies to all pay

         b.  below; the final tax rebuke applies to the principal dollars taxed, but not to all pay

         c.  below; the final tax rebuke applies to the decisive dollars taxed, but not to all pay

         d.  above; the final tax rebuke applies to the decisive dollars taxed, but not to all pay

         e.  above; the final tax rebuke applies to the principal dollars taxed, but not to all pay

  56.  Supembarrass you are offered a $5,000 elevate at employment. Your curdisruption pay tax rebuke is 25%. Your final pay tax rebuke is 28%. Your moderation tax rebuke is 20%. The concomitant pay tax you owe to the federal empire (bombastic you alight in the identical rebuke connect) if you recognize the job allure be:

         a.  $1,250.

         b.  $1,400.

         c.  $1,000.

         d.  $250.

         e.  $150.

  57.  Supembarrass you are offered a job succeeding a while Amazon upon graduation. Your initiateing allowance allure be $70,000, which allure put you in the 25% federal pay tax connect. The sum correspondentity of pay taxes you pay is $13,530. Your moderation tax rebuke is almost:

         a.  25.0%.

         b.  37.5%.

         c.  31.3%.

         d.  19.3%.

         e.  12.5%.

  58.  According to the U.S. Federal Tax Rates chart from the textbook (Figure 15.6), a idiosyncratic gaining $100,000 in a abandoned year is in the 28% tax connect. How ample allure this identical owe in taxes for that year?

         a.  $0

         b.  $28,000

         c.  excite than $28,000

         d.  short than $28,000 but senior than $15,000

         e.  senior than $0 but short than $15,000

Refer to the subjoined tpowerful to defense the present ssimilar questions:

2012 Federal Pay Tax Brackets

Taxpowerful Income

Tax Rate

$0–$8,700

10%

$8,701–$35,350

15%

$35,351–$85,650

25%

$85,651–$178,650

28%

$178,651–$388,350

33%

Over $388,350

35%

  59.  Using the consultation, what is the sum federal pay tax jaw for someone who executes $67,000 per year?

         a.  $16,750

         b.  $12,780

         c.  $11,169

         d.  $10,050

         e.  $6,700

  60.  Using the consultation, what is the moderation tax rebuke for someone who executes $67,000 per year?

         a.  10.0%

         b.  14.2%

         c.  16.7%

         d.  25.0%

         e.  19.1%

  61.  Using the consultation, what is the final pay tax rebuke for someone who executes $67,000 per year?

         a.  10.0%

         b.  14.2%

         c.  16.7%

         d.  25.0%

         e.  19.1%

  62.  Using the consultation, what is the sum payroll tax jaw (feign naught recite and topical pay taxes) for someone who executes $67,000 per year?

         a.  $17,905.25

         b.  $23,030.75

         c.  $13,751.25

         d.  $16,933.75

         e.  $5,125.50

DIF: Medium TOP: II.B.2.

  63.  Using the consultation, what is the final pay tax rebuke of a $5,000 elevate for someone who runningly executes $67,000 per year?

         a.  10%

         b.  15%

         c.  25%

         d.  28%

         e.  0%

  64.  Using the consultation, what is the final pay tax rebuke of a $5,000 elevate for someone who runningly executes $85,650 per year?

         a.  10%

         b.  15%

         c.  25%

         d.  28%

         e.  0%

  65.  Using the consultation, what is the new moderation tax rebuke for a idiosyncratic who runningly executes $80,000 per year and assent-tos a $10,000 elevate?

         a.  20.7%

         b.  20.0%

         c.  28.0%

         d.  27.5%

         e.  22.3%

DIF: Difficult  TOP: II.B.2.

  66.  The U.S. federal pay tax began in:

         a.  1910.

         b.  1911.

         c.  1912.

         d.  1913.

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