Chapter 2: Overview of the Nonprofit Sector

Test Bank

Multiple Choice

1. How much of the revenue for charitable nonprofits comes from government funds?

A. one half

B. one third

C. two fourths

D. three fourths

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: Introduction

Difficulty Level: Easy

2. A certain mistrust of ______ has provided philosophical support for voluntary initiatives throughout the history of the United States.

A. lawyers

B. academia

C. volunteers

D. government

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

3. Whose 1889 essay, titled “The Gospel of Wealth,” remains a classic statement of the American tradition of philanthropy?

A. Warren Buffet

B. Andrew Carnegie

C. John D. Rockefeller

D. Theodore Roosevelt

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

4. What term is defined as “giving for the alleviation of human suffering?”

A. charity

B. voluntarism

C. philanthropy

D. nonprofitism

Learning Objective: 2-3: Compare various terms used to identify the nonprofit sector and explain their implications.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

5. A nonprofit organization that blends traditional fundraising methods with commercial methods to generate revenue is referred to as a ______.

A. civil society

B. charitable sector

C. social enterprise

D. tax-exempt sector

Learning Objective: 2-1: Identify various types of nonprofit organizations.

Cognitive Domain: Knowledge
Answer Location: Alternatives to Nonprofit

Difficulty Level: Easy

6. Organizations that operate under both nonprofit and for-profit legal forms are referred to as ______ organizations.

A. hybrid

B. social sector

C. civil service

D. voluntary sector

Learning Objective: 2-1: Identify various types of nonprofit organizations.

Cognitive Domain: Knowledge

Answer Location: Alternatives to Nonprofit

Difficulty Level: Easy

7. The number of tax-exempt nonprofits operating in the United States in 2016 was approximately ______.

A. 1.5 million

B. 2.6 million

C. 3.5 million

D. 5.2 million

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: Size of the U.S. Nonprofit Sector

Difficulty Level: Easy

8. In 2013, the nonprofit sector employed what percentage of the total U.S. workforce?

A. 5%

B. 10%

C. 20%

D. 30%

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: Size of the U.S. Nonprofit Sector

Difficulty Level: Easy

9. What were the total combined assets of all nonprofits in 2013?

A. $500 million

B. $200 billion

C. $800 billion

D. $3.22 trillion

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: Size of the U.S. Nonprofit Sector

Difficulty Level: Easy

10. What benefit created by the U.S. Congress is intended to encourage charitable giving?

A. income tax deductions for gifts

B. removal of limitations on lobbying

C. receiving a 501(c)(1) classification

D. receiving free health-care vouchers in exchange for gifts

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Comprehension

Answer Location: Differentiating the Nonprofit Sector

Difficulty Level: Medium

11. Who wrote “Bowling Alone: America’s Declining Social Capital” to discuss the decline in civic engagement among Americans?

A. Bill Gates

B. Robert Putnam

C. Lester Salamon

D. Michael Moore

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: Size of the U.S. Nonprofit Sector

Difficulty Level: Easy

12. A nonprofit that qualifies under Section 501(c)(3) must limit its expenditures on ______.

A. lobbying

B. health care

C. staff salaries

D. legal counsel

Learning Objective: 2-5: Explain the differences between organizations classified under 501(c)(3) and 501(c)(4) and the advantages and limitations related to each classification.

Cognitive Domain: Comprehension

Answer Location: IRS Classifications

Difficulty Level: Medium

13. What principle prevents government funds from going directly to religious congregations?

A. tax-exempt provisions

B. the nondistribution test

C. charitable choice provisions

D. separation of church and state

Learning Objective: 2-6: Explain differences among charitable subsectors.

Cognitive Domain: Comprehension

Answer Location: Charitable Subsectors

Difficulty Level: Medium

14. Which type of charitable nonprofit organizations is the least professionalized?

A. religious

B. advocacy

C. environmental

D. arts and culture

Learning Objective: 2-6: Explain differences among charitable subsectors

Cognitive Domain: Comprehension

Answer Location: Charitable Subsectors

Difficulty Level: Medium

15. What is the Internal Revenue Service classification for nonprofits organizations that work for social change?

A. cultural

B. religious

C. advocacy

D. environmental

Learning Objective: 2-5: Explain the differences between organizations classified under 501(c)(3) and 501(c)(4) and the advantages and limitations related to each classification.

Cognitive Domain: Knowledge

Answer Location: IRS Classifications

Difficulty Level: Easy

16. The National Taxonomy of Exempt Entities divides nonprofit organizations into categories based on their ______.

A. budgets and staffs

B. types of clients served

C. purposes and activities

D. mission and vision statements

Learning Objective: 2-4: Classify nonprofit organizations according to the National Taxonomy of Exempt Entities and the Internal Revenue Code.

Cognitive Domain: Knowledge

Answer Location: National Taxonomy of Exempt Entities

Difficulty Level: Easy

17. If measured by the total number of organizations, the largest subsector of charitable nonprofits is the ______.

A. religious

B. health services

C. human service

D. international and foreign affairs

Learning Objective: 2-6: Explain differences among charitable subsectors

Cognitive Domain: Knowledge

Answer Location: Charitable Subsectors

Difficulty Level: Easy

18. If measured by total revenue, which subsector of charitable nonprofits is the largest?

A. religious

B. health services

C. human services

D. international and foreign affairs

Learning Objective: 2-6: Explain differences among charitable subsectors

Cognitive Domain: Comprehension

Answer Location: Charitable Subsectors

Difficulty Level: Medium

19. Organizations that exist for the sole purpose of directing money to other nonprofits are called ______.

A. banks

B. funding intermediaries

C. advocacy organizations

D. international development entities

Learning Objective: 2-6: Explain differences among charitable subsectors

Cognitive Domain: Knowledge

Answer Location: Funding Intermediaries

Difficulty Level: Easy

20. What term identifies organizations that do not have to pay federal income taxes?

A. public

B. private

C. tax-exempt

D. income-exempt

Learning Objective: 2-4: Classify nonprofit organizations according to the National Taxonomy of Exempt Entities and the Internal Revenue Code.

Cognitive Domain: Knowledge

Answer Location: IRS Classifications”

Difficulty Level: Easy

21. Private foundations are usually funded by ______.

A. the U.S. Congress

B. a single donor

C. community organizations

D. a vast number of corporate sponsors

Learning Objective: 2-4: Classify nonprofit organizations according to the National Taxonomy of Exempt Entities and the Internal Revenue Code.

Cognitive Domain: Knowledge

Answer Location: IRS Classifications

Difficulty Level: Easy

22. Unlike public charities, private foundations are not permitted to engage in ______.

A. lobbying

B. fund-raising

C. providing direct services

D. international exchange programs

Learning Objective: 2-4: Classify nonprofit organizations according to the National Taxonomy of Exempt Entities and the Internal Revenue Code.

Cognitive Domain: Comprehension

Answer Location: IRS Classifications

Difficulty Level: Medium

23. Salamon’s anatomy classifies nonprofit organizations by ______.

A. the nature of their programs and activities

B. their eligibility to receive tax-exempt gifts

C. the amount of revenue received in a fiscal year

D. who receives the principal benefit of their activities

Learning Objective: 2-6: Explain differences among charitable subsectors.

Cognitive Domain: Comprehension

Answer Location: Salamon’s Anatomy

Difficulty Level: Medium

24. Exempt activities ______.

A. support direct services

B. directly support a social mission

C. consist solely of volunteer workers

D. generate income for the organization

Learning Objective: 2-3: Compare various terms used to identify the nonprofit sector and explain their implications.

Cognitive Domain: Comprehension

Answer Location: Commercialization and Tax Exemption

Difficulty Level: Medium

25. The two spectrums that define a social enterprise are philanthropic and ______.

A. hybrid

B. charitable

C. commercial

D. foundational

Learning Objective: 2-7: Classify organizations as purely philanthropic, purely commercial, or hybrid, depending on various characteristics.

Cognitive Domain: Knowledge

Answer Location: The Spectrum of Organizations

Difficulty Level: Easy

26. Nonprofit organizations interested in achieving social and economic values are referred to as ______.

A. hybrids

B. charitable

C. commercial

D. philanthropic

Learning Objective: 2-7: Classify organizations as purely philanthropic, purely commercial, or hybrid, depending on various characteristics.

Cognitive Domain: Knowledge

Answer Location: The Spectrum of Organizations

Difficulty Level: Easy

27. According to Sabeti, a critical mass of organizations is occurring within the public, nonprofit, and private sectors creating a ______ sector.

A. fourth

B. hybrid

C. new era

D. multipurpose

Learning Objective: 2-8: Explain new organizational forms and the concept of the fourth sector.

Cognitive Domain: Knowledge

Answer Location: Emerging New Models

Difficulty Level: Easy

28. Social welfare organizations are classified by the Internal Revenue Service as ______.

A. 501(c)(1)

B. 501(c)(2)

C. 501(c)(3)

D. 501(c)(4)

Learning Objective: 2-5: Explain the differences between organizations classified under 501(c)(3) and 501(c)(4) and the advantages and limitations related to each classification.

Cognitive Domain: Knowledge

Answer Location: IRS Classifications

Difficulty Level: Easy

29. Dees’ Spectrum of Organizations classifies organizations that use only volunteers as a workforce as purely ______.

A. public

B. charitable

C. commercial

D. philanthropic

Learning Objective: 2-7: Classify organizations as purely philanthropic, purely commercial, or hybrid, depending on various characteristics.

Cognitive Domain: Comprehension

Answer Location: The Spectrum of Organizations

Difficulty Level: Medium

30. The legal foundations of America’s nonprofit sector are drawn from ______law.

A. natural

B. English

C. Spanish

D. nonprofit

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

True/False

1. “The Gospel of Wealth” was written by John D. Rockefeller.

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

2. Giving intended to meet current individual human needs is referred to as charity.

Learning Objective: 2-3: Compare various terms used to identify the nonprofit sector and explain their implications.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

3. A nonprofit classified as 501(c)(3) cannot support candidates for public office.

Learning Objective: 2-5: Explain the differences between organizations classified under 501(c)(3) and 501(c)(4) and the advantages and limitations related to each classification.

Cognitive Domain: Knowledge

Answer Location: IRS Classifications

Difficulty Level: Easy

4. The first person to establish a distinction between charity and philanthropy was Warren Buffet.

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

5. Increased government spending on social programs in the 1960s began with President Lyndon B. Johnson.

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

6. Beginning in the 1980s, federal spending for many social programs was sharply reduced by President Gerald R. Ford.

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Comprehension

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Medium

7. Some people believe that commercialization of the nonprofit sector may result in profit being placed ahead of the mission.

Learning Objective: 2-7: Classify organizations as purely philanthropic, purely commercial, or hybrid, depending on various characteristics.

Cognitive Domain: Knowledge

Answer Location: Differentiating the Nonprofit Sector

Difficulty Level: Easy

8. Most museums are classified as 501(c)(3) by the Internal Revenue Service.

Learning Objective: 2-5: Explain the differences between organizations classified under 501(c)(3) and 501(c)(4) and the advantages and limitations related to each classification.

Cognitive Domain: Knowledge

Answer Location: IRS Classifications

Difficulty Level: Easy

9. Religious organizations are not considered charitable nonprofits by the Internal Revenue Service.

Learning Objective: 2-1: Identify various types of nonprofit organizations.

Cognitive Domain: Comprehension

Answer Location: IRS Classifications

Difficulty Level: Medium

Short Answer

1. Identify the three ancient traditions in which the roots of America’s nonprofit sector lie.

Learning Objective 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Knowledge

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Easy

2. Explain Andrew Carnegie’s perspective for charitable giving.

Learning Objective: 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Comprehension

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Medium

3. Compare and contrast charity and philanthropy.

Learning Objective: 2-3: Compare various terms used to identify the nonprofit sector and explain their implications.

Cognitive Domain: Analysis

Answer Location: America’s Nonprofit Sector: A Historical Overview

Difficulty Level: Hard

4. Explain the similarities and differences of 501(c)(3) and 501(c)(4) organizations.

Learning Objective: 2-5: Explain the differences between organizations classified under 501(c)(3) and 501(c)(4) and the advantages and limitations related to each classification.

Cognitive Domain: Comprehension

Answer Location: IRS Classifications

Difficulty Level: Medium

5. Identify and explain the characteristics of purely philanthropic nonprofit organizations.

Learning Objective: 2-7: Classify organizations as purely philanthropic, purely commercial, or hybrid, depending on various characteristics.

Cognitive Domain: Comprehension

Difficulty Level: Medium

6. Analyze the Smithsonian Institution and explain the complexity of its structure as opposed to a traditional nonprofit.

Learning Objective: 2-1: Identify various types of nonprofit organizations.

Cognitive Domain: Analysis

Answer Location: Introduction

Difficulty Level: Hard

7. Define the terms “third sector, fourth sector, charitable sector, voluntary sector, independent sector, and tax-exempt sector.” Explain the characteristics that distinguish each term.

Learning Objective: 2-3: Compare various terms used to identify the nonprofit sector and explain their implications.

Cognitive Domain: Comprehension

Answer Location: Differentiating the Nonprofit Sector

Difficulty Level: Medium

8. Analyze the pros and cons of repealing the Johnson Amendment. Write an argument in support of or against the act.

Learning Objective 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Analysis

Answer Location: IRS Classifications

Difficulty Level: Hard

9. Examine and explain the Johnson Amendment and President Trump’s influence on the amendment.

Learning Objective 2-2: Explain the historical growth of the nonprofit sector.

Cognitive Domain: Analysis

Answer Location: IRS Classifications

Difficulty Level: Hard

10. Compare and contrast benefit corporations, for-profit corporations, and social purpose corporations.

Learning Objective 2-8: Explain new organizational forms and the concept of the fourth sector.

Cognitive Domain: Analysis

Answer Location: Emerging New Models

Difficulty Level: Hard