Deck 27: Before the New Frontier: The Postwar Economy

Question 1

The Economic Act of 1946 allowed the federal government to use discretionary fiscal policy to pursue economic prosperity.

Answer 1

True

Question 2

The Marshall Plan (1948-51)brought about the immediate integration of Europe into international markets.

Answer 2

False

Question 3

Unemployment in the post-World War II era (1945-50)

A) was reduced only because of the post-war decline in the size of the civilian labor force.
B) rose above wartime levels, but remained far below the levels of the 1930s.
C) rose in response to the decline in civilian consumption levels.
D) remained at the low levels achieved in World War II (1941-45).

Answer 3

rose above wartime levels, but remained far below the levels of the 1930s.

Question 4

The natural rate of unemployment is not zero.It is at least 5 percent,allowing for individuals who are frictionally and structurally unemployed.

Question 5

Eisenhower's conservative policies were characterized by budget surpluses that produced further declines in price levels.

Question 6

Under the Marshall Plan (1948-51),the U.S.granted resources to and transfused U.S.dollars into European countries devastated by World War II.In return,the U.S.requested coordinated plans of European recovery that promoted efficient and effective production in private markets with minimal government interference.

Question 7

Private investment spending escalated during the post-World War II era (1945-50).

Question 8

Moore (1959)finds evidence to suggest that the mild cyclical deviations in employment and output ?of the Korean War were caused by progressive income taxes and unemployment compensation.

Question 9

In 1945-52,the records show that falling price levels stimulated increases in real Gross National Product (GNP).

Question 10

Eisenhower wanted producers of weapons and war-related goods to have influence over fiscal policy decisions.

Question 11

Expansionary fiscal policy includes an increase in government spending,a decrease in taxes or some combination of the two.

Question 12

After the depression of the 1930s and the interruption of World War II,in the post-war period?(1945-50)private investment

A) fell back to the 1920s level.
B) rose to unprecedented levels.
C) collapsed in the 1948 downturn and then returned to the stagnation levels of the 1930s.
D) did none of the above.

Question 13

Like the two world wars,the Korean War (1950-53)produced shortages of resources,labor and output due to large-scale foreign military deployments and demands for the production of war-related goods and services.

Question 14

The post-World War II prosperity (1945-1949)was due in large part to Harry Truman's commitment to maintaining high levels of federal expenditures after World War II (1941-45).

Question 15

In implementing the Marshall Plan (1948-51),

A) the United States discouraged European countries from cooperating among themselves to increase trade, as it was felt that economic recovery would be better achieved through competition.
B) the United States, in order to offset the large capital outflow caused by loans and grants made abroad, tried to maintain a balance of payments surplus.
C) the United States offered financial aid to many of the economies in Western Europe devastated by World War II.
D) the U.S. dollar was devalued 30% against other world currencies.

Question 16

By fixing the mint price of gold among commercial nations under the Gold Standard,the exchange rate risk falls significantly,thus encouraging trade.

Question 17

After World War II,the U.S.dollar was to become the main,official "reserve currency of the new international order," according to Hughes and Cain (2011).

Question 18

World trade and tariffs have been regulated by the International Trade Organization (ITO),General Agreement on Tariffs and Trade (GATT)and the World Trade Organization (WTO).Today,only ?the ITO still exists to address international trade issues and monitor the implementation of any trade agreements negotiated in the Uruguay Round of world trade talks.

Question 19

The growing post-war (1945-50)economy was sustained by

A) an expansion of government expenditures.
B) the general expansion of nearly all sectors despite the decline in government expenditures.
C) significant increases in both government and private expenditures.
D) trade deficits.

Question 20

Some economists argue that unemployment compensation increases the natural rate of unemployment because it increases the amount of time people spending finding new work while without work.Additionally,it makes unemployment more visible with the steady growth in urbanization.

Question 21

The Employment Act of 1946,which sets up the Council of Economic Advisers,

A) was the final legislation of the New Deal.
B) grew out of the War Manpower Board's experience.
C) grew out of financial negotiations with Britain.
D) was the product of New Deal experience with fiscal policy.

Question 22

Between 1945 and 1950,the U.S.price level rose by one-third.This increase was complemented by which of the following?

A) An increase in nominal and real GDP
B) An increase in nominal GDP but a decrease in real GDP
C) An increase in real GDP but a decrease in nominal GDP
D) Stable nominal and real GDP

Question 23

What agreement was made between the Federal Reserve System and the U.S.Treasury in 1951? Why was it significant?

Question 24

The International Monetary Fund,one of the Bretton Woods Institutions,

A) was meant to provide short-term credit.
B) was meant to provide long-term credit.
C) was meant to provide both short- and long-term credit.
D) was not meant to provide credit.

Question 25

What did the fiscal conservatives of the Eisenhower administration (1953-61)want?

A) Balanced budgets and with manageable inflation
B) Inflation and budget surpluses
C) A balanced budget and high rates of interest
D) Laissez-faire economy

Question 26

How can banks increase the amount of loanable funds available for private lending?

A) By selling government securities to securities dealers and the Federal Reserve System
B) By buying government securities from securities dealers and the Federal Reserve System
C) By buying stocks, property and other assets to hold on behalf of the banks
D) By holding 100 percent of customers' deposits in bank vaults

Question 27

Economists believe the "full employment" level of unemployment is

A) 0 percent
B) 2 percent
C) 5 percent
D) 10 percent

Question 28

The Bretton Woods Systems established

A) the International Monetary Fund.
B) the International Bank for Reconstruction and Development (the World Bank).
C) the International Trade Organization (WTO).
D) all of the above.

Question 29

What produced the European Payments Union?

A) The Schumann Plan
B) The Monet Plan
C) The Spaak Plan
D) The Marshall Plan

Question 30

Explain what is meant by the impressive stability of the "peacetime" economy in the U.S.between 1945 and 1962.

Question 31

What is fiscal policy? Under the Eisenhower administration,why did the U.S.government experience budget deficits during recessions and surpluses during expansions?

Question 32

What did the Economic Act of 1946 require the U.S.government to do?

A) Keep its "hands off" the economy
B) Present an annual "Economic Report of the President"
C) Let market forces determine equilibrium quantities of labor hired and wages paid
D) Maintain a current account surplus where U.S. exports exceeded imports each year

Question 33

What was the World Bank designed to do?

A) Serve as a long-term lender
B) Serve as a short-term lender
C) Make both short and long-term loans
D) Make grants-in-aid, but not to be a lending institution

Question 34

Explain the economic theory behind Moore's (1959)claim that a progressive income tax system and unemployment compensation are likely the "automatic stabilizers" causing some of the cyclical fluctuations in the U.S.economy experienced during the post-war era.

Question 35

What characterized the 1950-1962 economy (from the Korean War to the last year of John F.Kennedy's presidency)?

A) Significant inflation
B) Deflation
C) High unemployment
D) Falling prices and wages

Question 36

Which of the following best describes the Employment Act of 1946?

A) A piece of New Deal legislation that had to be postponed until after the war
B) An effort to stabilize the U.S. balance of payments as the world moved toward ?using the U.S. dollar as the main reserve currency
C) An attempt to reduce the overall extent of federal responsibility in the ?post-war national economy
D) All of the above

Question 37

Compared to earlier times,the period of the 1950s to the early 1960s was one characterized by

A) temporary deficit spending of the government.
B) permanent deficit spending of the government.
C) temporary surplus spending of the government.
D) permanent surplus spending of the government.

Question 38

What did the 1958 Treaty of Rome establish?

A) The European Payments Union
B) The European Economic Community
C) The European Coal and Steel Community
D) The Marshall Plan

Question 39

When all else is held constant,during recessions government

A) revenues and expenditures increase.
B) revenues increase and expenditures decrease.
C) revenues decrease and expenditures rise.
D) revenues and expenditures decrease.

Question 40

Between 1945 and 1950,federal expenditures

A) dropped by two-fifths despite the Marshall Plan.
B) dropped by two-fifths because of dissipation of wartime expenditures.
C) increased by two-fifths because of increased spending in private consumer and business markets.
D) increased by two-fifths because of the Marshall Plan.

Question 41

Why is it important for the U.S.to maintain stable imports in a global economy?

Question 42

How did the world try to establish a new sense of financial order after World War II (1941-45)? Why did the world choose to use the gold-backed U.S.dollar as reserves?

Question 43

Compare and contrast the International Bank for Reconstruction and Development (the World Bank)and the World Trade Organization using Internet resources.Identify what they have in common and describe how they differ.

Question 44

Link modern discussions about industrial incentives to influence fiscal policy decisions in the wake of 11 September 2001.Discuss the impact on consumers and on firms competing with the industries benefiting from swayed fiscal policy,subsidies and expenditures.

Question 45

Explain how the U.S.produced its own "competition" in the world.Identify the benefits and costs ?of doing so.

Question 46

Describe the origins of and the economic history behind the European Common Market.

Question 47

Explain why the Employment Act of 1946 is not a "New Deal" device.

Question 48

From the end of World War II to the beginning of the Johnson presidency (1945-1962),what did the "New Frontier" mean in terms of the economy?

Question 49

Define the "natural" rate of unemployment,structural unemployment and frictional unemployment.What does "overfull-employment" produce? Why did economists change the natural rate of unemployment?

Question 50

Why is international trade important to the U.S.economy? How does it contribute to economic growth in U.S.output and income? Which barriers to trade emerged during the Great Depression?and remained in place until the Bretton Woods System was established?