Deck 16: Government and the Economy

Question 1

________ occurs when the price level of goods and services increases over several months.

A) Monetarism
B) A budget deficit
C) An open-market operation
D) Inflation
E) A recession

Answer 1

D

Question 2

The index of the total output of goods and services produced in a national economy is called the ________.

A) federal funds rate
B) inflation index
C) gross domestic product
D) monetary fund
E) consumer price index

Answer 2

C

Question 3

The National Labor Relations Act was designed to

A) oversee union elections and collective bargaining between labor and industry.
B) prohibit workers from forming unions.
C) establish a national minimum hourly wage.
D) limit the amount of money labor unions and corporations could donate to political parties.
E) regulate contractual negotiations between private businesses competing in the same industry.

Answer 3

A

Question 4

Public policy can be embodied in all of the following forms EXCEPT a(n) ________.

A) law
B) administrative rule
C) order
D) regulation
E) petition

Question 5

Which of the following was NOT one of the goals of the American Recovery and Reinvestment Act of 2009?

A) encourage economic growth
B) develop weatherization projects and clean technology construction
C) save existing jobs that might be lost due to the economic recession
D) provide for a national health care system
E) make longer-term investments to encourage job creation

Question 6

During the New Deal, ________ theory that a government could boost employment by stimulating demand became quite influential.

A) Adam Smith's
B) Milton Friedman's
C) Friedrich Hayek's
D) John Maynard Keynes's
E) David Stockman's

Question 7

Which of the following is NOT a method used by government officials to promote business development?

A) subsidies
B) tax breaks
C) loans
D) regulations
E) grants

Question 8

An officially expressed purpose or goal backed by a sanction is a ________.

A) public policy
B) regulation
C) rule
D) bill
E) reward

Question 9

Which of the following is the best example of a public good?

A) a computer
B) the interstate highway system
C) the airline industry
D) Wall Street
E) an iPhone

Question 10

Which of the following does the Small Business Administration provide?

A) insurance
B) legal counsel
C) disaster assistance
D) subsidies
E) grants

Question 11

Why do many businesses prefer Congress to regulate the economy?

A) Regulations are more cost-effective in the long run.
B) One national regulation is better than the inconsistencies and disparities of different state laws.
C) Businesses argue that regulations help to increase their market share.
D) Regulations lead to a fairer and more equitable marketplace.
E) Regulations help businesses net more profit.

Question 12

Which of the following was a driving force for economic growth during the late nineteenth century?

A) agriculture
B) war
C) manufacturing industries
D) government work projects
E) international trade

Question 13

The recession of 2008 led to the loss of ________ million American jobs.

A) 1
B) 5
C) 8
D) 16
E) 25

Question 14

Something that must be supplied by the government because it cannot be provided by the marketplace is called ________.

A) a public good
B) a commodity
C) a governmental appropriation
D) pork
E) the public option

Question 15

Vehicle safety is one of the chief responsibilities of the Department of ________.

A) Transportation
B) Consumer Safety
C) Commerce
D) the Interior
E) Health and Human Services

Question 16

________ are given to states and local governments on the condition that all expenditures are limited to the problem or group specified by law.

A) Tariffs
B) Loopholes
C) Monopolies
D) Categorical grants
E) Block grants

Question 17

What event marked the major historical turning point in the relationship between the government and the marketplace?

A) the Civil War
B) the Depression of 1896
C) the Great Depression
D) World War II
E) the implementation of Reaganomics

Question 18

What did the Great Depression and World War II do to the public's expectations regarding employment?

A) They made Americans realize that unemployment was an unfortunate but largely irremediable occurrence.
B) They made Americans realize that unemployment could only be solved by a major international crisis, such as a war.
C) They showed that the government could help to ensure full employment.
D) They showed that the government could only solve unemployment when inflation levels were kept high.
E) They showed that ill-advised government programs could cause large increases in unemployment.

Question 19

During the 1960s, Ralph Nader was influential as a(n) ________.

A) environmental activist
B) consumer advocate
C) presidential candidate
D) corporate spokesman
E) member of Congress

Question 20

The goal of the Works Progress Administration was to

A) put unemployed people to work on public projects.
B) establish federal standards for hiring, firing, and laying off employees.
C) begin the nationalization of the American labor force.
D) help distribute food and aid to unemployed workers.
E) require companies to hire laid-off workers who had been out of work for six months or more.

Question 21

Which of the following are the three basic prerequisites for economic growth?

A) public investment, economic regulation, and a productive workforce
B) domestic investment, foreign investment, and government regulation
C) foreign investment, productive workforce, and economic regulation
D) public investment, government investment, and financial stability
E) public investment, innovation, and a productive workforce

Question 22

The federal government's role in providing electricity to rural areas is an example of the fact that

A) government often supplies public goods that are too big or risky for private actors to address.
B) private businesses are always more efficient at providing public goods and services than government actors.
C) government never gives up control of an industry once it has started to regulate it.
D) state governments are not allowed under the Constitution to engage in any activity related to the provision of public goods.
E) the federal government has rarely undertaken projects to produce public goods.

Question 23

When did Keynesian economic ideas lead to a revolution in thinking about the role of the government in the economy?

A) the 1890s
B) the 1930s
C) the 1960s
D) the 1980s
E) the 1990s

Question 24

Those who believe in the theory of ________ maintain that the government's role in regulating the economy should be focused on lowering taxes and creating incentives for a more productive and efficient use of resources.

A) Keynesianism
B) supply-side economics
C) fiscalism
D) inflation
E) laissez-faire capitalism

Question 25

Which of the following actions marked a decisive break with the tradition of the federal government promoting compromises between labor and management?

A) When President Ronald Reagan fired striking air traffic controllers and hired permanent replacements to fill their jobs in 1981.
B) When President Reagan sent in the National Guard to break up picketing in front of major defense contractors in 1985.
C) When Congress passed and George H. W. Bush signed legislation dismantling the National Labor Relations Board in 1992.
D) When Congress passed and Bill Clinton signed legislation permitting companies to shut down without giving their employees advance notification in 1994.
E) When the National Labor Relations Act set up a framework for labor relations in 1935.

Question 26

Which of the following is NOT a function of the Securities and Exchange Commission?

A) It requires companies to disclose information about the stocks and bonds that they are selling.
B) It informs buyers of investment risks.
C) It protects the confidentiality of all sales of stocks and bonds.
D) It protects investors against fraud.
E) It helps the government promote reliable access to new investments through its regulation of financial markets.

Question 27

According to many analysts, the spurt of economic growth in 2003 illustrates that

A) the federal government can always produce large levels of economic growth if the right decisions are made regarding deficit spending.
B) inflation is always a problem that government officials should attempt to solve.
C) inflation is not a problem that government officials should attempt to solve.
D) some kinds of public investment, such as military spending on wars, can produce economic growth as a by-product of pursuing other more central objectives.
E) public investment always reduces economic growth and should therefore be eliminated.

Question 28

Which of the following statements best describes the federal government's role in higher education?

A) The federal government determines which classes will be taught in colleges and universities but provides no financial assistance for higher education.
B) The federal government provides all of the funding for higher education, but state and local governments are placed in charge of operating colleges and universities.
C) The federal government supports higher education through educational grants, tax breaks, and loans.
D) The federal government is in charge of running the day-to-day operations of every public college and university around the country.
E) The federal government plays no role whatsoever in higher education.

Question 29

Adam Smith's theory of ________ maintains that many individual economic transactions come together to create a greater good for all.

A) rational expectations
B) the prisoner's dilemma
C) the invisible hand
D) trickle-down economics
E) collective action

Question 30

________ once said "Now I am a Keynesian."

A) Herbert Hoover
B) Dwight Eisenhower
C) Richard Nixon
D) Ronald Reagan
E) George W. Bush

Question 31

Which of the following statements about the relationship between government and capitalism is FALSE?

A) Government makes it possible for markets to function efficiently.
B) Government rule making means that people no longer need to rely on personal trust when conducting business.
C) Before the Progressive era, the marketplace was untouched by government interference.
D) Markets break down in nations that have weak governments.
E) There is much disagreement among the public and politicians over the extent of the role the government should play in the economy.

Question 32

The Securities and Exchange Commission was established

A) at the same time as stocks were publicly bought and sold.
B) after the stock market crash of 1929.
C) at the same time as the International Monetary Fund.
D) after the market crash of 1987.
E) after the terrorist attacks of 2001.

Question 33

________ contended with double-digit inflation when he was president.

A) John Kennedy
B) Jimmy Carter
C) George H. W. Bush
D) Bill Clinton
E) George W. Bush

Question 34

Which of the following has NOT been a fundamental goal of the government's involvement in the economy?

A) promoting equality for all citizens
B) promoting economic stability
C) encouraging business development
D) stimulating economic growth
E) protecting employees and consumers

Question 35

Before the 1930s, relations between labor and management in the United States were ________.

A) defined by peaceful negotiations
B) heavily regulated by the national government
C) among the most violent in the world
D) dependent on labor unions for stability
E) stable

Question 36

The idea that the government can stimulate a slow economy by increasing public spending or cutting taxes is called ________.

A) laissez-faire economics
B) Keynesianism
C) social democracy
D) rational choice theory
E) monetarism

Question 37

Which of the following was NOT a major form of economic promotion by the federal government in the nineteenth century?

A) land grants to railroad companies
B) agricultural subsidies
C) public works projects
D) tariffs
E) building roads and canals to tie states and regions together

Question 38

Upton Sinclair's 1906 exposé, The Jungle, revealed the

A) widespread use of child labor in coal mines and factories throughout the United States.
B) violent suppression of labor unions by big business.
C) control of politicians by corporate interests who run the political machines.
D) unsanitary practices at meatpacking plants.
E) violent uprisings of union members across the United States.

Question 39

President ________ rejected the theory of Keynesian economics.

A) John Kennedy
B) Lyndon Johnson
C) Richard Nixon
D) Gerald Ford
E) Ronald Reagan

Question 40

What is the most important way that government officials affect personal and corporate investments?

A) granting tax breaks for stock gains and losses
B) promoting investor confidence through policies enforcing stability and regard for the law
C) allowing Social Security pensions to be invested in the stock market
D) requiring that all stock and bond transfers remain confidential
E) bailing out corporations like GM that are considered "too big to fail"

Question 41

________ taxation occurs when people in lower income brackets pay a larger percentage of their income in taxes.

A) Progressive
B) Regressive
C) Inflationary
D) Redistributive
E) Distributive

Question 42

Which of the following statements about the American Recovery and Reinvestment Act of 2009 is true?

A) It was a bipartisan bill.
B) Most Republicans supported the bill.
C) Most Democrats opposed the bill.
D) According to the CBO, the act resulted in the creation of 2 million full-time jobs.
E) The act caused the budget deficit to decline.

Question 43

A way to reduce the disparities in wealth between the rich and poor is called a(n) ________.

A) entitlement program
B) tariff
C) regressive tax policy
D) policy of redistribution
E) loophole

Question 44

Open-market operations describe the

A) government policy, beginning in the 1950s, of reducing tariffs on foreign products.
B) requirement that publicly owned businesses honestly report their earnings and losses.
C) method by which the Federal Reserve buys and sells government securities to increase or decrease the supply of money in the economy.
D) policy of deregulation pursued during the 1980s by the Reagan administration.
E) way in which the U.S. government purchases stocks and bonds from foreign corporations.

Question 45

Which of the following statements is true?

A) Democrats support higher levels of public spending than Republicans.
B) Republicans' support for tax cuts creates a political dilemma for Democrats.
C) Democrats support raising taxes on the wealthy.
D) Republicans believe that government spending is wasteful and puts a drag on the economy.
E) all of the above

Question 46

Which statement is the key argument of John Maynard Keynes?

A) Government can pull an economy out of a recession by stimulating demand and creating a cycle of increased production and jobs.
B) Government regulations during economic depressions must be lifted because they destroy the already slim profit margin.
C) The economy of size shows that monopolies are the most efficient way to distribute goods throughout a national marketplace.
D) A well-functioning economy need never experience an economic downturn.
E) Government can rectify a falling economy by regulating the money supply.

Question 47

Congress was granted the power to tax personal income in ________.

A) 1789
B) 1846
C) 1913
D) 1943
E) 1975

Question 48

A ________ is an incentive in the tax code for individuals and corporations to invest their money in ways that government officials desire in exchange for a reduction in tax liabilities.

A) categorical grant
B) loophole
C) federal funds rate
D) block grant
E) subsidy

Question 49

Which of the following is the best description of the changing expectations of government's role in the economy since the 1930s?

A) People hold government officials responsible for a healthy economy.
B) People demand that government officials provide health insurance.
C) People expect that government officials will engage in deficit spending.
D) People expect government officials to print more money in times of inflation.
E) People expect government officials to stay completely out of the economy.

Question 50

Today, labor unions represent about ________ percent of the labor force.

A) 50
B) 35
C) 25
D) 11
E) 3

Question 51

Which of the following statements is true?

A) The people do not support cutting specific government programs.
B) The people believe that government is too wasteful.
C) Republicans supported adding a prescription drug benefit to Medicare in 2003.
D) Neither Republicans nor Democrats wish to cut expensive, popular entitlement programs.
E) all of the above

Question 52

The minimum wage was first enacted in ________.

A) 1879
B) 1901
C) 1938
D) 1962
E) 1995

Question 53

Classic laissez-faire theory is based on all of the following EXCEPT that

A) government monopolies depress economic growth.
B) people's selfishness can promote the public good.
C) a truly efficient government allows private enterprise to provide all government services.
D) economic competition unleashes growth and innovation.
E) government should stay out of the private sector except when providing a select number of public goods.

Question 54

The most consistently powerful nongovernment actors in determining economic policy are ________.

A) labor unions
B) environmental groups
C) business organizations
D) foreign nations
E) private citizens

Question 55

The power to raise or lower the tax rate is part of ________.

A) fiscal policy
B) monetary policy
C) the contracting power
D) discretionary spending policy
E) budgetary policy

Question 56

Supply-side economics is the idea that

A) the best method of producing high levels of economic growth is to engage in high levels of government spending.
B) the government should impose heavy tariffs on imported goods in order to protect domestic suppliers.
C) the government's role in the economy should be strictly limited to regulating the supply of money.
D) increasing the marginal rate of taxation will create a productive economy by providing more revenue to finance government economic programs.
E) reducing the marginal rate of taxation will create a productive economy by promoting levels of work and investment that would otherwise be discouraged by higher taxes.

Question 57

Which of the following statements is true?

A) A majority of Americans believe that taxes are fairly low.
B) Republicans in recent decades have supported tax cuts.
C) A majority of Americans think that taxes are too high.
D) both b and c
E) Democrats in recent decades have supported cuts in social spending.

Question 58

________ are government grants of cash or other valuable commodities, such as land, that are used to promote activities desired by government leaders.

A) Contracts
B) Tax credits
C) Business development funds
D) Categorical grants
E) Subsidies

Question 59

During the nineteenth century, the federal government received most of its revenue from ________.

A) corporate taxes
B) personal income taxes
C) social insurance taxes
D) state and local governments
E) tariffs

Question 60

The ________ insures bank deposits up to $250,000.

A) Federal Reserve Board
B) Federal Deposit Insurance Corporation
C) U.S. Department of Treasury
D) Office of Management and Budget
E) Council of Economic Advisors

Question 61

Which of the following statements about the Federal Reserve Board is FALSE?

A) The Federal Reserve Board is part of the Department of the Treasury.
B) The Federal Reserve Board is the main organization for setting monetary policy.
C) The members of the Federal Reserve Board are selected by the president and confirmed by the Senate.
D) The president cannot remove the members of the Federal Reserve Board for political reasons.
E) The Federal Reserve Board sets the federal funds rate.

Question 62

Sales taxes are ________, and most income taxes are ________.

A) regressive; regressive
B) progressive; progressive
C) progressive; regressive
D) regressive; progressive
E) high; low

Question 63

Which of the following is NOT a benefit to government provided by contracting?

A) Government can acquire services or products at a cheaper rate than if government were to produce them itself.
B) Government can use its contracting power to encourage desirable behavior among those businesses that have contracts with the government.
C) Government can use contracting to encourage industries, universities, and other organizations to engage in valuable research.
D) Government can use contracting to help build up certain segments of the economy.
E) Government officials almost always use contracting to award businesses and corporations that donated substantial amounts of money to their political campaigns.

Question 64

Which of the following is NOT a power of the Federal Reserve Board?

A) the power to increase or decrease the interest rate it charges on the loans it extends to member banks
B) the power to control the reserve requirement
C) the power to buy and sell government securities in order to increase or decrease the supply of money in the economy
D) the power to manipulate the interest rate charge by one bank to another on loans in the federal funds market
E) the power to enforce the federal government's antitrust policies

Question 65

________ were the centerpiece of George W. Bush's economic policy.

A) Protective tariffs
B) Tax cuts
C) Antiglobalization measures
D) Agriculture subsidies
E) Categorical grants

Question 66

________ was most responsible for the creation of the Bank of the United States.

A) Thomas Jefferson
B) James Madison
C) John Adams
D) Alexander Hamilton
E) Benjamin Franklin

Question 67

What is a key power of the Fed?

A) The power to change tax rates.
B) The power to lower the budget deficit.
C) The power to lower the total national debt.
D) The power to expand and contract the amount of credit available in the United States.
E) both b and c

Question 68

The best way for Federal Reserve Board officials to help boost a stagnant economy is to

A) raise interest rates so that banks can earn more money on the loans they provide to individuals and businesses.
B) lower interest rates so that banks can provide more loans at cheaper rates to individuals and businesses.
C) take money out of circulation so that the dollar becomes more valuable.
D) raise the reserve requirement, restricting the amount of cash and negotiable securities banks must have on hand.
E) lower tariffs so that corporations can trade more freely with foreign countries.

Question 69

In order to have reliable information about the costs and impact of economic policies, Congress created the ________.

A) Federal Reserve Board
B) Office of Management and Budget
C) Congressional Budget Office
D) Congressional Oversight Commission
E) Congressional Research Service

Question 70

The ________ is determined by the amount by which government spending exceeds government revenue in a fiscal year.

A) budget deficit
B) inflation rate
C) gross domestic product
D) reserve requirement
E) gross national product

Question 71

Why have politicians always favored using subsidies to promote certain economic activities?

A) They can be treated as benefits that can be widely spread in response to many demands.
B) They are generally cheaper than other forms of government support.
C) Recipients are always required to pay back the subsidies.
D) Congress does not have to pass legislation in order to provide subsidies.
E) They are paid for through international tariffs rather than personal income taxes.

Question 72

Which of the following is NOT an example of mandatory spending?

A) farm price supports
B) Social Security payments
C) defense spending
D) Medicare
E) interest payments on the national debt

Question 73

Approximately ________ percent of the federal budget is in the mandatory spending category.

A) 25
B) 33
C) 50
D) 65
E) 90

Question 74

Which of the following statements best characterizes the percentage of the federal budget that is spent on mandatory programs?

A) Spending on mandatory programs increased between 1962 and 1990 but has decreased dramatically since 1990.
B) Spending on mandatory programs decreased between 1962 and 1990 but has increased dramatically since 1990.
C) Spending on mandatory programs has remained constant since 1970.
D) Spending on mandatory programs has grown dramatically since 1970.
E) Spending on mandatory programs has declined dramatically since 1970.

Question 75

Before World War II, ________ of federal revenue was generated from individual income taxes.

A) less than 15 percent
B) a quarter
C) half
D) 80 percent
E) 100 percent

Question 76

The Budget Control Act of 2011 purported to

A) reduce the deficit by $1 trillion over 10 years.
B) balance the budget in the short term.
C) start paying off the total national debt.
D) dramatically reduce defense spending.
E) dramatically reduce social spending.

Question 77

The Interstate Commerce Act and the Sherman Antitrust Act are examples of the federal government's attempt to

A) control discretionary spending.
B) deregulate the economy.
C) regulate large businesses that establish monopolies.
D) control mandatory spending.
E) close tax loopholes.

Question 78

________ policies are designed to eliminate the abuses of powerful ________.

A) Redistributive; tariffs
B) Fiscal; loopholes
C) Antitrust; monopolies
D) Taxation; gross domestic product indexes
E) Monetary; interest groups

Question 79

The tax reform laws of 1981 and 1986 were significant because they

A) permanently increased the reserve requirement.
B) lowered the federal funds rate.
C) made budget deficits illegal.
D) significantly reduced the progressiveness of the federal income tax.
E) significantly increased the progressiveness of the federal income tax.

Question 80

From the perspective of members of Congress, what was the principal cause of the economic recession of 2008?

A) too much government spending on social welfare programs
B) not enough government spending on social welfare programs
C) the high prices Americans pay for health care and health insurance
D) excessive risk taking by investors
E) too much government regulation