Deck 17: Economic Policy

Question 1

President __________ embraced supply-side economics.

A)Clinton
B)Carter
C)Roosevelt
D)Reagan
E)None of these choices is true.

Answer 1

D

Question 2

Monetarists argue that government can control the economy's performance simply by

A)raising the interest rate.
B)cutting back on loans.
C)reducing the interest rate.
D)controlling the money supply.
E)cutting back on loans and reducing the interest rate.

Answer 2

D

Question 3

A government spending in excess of tax revenues to combat an economic slump is known as

A)net increase.
B)anticipated shortfall.
C)reconciliation.
D)readjustment.
E)deficit financing.

Answer 3

E

Question 4

Traditionally the Federal Reserve has tended to be more concerned about __________ than __________.

A)deficits; inflation
B)unemployment; deficits
C)unemployment; inflation
D)the reelection of Congress; the reelection of the president
E)inflation; unemployment

Question 5

When John Maynard Keynes suggested deficit financing by the government to stabilize the economy,he was advocating the use of

A)fiscal policy.
B)monetary policy.
C)a business cycle.
D)an "invisible hand."
E)productive capacity.

Question 6

The simultaneous occurrence of slow growth,unemployment,and inflation is referred to as ____________.

A)depression
B)stagflation
C)recession
D)authorization
E)monetarism

Question 7

The Federal Reserve can increase the money supply in all but which of the following ways?

A)The Fed can buy government securities.
B)The Fed can lower interest rates by altering the federal funds rate.
C)The Fed may change its discount rate.
D)The Fed can increase its reserve requirement for member banks.
E)All of these choices are true.

Question 8

Market economies are loosely called

A)capitalist economies.
B)monetarist models.
C)command economies.
D)planning models.
E)competition constructs.

Question 9

If government cuts taxes to encourage people to spend more money in order to stimulate economic growth,it is using

A)business cycling.
B)fiscal policy.
C)monetary policy.
D)pro-growth economics.
E)public income reductions.

Question 10

A good method of evaluating a country's amount of national debt,according to the authors,is

A)looking at the raw amount of debt, without any fancy statistics.
B)looking at the amount of debt controlling for inflation.
C)dividing the debt as a percentage of the amount of U.S. currency in active circulation.
D)dividing the debt as a percentage of gross domestic product.
E)comparing the net debt load today to the net debt load in the same month, but ten years ago.

Question 11

One famous monetarist theorist is Nobel Laureate

A)John Maynard Keynes.
B)Friedrich Hayek.
C)Karl Marx.
D)Alan Greenspan.
E)Milton Friedman.

Question 12

Between 1965 and 2013 the amount of U.S.public debt held by foreigners increased from 4.7 percent to _____ percent.

A)7.1
B)12
C)31.6
D)47.2
E)68.7

Question 13

The value of the goods and services actually produced is called the nation's

A)productive capacity.
B)economic outlook.
C)GSB.
D)composite wealth.
E)gross domestic product.

Question 14

Adam Smith's "invisible hand" refers to

A)the uncontrollable forces of nature that affect the economy.
B)a successful gothic novel Smith wrote, thereby gaining the income necessary to pursue less lucrative academic speculation.
C)the control that government exercises over the economy.
D)the economic force that converts individual pursuit of personal profit into societal good.
E)the fact that the basic cost of goods will always increase.

Question 15

Laissez-faire thought today is often compared as similar to

A)John Maynard Keynes and his demand-side economics.
B)Karl Marx's communism.
C)the inefficient market hypothesis.
D)monetary policy.
E)Friedrich Hayek and the "Austrian School" of economics.

Question 16

In 2013 the U.S national debt was roughly equivalent to _________ per person.

A)$23,000
B)$53,000
C)$93,000
D)$163,000
E)$323,000

Question 17

Economic criticisms of Keynesian theories include

A)government spending programs take too long to enact to help the economy.
B)government spending is easier to start than to stop.
C)it is much easier to raise taxes than to cut them.
D)it is not easy to keep the money supply growing by a steady amount every year.
E)government spending programs take too long to enact to help the economy and government spending is easier to start than to stop.

Question 18

The business cycle is

A)the process of investing and gaining a profit.
B)the period during which the federal government compiles the budget.
C)periods of expansion and inflation alternating with periods of contraction and unemployment.
D)the process of extracting money from the economy through taxes and then returning it through spending.
E)inflation and recession.

Question 19

The text observes that in the aftermath of the stimulus passed  in response to the 2008 economic downturn,there was a backlash that valued _________________ over ______________.​

A)​domestic economic growth; foreign affairs
B)​jobs for the unemployed; debt reduction
C)​tax cuts for the wealthy; tax relief for the middle class
D)​the financial services industry; the automobile industry
E)​debt reduction; jobs for the unemployed

Question 20

Monetary policies are largely determined by

A)Congress.
B)state legislatures.
C)select members of the Senate.
D)the Congressional Budget Office.
E)the Federal Reserve Board.

Question 21

By April 2014,the total national debt was about __________ trillion dollars.

A)1.1
B)4.9
C)12.3
D)17.5
E)22.4

Question 22

At the time of Reagan's Economic Recovery Tax Act of 1981,the top marginal rate for the highest income group of Americans was

A)15 percent.
B)28 percent.
C)39 percent.
D)70 percent.
E)91 percent.

Question 23

The __________ supervises the development of the president's budget.

A)Council of Economic Advisers
B)comptroller general
C)Federal Reserve Board
D)Office of Management and Budget (OMB)
E)Budget Control Board

Question 24

The House Armed Services Committee and the Senate Banking,Housing,and Urban Affairs Committee are __________ committees that review portions of the budget that pertain to their area of responsibility.

A)authorization
B)appropriations
C)tax
D)select
E)joint

Question 25

The U.S.Fiscal Year 2015 budget submitted by President Obama reflected expended federal government spending of approximately _________ dollars.

A)998 billion
B)1,576 billion
C)3,901 billion
D)6,427 billion
E)1.2 trillion

Question 26

Which of the following did not occur,after the passage of Reagan's Economic Recovery Tax Act of 1981?

A)Unemployment went up to 9.6 percent in 1983.
B)There was a massive drop in tax revenues.
C)Federal budget deficits grew.
D)The Federal Reserve continued to keep interest rates high.
E)Inflation grew from about 3 percent in 1981 to 13 percent in 1983.

Question 27

The Budget and Accounting Act of 1921 placed the responsibility for preparing the federal budget in the hands of

A)Congress.
B)the Federal Reserve Board.
C)the Treasury Department.
D)the Council of Economic Advisers.
E)the president.

Question 28

President Reagan backed a sweeping tax reform that reduced the number of brackets.By eliminating many tax brackets,the new tax policy approached the idea of a __________-one that requires everyone to pay at the same rate.

A)loophole tax
B)progressive tax
C)wealth tax
D)flat tax
E)bracket tax

Question 29

The Department of Education successfully lobbies to have  added to the budget a new federally-funded program that would ​provide for technology in classrooms.Spending on this program would be best described as _____________ spending.

A)​mandatory
B)​budget-busting
C)​discretionary
D)​presidential
E)​Article I

Question 30

The essence of supply-side economics is that

A)government spending should be used to "prime the pump" and aid economic recovery.
B)industry should be centrally coordinated to ensure a steady supply of necessary goods.
C)taxes should be cut to stimulate investment, and government regulation of business should be decreased.
D)government should tax heavily and redistribute the money in an equitable fashion.
E)business should be forced by government to allow inventories of goods to grow, thereby reducing costs.

Question 31

Which of the following taxes is not a major source (as in over 10 percent)of the federal government's revenue?

A)Individual income taxes
B)Social income taxes
C)Corporate income taxes
D)Estate taxes
E)All of these choices are major sources of federal government revenue.

Question 32

Of the twelve appropriations bills that are supposed to be passed​ to fund operations of the U.S.government,_______ were passed by the appropriations committees in 2013

A)​zero
B)​three
C)​six
D)​nine
E)​twelve

Question 33

Social Security and veterans' pensions,which provide benefits to which individuals have a legal right and which cannot be reduced without changing the law,are also referred to as

A)retroactive programs.
B)discretionary spending.
C)controllable spending.
D)earmarks.
E)entitlements.

Question 34

The role of appropriations committees is to

A)monitor overall spending.
B)oversee implementation of the Gramm-Rudman-Hollings Act.
C)authorize spending in particular legislative areas.
D)offer a comprehensive budget review process.
E)decide which programs will be funded.

Question 35

Non-entitlement spending ​that is authorized by annual appropriations is referred to as _____________ spending.

A)​Congressional
B)​optional
C)​mandatory
D)​committee
E)​discretionary

Question 36

In the 1980s,Congress tried to force itself to balance the budget by

A)increasing taxes on all income levels.
B)impounding funds for programs deemed unnecessary.
C)cutting military funding.
D)setting annual targets to gradually lower the deficit.
E)None of these choices is true.

Question 37

In contrast to its normal practice,in 2014 the Fed seemed more concerned about ___________ than about ______________.​

A)​persistent unemployment; inflation
B)​corporate profits; job growth
C)​inflation; persistent unemployment
D)​the fed funds rate; mortgage interest rates
E)​politics; policy

Question 38

In 2011,under pressure from the tea party movement,congressional Republicans opposed

A)voting for final passage of Obama's health care law.
B)the TARP bill providing emergency funding to Wall Street.
C)raising the federal debt ceiling.
D)funding for the Internal Revenue Service.
E)emergency foreign aid to the governments of Spain, Greece, and Portugal.

Question 39

The text suggests that no one in Congress is responsible for the budget as a whole because

A)one group in each house plans for revenues, and many other groups plan for spending.
B)the executive branch dominates the process at every point.
C)committee chairpersons make the critical decisions in secret.
D)the election cycle creates too much turnover in membership.
E)informal norms prevent members from revealing the sources of key decisions.

Question 40

The idea of tax cuts for the rich that will then "trickle down" to working people in the form of additional jobs and income,is consistent with

A)Keynesian economics.
B)the Milton Friedman hypothesis.
C)the aggregate demand hypothesis.
D)supply-side economics.
E)None of these choices is true.

Question 41

The total federal tax burden on U.S.citizens __________ the 1950s.

A)has increased slightly since
B)has increased dramatically since
C)has stayed about the same since
D)has actually decreased since
E)is impossible to directly compare to

Question 42

One important governmental justification for progressive taxation is​ ____________________.

A)​assisting small businesses
B)​promoting equality
C)​giving corporations more incentive to hire new employees
D)​allowing people to keep more of the income that they earn
E)​enhancing national security by enhancing federal revenues

Question 43

The U.S.income tax was first introduced in order to

A)help finance the Civil War.
B)respond to the dramatic drop in federal revenues as a result of the Great Depression.
C)finance U.S. participation in World War I.
D)reduce the ability of a few industrialists to create economic disadvantage for the majority of citizens.
E)enable the U.S. government to grow in response to competition from foreign countries.

Question 44

​If a policy rationale and the political will were present,___________ could eliminate expensive federal entitlement programs.

A)​the President
B)​executive agencies
C)​the Congress
D)​the Supreme Court
E)​a simple majority of state legislatures

Question 45

Because everyone pays the same rate of sales tax on purchases,and less wealthy people spend most of their income buying things,as opposed to saving and investing​,the sales tax has a ___________ impact.

A)​pluralist
B)regressive
C)​​discretionary
D)​positive
E)​​progressive

Question 46

​According to the text,_____________ have historically been most favored by America's tax policies.

A)​poorer citizens
B)​the middle class
C)​those who gain most of their income from wages for work
D)​the richest citizens
E)​no particular citizens, compared to other groups,

Question 47

The __________ Amendment empowered the national government to collect taxes on income.

A)​Sixteenth
B)​Nineteenth
C)​Twenty-first
D)​Twenty-sixth
E)​Twenty-eighth

Question 48

Developing budgets by using last year's budget as the base and adding an amount to cover the increased costs of doing business (inflation)and any new programs is called

A)deficit budgeting.
B)the program planning budgeting system (PPBS).
C)incremental budgeting.
D)zero-based budgeting.
E)cost analysis.

Question 49

During the Reagan administration,the maximum individual income tax rate fell to the lowest level since

A)the Kennedy administration.
B)the Coolidge and Hoover administrations of the 1920s and 1930s.
C)the Eisenhower administration.
D)the Franklin Delano Roosevelt administration.
E)None of these choices is true.

Question 50

The federal government's single largest budgeted spending item is

A)Social Security.
B)national defense.
C)Medicare.
D)humanitarian foreign aid.
E)food stamps.

Question 51

An example of a regressive tax in America is the

A)income tax.
B)Medicare tax.
C)Social Security tax.
D)estate tax.
E)corporation tax.

Question 52

When asked in a recent national poll whether federal spending should be "increased,decreased or kept about the same" for eighteen different purposes,respondents said that every category of spending should be maintained or increased except ____________________.

A)​highways, military defense and foreign aid
B)​welfare, unemployment aid and the space program
C)​education, aid to the world's needy, and child care
D)​military defense, unemployment aid, and aid to the world's needy
E)​Respondents believed every category of spending should be maintained or increased.

Question 53

Of spending planned in President Obama's FY 2015 budget,about ____ percent can be classified as uncontrollable or relatively uncontrollable.

A)​15
B)​25
C)​45
D)​65
E)​85

Question 54

The phrase "uncontrollable outlays" refers to the fact that

A)much of the budget is already committed by past contracts and agreements.
B)Congress and the president seldom agree on a budget.
C)politicians lack the courage to make budget cuts.
D)the amount of time spent in hearings and debates on the federal budget increases every year.
E)spending is automatic if no budget agreement is reached.

Question 55

A tax allocated based on a person's ability to pay,rather than,for example,requiring everyone to pay an equal percentage of their income,is known as a ______________ tax.​

A)​progressive
B)​mandatory
C)​discretionary
D)​regressive
E)​flat

Question 56

By comparison with most other democratic countries,the tax burden on American citizens is higher than ____________ other countries' citizens.​

A)​almost all
B)​about three-fourths
C)​about half of
D)​about one-fourth
E)​almost no

Question 57

The administration of __________ was notable for especially boosting increases in defense spending.

A)Jimmy Carter
B)Bill Clinton
C)George H.W. Bush
D)Ronald Reagan
E)None of these choices is true.

Question 58

A tax where the rich pay proportionately higher taxes as a share of their income than the poor is also known as a(n)

A)regressive tax.
B)payroll tax.
C)flat tax.
D)progressive tax.
E)decoupled tax.

Question 59

Spending for national defense reached its highest level as a percentage of the budget in the

A)1940s.
B)1950s.
C)1960s.
D)1980s.
E)2000s.

Question 60

International affairs,including "foreign aid" and the budget of the State Department and embassies and consulates in other countries,consume _________ percent of the FY 2015 budget.

A)​under 1.5
B)​about 4
C)​just under 10
D)​about 15
E)​just over 20

Question 61

What are the three ways the Fed controls the money supply?

Question 62

Describe some of the ways that the Federal Reserve Board arguably affects the nation's economy as much as the president can.

Question 63

Describe the difference between budget authority and budget outlays,and give an example of a federal budget outlay.

Question 64

Discuss some of the reasons that America's system of taxation does not do more to promote economic equality.​

Question 65

Describe the difference between mandatory and discretionary spending,provide some examples of each,and explain ​how these categories of spending impact budgeting decisions made by Congress.

Question 66

Explain the difference between laissez-faire economics and Keynesian economics.

Question 67

Compare and contrast the flat tax and the progressive tax,and describe which tax was more closely related to President Reagan's policies.

Question 68

Explain the difference between fiscal policy and monetary policy,and provide some examples of each.

Question 69

Explain some of the ways America's tax policies have traditionally favored the wealthy.​

Question 70

Explain the basic premises of supply-side economics.

Question 71

Describe President George W.Bush's election tax pledges,and what happened to budget deficits during Bush's presidency.

Question 72

Describe the process through which the U.S.budget is developed and passed.​