Deck 15: Political Economy

Question 1

Which statement characterizes John Maynard Keynes' approach to economic management?

A)Keynes advocated "trickle down" economic policies.
B)Keynes proposed dampening the swings of the business cycle.
C)Keynes argued for stronger stimulus packages to corporations and small businesses.
D)Keynes suggested infusing the economy with government funds to promote spending.

Answer 1

B

Question 2

Which of these is the best example of Keynesianism?

A)President Eisenhower's attempt to limit defense spending
B)President Reagan's efforts to deregulate the airline industry
C)President Johnson's deficit spending to support the Vietnam War
D)the Federal Reserve Board's sharp decrease in interest rates to address the 2008 economic crisis

Answer 2

C

Question 3

Investment bubbles are problematic for which of these reasons?

A)People with lower incomes are unable to participate.
B)Growth happens so quickly that people tend to ignore risks.
C)Investors pump too much money into the economy all at once.
D)The government assumes all of the risk of speculative behavior.

Answer 3

B

Question 4

Which term characterizes President Bush's policy of pumping billions of federal dollars into shaky banks and firms in response to the 2008 financial crisis?

A)conservative
B)Keynesian
C)Marxist
D)neoclassical

Question 5

The Vietnam War contributed to the high inflation of the 1960s because it __________.

A)diverted money from the private sector
B)increased spending without an increase in productivity
C)led to higher taxes that pushed down the real value of wages
D)pushed up interest rates as private borrowers competed with the government

Question 6

Why was President Johnson reluctant to request a tax increase to pay for the Vietnam War?

A)He had just gotten a tax cut through Congress in 1964.
B)He felt it was an unjust and emotionally taxing conflict.
C)He wanted to avoid blame for a war he knew the U.S.couldn't win.
D)He saw U.S.involvement as the fault of the Kennedy administration.

Question 7

The federal government's efforts to deregulate the financial industry during the late-1990s and early-2000s followed the advice of __________.

A)Keynesian economists
B)neoclassical economists
C)left-leaning policy makers
D)the Federal Reserve Board

Question 8

According to the theory of supply-side economics,tax cuts will result in __________.

A)budget deficits
B)higher interest rates
C)an economic downturn
D)greater government revenue

Question 9

A neoclassical critic of Keynesianism would be most likely to make which of these arguments?

A)Economic downturns are largely a result of decreased productivity and not a slump in consumption as Keynesians believe.
B)Keynesians are wrong to assert that higher taxes on the wealthy will stimulate consumer spending at the lower ends of the economy.
C)Keynesian policy relies on politicians to decrease spending during economic boom times,but politicians are generally unwilling to do this.
D)The economy does not respond to any type of government economic policy,so it is foolish to believe that the business cycle can be managed.

Question 10

A government policy that gives homeowners a tax break that renters do not get could have which of these unintended effects?

A)It drives down rental rates,hurting landlords.
B)It reduces tax revenues,deepening the national debt.
C)It incentivizes homeownership,promoting the start of a housing bubble.
D)It requires increased regulation,siphoning money from the private sector.

Question 11

According to the theory of supply-side economics,a cut in the tax rate will actually result in an increase rather than a decrease in tax revenues.Which statement best explains how this is supposed to happen?

A)Lower tax rates encourage greater investment,leading to economic growth that contributes to a higher tax base.
B)High tax rates stimulate government spending,which overheats the economy and brings on an economic downturn.
C)High tax rates give the government too much ability to pass and enforce regulations that are burdensome on the private sector.
D)Lower tax rates reduce bureaucratic intervention in the economy,allowing both consumers and producers to keep more of their own money.

Question 12

In response to the 2008 economic crisis,President Bush favored a massive spending program to shore up shaky banks.Which statement explains how this is an example of Keynesian economics?

A)Keynes favored policies that could be implemented and changed quickly.
B)Keynes believed that a stable banking system was the key to economic stability.
C)According to Keynes,governments can best address recessions through deficit spending.
D)According to Keynes,the private sector will always mimic the economic behavior of the government.

Question 13

What was the origin of President Clinton's budget surplus from 1997-2000?

A)Offshoring led to lower production costs for businesses and thus created revenue.
B)President Clinton created the surplus through "trickle-down" policies that stimulated growth.
C)The surpluses primarily resulted from budget cuts instigated by the Clinton administration from 1994-1998.
D)The surpluses were largely the result of booms in the high-tech and investment industries that generated higher tax revenues.

Question 14

How do Keynesian economic policies differ from the traditional laissez-faire policies developed by Adam Smith?

A)Laissez-faire policies advocate for "cutthroat" capitalism,while Keynesian policies seek to spread wealth equally among a nation's citizens.
B)Laissez-faire policies advocate for increased spending and stimuli for government-run businesses,while Keynesian economics argues for a hands-free approach.
C)Keynesian policies advocate for increased government control of economics,while traditional laissez-faire economics argues for a hands-free approach.
D)The more liberal laissez-faire economies distribute wealth more evenly among society,while Keynesian economics tends to distribute wealth among the top one percent.

Question 15

The Federal Reserve Board would address a sudden rise in the inflation rate by __________.

A)raising interest rates
B)balancing the budget
C)implementing a flat tax
D)decreasing government spending

Question 16

The economic policies Barack Obama pursued in response to the Great Recession most closely resembled those of __________.

A)Ronald Reagan
B)Lyndon Johnson
C)George W.Bush
D)Franklin Roosevelt

Question 17

Suppose a country's economy has recently suffered a contraction and a spike in unemployment.A Keynesian would recommend __________.

A)increasing the minimum wage
B)raising tariffs and lowering income taxes
C)decreasing interest rates on government loans
D)borrowing money to spend on new public works projects

Question 18

A neoclassical economist and a Keynesian economist would disagree most strongly about __________.

A)the problems of inflation
B)the need to address recessions
C)the benefits of deficit spending
D)the importance of rational tax policy

Question 19

Which presidential candidate ran for office with the slogan,"It's the economy,stupid"?

A)Bill Clinton
B)Richard Nixon
C)Ronald Reagan
D)George W.Bush

Question 20

The 1973 Mideast war allowed members of the Organization of Petroleum Exporting Countries (OPEC)to __________.

A)quadruple oil prices
B)keep oil prices down
C)export to Japan and China
D)sell to nations in Eastern Europe

Question 21

The Earned Income Tax Credit addresses the issue of __________.

A)stagflation
B)offshoring
C)moral hazard
D)welfare dependency

Question 22

Which of these is true about entitlement spending in the United States?

A)Most entitlement spending goes to people who are not poor.
B)Most entitlement spending goes to people who live in extreme poverty.
C)Most forms of entitlement spending benefit businesses instead of individuals.
D)Most forms of entitlement spending go to military personnel and defense contractors.

Question 23

Entitlements differ from welfare because __________.

A)entitlements cost less
B)entitlements benefit the wealthy
C)welfare is more efficient to administer
D)welfare is a form of discretionary spending

Question 24

Which of these contributes to an increase in mandatory spending levels?

A)an increase in deficit spending
B)the implementation of a tax cut
C)the creation of a means-tested program
D)an expansion of pre-existing welfare programs

Question 25

Which statement describes the role that derivatives trading played in the recent housing market bubble?

A)"Deriving" their value from real estate speculation,derivatives created a volatile value system.
B)Derivatives fluctuate widely in value,which led many investors to buy,only to lose large sums upon downward fluctuation.
C)Derivatives forced many banking institutions to sell or close,condensing the control of the finance industry into a few small hands.
D)Derivatives became so complex that no one could understand them,which masked losses and made assets extremely difficult to evaluate.

Question 26

Which of these is a liberal argument against the Affordable Care Act?

A)It results in many recipients losing their other welfare benefits.
B)It benefits not just the poor but the middle class and the wealthy.
C)It provides subsidies to individuals and companies that do not need financial help.
D)It does not include the kind of public option that would make health insurance truly affordable.

Question 27

Which combination of policies is most likely to decrease government deficits in the short-term?

A)higher taxes and reduced spending
B)increased spending and higher taxes
C)lower taxes and higher interest rates
D)decreased spending and lower interest rates

Question 28

Welfare programs are likely to produce welfare dependency when they __________.

A)reduce incentives to work
B)reduce a person's tax burden
C)benefit people who are disabled
D)benefit the middle class more than the poor

Question 29

Due to increased medical costs,Medicare recipients are required to contribute bigger __________ to hold down overuse.

A)copayments
B)contributions
C)imbursements
D)subsidies

Question 30

Liberals and conservatives agree that it is problematic for the nation's healthcare system when __________.

A)health insurance companies deny coverage to people who want to buy policies
B)copayments are so high that people who need care decide not to obtain that care
C)spiraling government debt prevents welfare programs from addressing health care needs
D)government regulations make it complicated for doctors to receive Medicare and Medicaid payments

Question 31

Medicaid is an example of a "means-tested" program because it is only available __________.

A)to people who earn a certain amount of money
B)during periods when the economy is struggling
C)to people who have the means to contribute to the Medicaid fund
D)for as long as the government has the ability to pay for Medicaid treatment

Question 32

Conservatives argue that Johnson's Great Society programs created __________.

A)poverty gaps
B)inefficient subsidies
C)welfare dependency
D)entitlement revenues

Question 33

Which statement explains how Medicare differs from Medicaid?

A)Medicare is an entitlement while Medicaid is a form of welfare.
B)Medicare is completely free while Medicaid requires a recipient contribution.
C)Medicare pays for itself while Medicaid costs the government billions of dollars.
D)Medicare subsidizes health insurance while Medicaid provides direct payments to doctors and hospitals.

Question 34

According to the U.S.Labor Department,the poverty line is __________.

A)three times a city's minimal lodging budget
B)twice a minimal food budget plus $400 for lodging
C)four times minimal living expenses for an urban family of five
D)three times a minimal food budget for nonfarm families of four

Question 35

President Clinton's 1996 welfare reform effort would be seen as a failure by liberals if it resulted in which of the following?

A)People got off welfare but not necessarily out of poverty.
B)Welfare dependency was replaced by reliance on entitlements.
C)Welfare recipients opted to stop receiving payments without enrolling in workfare. 
D)A reduction in the tax base occurred that increased deficit spending on remaining welfare programs.

Question 36

The occurrence of stagflation during the 1970s demonstrated which of these points about the economy?

A)Tax cuts do not automatically reduce government revenue.
B)Inflation is not necessarily accompanied by economic growth.
C)Government policy can do little to impact economic performance.
D)The private sector does not respond quickly to changes in government policy.

Question 37

A government attempt to stimulate the economy through increased spending is most likely to have which of these undesirable effects?

A)a drop in productivity
B)a rise in the inflation rate
C)a shrinking of the middle class
D)an increase in the unemployment rate

Question 38

With no other changes in economic policy,a recession will reduce __________.

A)government revenue
B)government spending
C)government regulation of the economy
D)the amount of money the government can borrow

Question 39

Between 1965 and 1973,the percentage of Americans living below the poverty line __________.

A)greatly decreased
B)increased slightly
C)stayed about the same
D)approximately doubled

Question 40

In 2014,the federal poverty line was set at __________.

A)$14,505
B)$17,060
C)$23,550
D)$29,950

Question 41

Which of these ideas best supports the argument that the government should take a limited role in the economy?

A)Government programs rely on tax revenues.
B)Government institutions are inherently inefficient.
C)Tax incentives are effective at changing consumption patterns.
D)Economic downturns can be avoided through shrewd economic management.

Question 42

Many of today's American welfare programs began during the 1960s during the Kennedy and Johnson administrations.

Question 43

Despite its extensive welfare programs,New York City maintains a high degree of poverty.

Question 44

Starting in the late 1950s,the United States began importing more than it exported.

Question 45

Which of these statements expresses a common misperception about the American welfare state?

A)The middle class increasingly relies on welfare programs.
B)Welfare spending is largely responsible for growth of the national debt.
C)President Clinton's welfare reform made the problem of welfare dependency worse.
D)The United States spends less on welfare than most other advanced industrial nations.

Question 46

Moral hazard is created when the government __________.

A)lowers taxes hoping to increase tax revenue
B)uses deficit spending to stimulate the economy
C)assumes the financial risks of the private sector
D)provides payments that reduce incentives to work

Question 47

Suppose a nation creates a brand new welfare program that provides free pre-school for children whose parents earn below the poverty level.This is likely to result in __________.

A)calls by conservatives to cut taxes
B)a sharp increase in the national debt
C)an expansion of the government bureaucracy
D)poor parents dropping out of workfare programs

Question 48

Most economists want the government to create economic equity even if that means sacrificing prosperity.

Question 49

Conservatives complain that the federal government often sets the poverty line too low because of its emphasis on estimating the costs of a suburban lifestyle.

Question 50

David Ricardo,Karl Marx,and John Stuart Mill all agreed that a socialist economy would be more fair and more efficient.

Question 51

Someone participating in a workfare program is likely to end up __________.

A)relying on food stamps
B)enrolled in the Medicaid program
C)getting the Earned Income Tax Credit
D)getting a job with the federal government

Question 52

President Clinton's 1996 entitlement reforms gave welfare recipients two years to get off government assistance.

Question 53

How do American and Canadian views differ on the size of government?

A)Americans believe the government is too small,while Canadians feel that government intrudes on individual privacy.
B)As similar democratic nations located in North America,both Americans and Canadians feel that government is too large.
C)Americans and Canadians generally agree that government should be larger,funding welfare programs such as Medicaid and Food Stamps.
D)Many Americans believe government is too large,while Canadians recognize that government has a pivotal role to play and accept higher taxes.

Question 54

How does the American welfare state compare to those of other industrialized nations?

A)Much less is allocated to welfare in the United States.
B)The United States allocates about the same to welfare.
C)Other nations allocate less to welfare than the United States.
D)Few nations besides the United States maintain funds for welfare.

Question 55

Conservatives argue that high taxes on the wealthy and redistributive social welfare programs encourage effort and investment.

Question 56

Medicaid runs deficits largely because of fraudulent charges.

Question 57

Which of these people is least likely to complain about high taxes?

A)a taxpayer who qualifies for the Earned Income Tax Credit
B)an investor who suffered losses when an economic bubble burst
C)a small business owner who hires people through the workfare program
D)an executive for a company with a large number of government contracts

Question 58

Moral hazard contributes __________.

A)austerity
B)stagflation
C)economic bubbles
D)welfare dependency

Question 59

Many conservative economists argue that some banks are __________ because they would topple the rest of the economy with them.

A)too big to fail
B)destined for profit
C)inherently successful
D)practically invincible

Question 60

President Nixon took the United States off of the gold standard.