Deck 6: Government and the Economy

Question 1

Between 1961 and 1972,the federal government spent as much on ______ as it did on building highways.

A) welfare
B) Medicare
C) crop subsidies
D) space exploration

Answer 1

D
Explanation: Between 1961 and 1972, the federal government spent as much on space exploration as it did on building highways.

Question 2

The inefficiency of taxation means that imposing a tax on a good or service typically

A) reduces the amount produced.
B) increases the amount produced.
C) causes backlogs and surpluses.
D) increases costs across the board.

Answer 2

A
Explanation: Taxes increase costs, thereby reducing demand and eventually supply.

Question 3

Which legislation was NOT signed into law by Richard Nixon?

A) The Environmental Protection Agency Act (EPA).
B) The Occupational Health and Safety Act (OSHA).
C) The Equal Employment Opportunity Commission Act (EEOC).
D) The Social Security Administration Act (SSA).

Answer 3

D
Explanation: Social Security was signed into law by President Roosevelt.

Question 4

World War II increased the amount of government spending and economic intervention in the United States.

Question 5

There are no discernible downsides to government action.

Question 6

In 1971 President Richard Nixon announced a 90-day freeze on wage and price increases to stem economic stagflation.

Question 7

The private sector includes privately owned businesses and for-profit divisions of various governments.

Question 8

Under President Lyndon Johnson,the federal government actually decreased its involvement in the economy.

Question 9

Government employment (excluding wartime employment)peaked during the

A) 1980s.
B) 1930s.
C) 1960s.
D) 1970s.

Question 10

The New Deal was a government outgrowth of World War I.

Question 11

The New Deal was

A) the name of a television game show in the 1930s.
B) a government agency that regulated auto dealerships.
C) the cornerstone of the Kennedy administration.
D) legislation passed by the Roosevelt administration.

Question 12

As one of the New Deal programs,the WPA was a government agency that

A) regulated the banking industry.
B) regulated the securities industry.
C) regulated the trucking and interstate commerce industries.
D) increased employment through construction projects.

Question 13

The Public Broadcasting Service and National Public Radio are examples of

A) private nonprofit organizations.
B) private for-profit companies.
C) nonprofit government-funded organizations.
D) government agencies.

Question 14

The Airline Deregulation Act

A) allowed airlines to enter new markets, with government permission.
B) allowed airlines to change prices, with government consent.
C) created a new regulatory body called American Airlines.
D) subjected new airlines only to safety regulations.

Question 15

Deregulation (the reduction of government intervention)began with the oil price shock of 1973.

Question 16

Which of the following was NOT part of the New Deal?

A) Social Security.
B) Unemployment insurance.
C) The federal minimum wage.
D) Medicare.

Question 17

The oil price shock of 1973 was caused by

A) A series of earthquakes in Venezuela.
B) The overthrow of the Iranian government by terrorists.
C) The drying up of two major U.S. oil wells.
D) An embargo by the Organization of Petroleum Exporting Countries (OPEC).

Question 18

Under President John
F. Kennedy, the United States expanded its highway system, creating 50,000 miles of high-speed limited-access highway.

Question 19

The public sector includes state and local governments,as well as the federal government.

Question 20

An example of the command approach is public education.

Question 21

Corruption is

A) the creation of oxidized material on metal.
B) legal activities to promote a viewpoint.
C) illegal activities to create an unfair advantage.
D) found only within local governments.

Question 22

The Federal Reserve Board is responsible for

A) maintaining adequate supervision of insurance companies.
B) protecting consumers from antitrust violations.
C) supervising the financial and monetary system.
D) regulating privacy issues relating to health care providers.

Question 23

The inefficiency of taxation means that

A) governments tax only specific industries.
B) taxes are applied more on consumers than businesses.
C) imposing a tax on goods typically reduces the amount produced.
D) imposing a tax on goods reduces prices that buyers pay and decreases supply.

Question 24

Which of the following is NOT an appropriate role for government to play in the economy?

A) Regulating markets.
B) Promoting free speech in marketing.
C) Addressing externalities.
D) Redistributing income.

Question 25

What happens to the market price that buyers face as a result of taxation?

A) It is greater than before the tax was imposed.
B) It is less than before the tax was imposed.
C) Taxation has no effect on price, only output.
D) Taxation affects average cost only.

Question 26

The Federal Trade Commission is responsible for enforcing

A) health care.
B) antitrust law.
C) interstate commerce.
D) communications law.

Question 27

The Wage and Price Controls of 1971 were an example of

A) command approach intervention.
B) free enterprise.
C) market-based economics.
D) a balanced approach.

Question 28

Among industrialized countries,the United States has one of the __________ public sectors,as a percentage of government spending and the economy.

A) smallest
B) largest
C) fastest-growing
D) slowest-growing

Question 29

Which of the following is NOT a public good?

A) Police protection.
B) Fire protection.
C) Primary and secondary education.
D) Business incubator sites.

Question 30

The Uniform Commercial Code governs

A) what can be broadcast on public airways.
B) commercial transactions between companies and consumers.
C) commercial transactions between the United States and foreign countries.
D) international commerce transactions.

Question 31

The era of deregulation,when the role of the government in the economy steadily decreased,began

A) shortly after WWII.
B) in the mid-1970s.
C) with the presidency of Dwight Eisenhower.
D) with the presidency of Ronald Reagan.

Question 32

The original research that culminated in the Internet was sponsored by

A) Al Gore.
B) Microsoft.
C) NASA.
D) The Defense Department.

Question 33

Rent-seeking behavior means

A) companies try to increase profit by cutting costs or improving products.
B) companies spend money on influencing government rather than on profit-increasing strategies.
C) consumer real estate studies that focus on renting versus buying.
D) a transfer of knowledge between private and public sectors.

Question 34

The U.S.Consumer Product Safety Commission is responsible for

A) cell phone company billing practices.
B) regulating the flammability of mattresses.
C) regulating the safety of aircraft.
D) regulating consumer financial protection.

Question 35

Rent-seeking behavior can sometimes cause

A) housing rental prices to increase.
B) a decrease in government spending.
C) corruption in public officials.
D) a sharp increase in economic activity.

Question 36

______________ means that government sets the rules for market competition.

A) Market regulation
B) Market dynamics
C) Market economics
D) Government metrics

Question 37

Which of the following programs that expanded the government's role in the economy was enacted by a Republican president?

A) The interstate highway program.
B) The Environmental Protection Agency (EPA).
C) The Occupational Safety and Health Administration (OSHA).
D) All of these were enacted by Republican presidents.

Question 38

Which of the following is NOT a type of tax?

A) Estate tax.
B) Payroll tax.
C) Excise tax.
D) Family tax.

Question 39

The free-rider problem concerns

A) government deregulation of the public transit system.
B) voluntary associations that provide public goods to an individual who receives the benefit but does not pay for it.
C) government taxation.
D) welfare programs.

Question 40

Which is an example of the government command approach?

A) The growth of community banks.
B) Fast-food franchise growth.
C) Public schools.
D) Private college education.

Question 41

After a tax is placed on a good or service,which of the following does not occur?

A) Buyers pay more for the good or service.
B) Sellers receive less when they produce and sell the good or service.
C) The total volume of sales of the good or service decreases.
D) The total volume of sales of the good or service increases.

Question 42

$$\begin{array}{l}\begin{array} { c | c | c } \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Supplied }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 0 & 0 & 300 \\\$ 1 & 10 & 250 \\\$ 2 & 50 & 180 \\\$ 3 & 90 & 150 \\\$ 4 & 120 & 120 \\\$ 5 & 150 & 90 \\\$ 6 & 180 & 50\end{array}\\\text { Table } 6.1\end{array}$$ Refer to Table 6.1,which gives the daily supply and demand schedules for cups of coffee at a kiosk in a shopping mall.If the government places a $2 per cup tax on coffee,how many cups of coffee will be bought and sold after the tax is imposed?

A) 50.
B) 90.
C) 120.
D)150.

Question 43

The New Deal legislation passed by President Roosevelt was inspired by

A) the Irish potato famine of 1927.
B) economic problems caused by World War I.
C) the Great Depression
D) normal business cycles.

Question 44

Imposing a tax on a market typically hurts

A) buyers only.
B) sellers only.
C) both buyers and sellers.
D) buyers, sellers, and government agencies.

Question 45

$$\begin{array}{l}\begin{array} { c | c | c } \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Supplied }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 0 & 0 & 300 \\\$ 1 & 10 & 250 \\\$ 2 & 50 & 180 \\\$ 3 & 90 & 150 \\\$ 4 & 120 & 120 \\\$ 5 & 150 & 90 \\\$ 6 & 180 & 50\end{array}\\\text { Table } 6.1\end{array}$$ Refer to Table 6.1,which gives the daily supply and demand schedules for cups of coffee at a kiosk in a shopping mall.If the government places a $4 per cup tax on coffee,how many cups of coffee will be bought and sold after the tax is imposed?

A) 50.
B) 90.
C) 120.
D)150.

Question 46

When one person's actions harm others (such as in the case of pollution),economists say that a(n)_________ is present.

A) network externality
B) antitrust externality
C) negative externality
D) market externality

Question 47

The unintentional impact that the actions of an individual can have on others is called:

A) an externality.
B) a public good.
C) a network effect.
D) the free-rider problem.

Question 48

Which of the following is mentioned in the textbook as a deficiency in private markets for which government action can provide a remedy?

A) Pollution.
B) High prices.
C) Low interest rates.
D) Excessive levels of debt.

Question 49

Which of the following is NOT a type of externality?

A) Network externality.
B) Positive externality.
C) Negative externality.
D) Market externality.

Question 50

Which president signed into law the Environmental Protection Agency Act?

A) Richard Nixon.
B) John
C) Jimmy Carter.
D) Lyndon Johnson.
F) Kennedy.

Question 51

Which of the following is NOT one of the programs through which the U.S.government attempts to redistribute income to the poor?

A) The Supplemental Nutrition Assistance Program (food stamps).
B) Medicare.
C) Unemployment insurance.
D) The Works Progress Administration (WPA).

Question 52

Which of the following does NOT provide a positive externality?

A) Actions that benefit others.
B) The proliferation of Internet accounts.
C) Airport and aircraft noise.
D) Getting a flu vaccine.

Question 53

The disadvantages of government intervention include

A) achieving desirable goals.
B) lower taxation.
C) incentive problems.
D) reduced regulation.

Question 54

$$\begin{array}{l}\begin{array} { c | c | c } \text { Price } & \begin{array} { c } \text { Quantity } \\\text { Supplied }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Demanded }\end{array} \\\hline \$ 0 & 0 & 300 \\\$ 1 & 10 & 250 \\\$ 2 & 50 & 180 \\\$ 3 & 90 & 150 \\\$ 4 & 120 & 120 \\\$ 5 & 150 & 90 \\\$ 6 & 180 & 50\end{array}\\\text { Table } 6.1\end{array}$$ Refer to Table 6.1,which gives the daily supply and demand schedules for cups of coffee at a kiosk in a shopping mall.If there is no tax placed on coffee,how many cups of coffee will be bought and sold?

A) 50.
B) 90.
C) 120.
D)150.

Question 55

The potential profit from new technological advancements and innovations

A) Gives the private sector a better incentive to commercialize new technologies.
B) Gives the public sector a better incentive to make investments into farsighted research.
C) Leads to rent-seeking behavior and corruption in government.
D) Provides similar incentives to the private and public sectors with respect to researching new technologies.

Question 56

The Securities and Exchange Commission regulates

A) security and alarm companies.
B) nonmonetary exchanges, like bartering.
C) stock markets.
D) auto insurance companies.

Question 57

In 1997 the FTC blocked the merger between Staples and Office Depot.Why was this merger blocked?

Question 58

What percentage of college students attends a publicly funded college or university?

A) 20%.
B) 75%.
C) 40%.
D) 30%.

Question 59

In the United States,the government does NOT play much of a role in

A) Managing globalization.
B) Encouraging technological change.
C) Inspiring consumer preferences.
D) Shaping financial markets.

Question 60

The laws that prevent companies from unfairly trying to get market power or reduce the amount of competition in a market are known as

A) the Universal Commercial Code.
B) antitrust laws.
C) free-rider laws.
D) OSHA, EPA, and FCC.

Question 61

What is a network externality?

Question 62

What happened to government regulation in the aftermath of the oil shock of 1973?

Question 63

What are the four justifications for government intervention in the economy? Describe two in detail,providing an example of each.

Question 64

What is income redistribution?