Question 1

A principle goal of market fundamentalism was to

Accepted Answer

The principle goal of market fundamentalism is to limit the role of government in the economy and promote free markets. This often involves reducing government spending and cutting taxes, which can starve the government of funds. Therefore, the best choice is D.

Question 2

Which of the following families saw their share of aggregate household income increase during the period of market fundamentalism?

Accepted Answer

During the period of market fundamentalism, income inequality increased, with the families in the top quintile of the economic ladder seeing their share of aggregate household income increase, while other quintiles generally saw stagnation or decline in their income shares.

Question 3

According to the text, the theory that states markets are "rational, self-correcting, and beneficial" is called

Accepted Answer

The theory that markets are rational, self-correcting, and beneficial is known as market fundamentalism.

Question 4

According to the text, the period from 1945 to 1973 when wages, productivity, and economic growth all rose together, inequality declined, and the average American's standard of living increased is called

Accepted Answer

The period described is commonly referred to as the Golden Age of capitalism.

Question 5

According to the text, the tax cuts that took place under President George W. Bush

Accepted Answer

The tax cuts under President George W. Bush are often criticized for reducing the government's revenue, which in turn limited its ability to fund alternative policies to market-driven solutions, aligning with the concept of "starving the beast." This strategy involves cutting taxes to reduce government revenue, with the aim of forcing the government to reduce spending, particularly on social programs.

Question 6

During the golden age of capitalism

Accepted Answer

The golden age of capitalism refers to the period from 1945 to the early 1970s, during which the U.S. economy experienced significant growth and prosperity. One of the key factors that contributed to this growth was the emergence of U.S. global dominance, as the U.S. emerged as a world leader in technology, manufacturing, and finance. As a result, the U.S. economy benefited from increased exports and investment flows, which helped fuel economic growth and led to rising living standards for many Americans.

Question 7

The Full Employment Act proposed by President Truman is best understood as an example of

Accepted Answer

The Full Employment Act proposed by President Truman is best understood as an example of Keynesian economic policies, which focused on government intervention in the economy to maintain full employment and stabilize the economy. This Act reflected the Keynesian belief that government spending could stimulate economic growth and reduce unemployment during times of economic downturns.

Question 8

Ronald Reagan's economic policies

Accepted Answer

Ronald Reagan's economic policies were based on the belief that the economy suffered from insufficient investment capital, not insufficient demand. This belief became known as supply-side economics, which holds that economic growth is mainly a result of lower taxes and less regulation, as these policies increase incentives for businesses and individuals to invest and work. Reagan's policies included tax cuts, deregulation, and reduction of government spending, all aimed at increasing investment capital and promoting economic growth. This strategy contrasted with Keynesian economics, which focuses on government spending to stimulate demand and reduce unemployment. Reagan's policies led to a period of economic growth and low inflation in the 1980s, but also contributed to increased income inequality.

Question 9

What the text calls the golden age of capitalism occurred

Accepted Answer

The text states that the golden age of capitalism occurred in the approximately twenty-five years after World War II.

Question 10

During the period of market fundamentalism, the deficit when computed as a percentage of the GDP

Accepted Answer

During the period of market fundamentalism, the deficit increased as a percentage of the GDP. This is because market fundamentalism promoted tax cuts and reduced government spending, leading to a decrease in government revenue and an increase in expenditures, which in turn increased the deficit relative to the size of the economy (GDP).

Question 11

The removal of rules that constrain market actors is called

Accepted Answer

Deregulation refers to the removal of rules and regulations that constrain market actors. Earmarks refer to government funds set aside for specific purposes, while monetary and fiscal policy refer to government interventions in the economy. Outsourcing refers to the practice of hiring external parties to perform services or tasks that were previously done in-house.

Question 12

The U.S. version of conservative Keynesianism included all of the following except

Accepted Answer

Nationalization of major industries was not a part of the U.S. version of conservative Keynesianism. The other options were all utilized to varying degrees during the period of conservative Keynesianism in the U.S. from the 1950s to the 1970s.

Question 13

The theory that government can use its budgetary authority to tame the business cycle to maintain full employment is called

Accepted Answer

The theory that government can use its budgetary authority to tame the business cycle to maintain full employment is called Keynesianism, named after economist John Maynard Keynes. The Keynesian approach argues that government spending can stabilize the economy during downturns and stimulate economic growth during expansions.

Question 14

Stagflation

Accepted Answer

Stagflation is a situation where there is a combination of stagnant economic growth or even a recession, high inflation rates, and high unemployment levels. It is often considered a difficult economic situation to address, as traditional monetary and fiscal policies may not be effective in tackling both inflation and unemployment simultaneously. Therefore, option B, heightened unemployment, is the correct choice.

Question 15

In trying to prevent a recession or decrease the effects of a recession, a president who sought to implement Keynesian policies would most likely

Accepted Answer

Keynesian economics calls for increased government spending during times of recession in order to stimulate aggregate demand and boost economic activity. This often requires deficit spending, as the government may not have enough revenue to fund the necessary expenditures.

Question 16

What the text calls market fundamentalism has all of the following characteristics except

Accepted Answer

The text does not mention the eclipse of financial capital by industrial capital as a characteristic of market fundamentalism. The other four characteristics (belief in rational and self-correcting markets, growing economic inequality, and increased deregulation) are mentioned.

Question 17

Policies and programs including Social Security, unemployment insurance, minimum-wage laws, public works programs for the unemployed, and laws protecting workers' right to organize unions were all created under the

Accepted Answer

These policies and programs were created under the New Deal, a series of programs and policies implemented by President Franklin D. Roosevelt in response to the Great Depression. The Square Deal was a set of progressive reforms initiated by President Theodore Roosevelt, the Fair Deal was a set of proposals put forth by President Harry Truman, and the Great Society was a set of domestic programs initiated by President Lyndon B. Johnson. The Reagan Revolution was a series of conservative policies put forth by President Ronald Reagan in the 1980s.

Question 18

Compared with Keynesianism in Europe, Keynesianism in the United States

Accepted Answer

Compared to the European approach to Keynesianism, the U.S. approach was more conservative. While the U.S. did increase government spending on infrastructure and social welfare programs, it did not go as far as nationalizing industries or implementing widespread economic redistribution. The U.S. also did not regulate business to the same extent as some European countries.

Question 19

According to Keynes, the major cause of the Great Depression was

Accepted Answer

Keynes believed that the root cause of the Great Depression was an inadequate level of consumer demand, which led to a decrease in production and increased unemployment. This was exacerbated by the contractionary policies pursued by governments, which worsened the economic downturn.

Question 20

Ronald Reagan was first elected president in

Accepted Answer

Ronald Reagan was first elected president in 1980. He was re-elected for a second term in 1984.

Quiz 3: The History of American Political Economy