Deck 15: Economic Policy

Question 1

When we drive our own cars, we pollute the air. Our benefit-driving the cars-causes others to experience a cost-breathing polluted air and the possibility of related illness or discomfort. Polluted air is an example of a/an ________.

A) public good
B) contaminant
C) club good
D) externality
E) common good

Answer 1

D

Question 2

________ is an economic philosophy that advocates public ownership and control of capital through government.

A) Marketism
B) Corporatism
C) Socialism
D) Capitalism
E) Marxism

Answer 2

E

Question 3

Compared to other modern democratic countries, government intervention in the United States' economy is ________ consequential.

A) less pervasive and
B) equally pervasive and
C) more pervasive and
D) less pervasive but more
E) more pervasive but less

Answer 3

B

Question 4

Over the last century, the federal government has become increasingly active in every area of economic regulation and activity EXCEPT ________.

A) unionization and working conditions
B) infrastructure construction and maintenance
C) poverty relief and social services
D) medicine and health care
E) tariffs and foreign trade

Question 5

What is the principal goal of the Social Security program?

A) to provide economic benefits to retirees and the disabled
B) to create a federal trust fund that supports government spending during a recession
C) to support national border security
D) to establish a national reserve of precious metals
E) to keep unemployment and inflation under target rates established by Congress

Question 6

Which is a product or benefit that can be enjoyed by anyone, regardless of whether he or she has paid for it, such that its consumption by one person does not prevent its consumption by others?

A) social good
B) club good
C) common good
D) public good
E) private good

Question 7

Which refers to goods used to produce other goods in an economy?

A) land
B) labor
C) capital
D) stock
E) bond

Question 8

Which policy is most consistent with a laissez-faire economic philosophy?

A) using the Federal Reserve system to expand the supply of money in order to promote commercial lending
B) providing subsidies for people to start new small businesses
C) requiring automobile manufactures to meet certain fuel economy standards
D) eliminating regulations that limit the types of loans that banks may offer to consumers
E) establishing zoning laws that limit the ways that individuals and firms use land in certain places

Question 9

When you and your friends enjoy loud music at a party late at night, your neighbors also experience that noise and may not appreciate it. Your enjoyment of a benefit-music played loudly-affects others who consider it a cost. This spillover is an example of a/an ________.

A) common good
B) public good
C) club good
D) contaminant
E) externality

Question 10

Joe buys and eats a candy bar. Joe's candy bar is a ________ good.

A) common
B) private
C) social
D) public
E) club

Question 11

Which of the following is an effect on others, whether good or bad, arising from a person's behavior?

A) externality
B) equality
C) contaminant
D) contagion
E) overflow

Question 12

Workers at the Amalgamated Widget Corporation's factory use a press to turn sheets of aluminum into widgets. Which element of production at the factory is capital?

A) workers
B) the corporation
C) the press
D) the factory building
E) widgets

Question 13

The economic philosophy that promotes private ownership of capital and advocates minimal government regulation of economic activity is known as ________.

A) Keynesianism
B) corporatism
C) capitalism
D) socialism
E) Marxism

Question 14

Which of the following contains the set of policies or thinking most in line with conservatism?

A) Austrian economics, pro-capitalism, Keynesian
B) Keynesian, supply-side, pro-capitalism
C) pro-capitalism, supply-side, monetarism
D) pro-redistribution, pro-regulatory, Austrian economics
E) Austrian economics, pro-capitalism, pro-regulatory

Question 15

Which is a product or benefit provided in such a way that it could be enjoyed only by those who pay for it, and such that its consumption by one person prevents its consumption by others?

A) social good
B) club good
C) common good
D) public good
E) private good

Question 16

Since 1917, ________ taxes have been the chief source of revenue for the U.S. government.

A) property
B) sales
C) import
D) export
E) income

Question 17

Keynesian economics ________.

A) promotes active government intervention during economic downturns
B) promotes spending for government jobs even when such jobs aren't completely necessary
C) advocates increased government spending during economic recessions to stimulate the economy
D) promotes active government intervention during economic downturns and promotes spending for government jobs even when such jobs aren't completely necessary
E) promotes active government intervention during economic downturns, promotes spending for government jobs even when such jobs aren't completely necessary, and advocates increased government spending during economic recessions to stimulate the economy

Question 18

The central thesis of Adam Smith's The Wealth of Nations is that economic markets ________.

A) will create greater wealth for society if governments practice laissez-faire capitalism
B) work best in societies with capitalistic foundations
C) are more prosperous under Marxist principles in which the government controls the economy
D) will create greater wealth for society if governments practice Keynesianism economics
E) flourish under any level of government intervention if taxes are low

Question 19

Which amendment to the U.S. Constitution empowered Congress to tax personal income?

A) Thirteenth
B) Fourteenth
C) Fifteenth
D) Sixteenth
E) Seventeenth

Question 20

________ is an economic philosophy that advocates the government not intervene in the economy and leave market forces to influence the economic behavior of individuals and firms.

A) Laissez-faire
B) Keynesianism
C) Socialism
D) Individualism
E) Communism

Question 21

In the absence of environmental laws, many people will act in their own self-interests; they will overuse natural resources and abuse the environment. If many individuals and businesses act this way, we will have a degraded environment and depleted resources. This poses a ________ for people who wish to enjoy the goods provided by nature.

A) principal-agent problem
B) coordination problem
C) prisoner's dilemma
D) collective action problem
E) unstable coalition

Question 22

In general, a/an ________ is most threatening to public goods.

A) unstable coalition
B) prisoner's dilemma
C) collective-action problem
D) coordination problem
E) principal-agent problem

Question 23

National defense, which provides security against foreign invasion to all Americans living within the country's borders, is an example of a ________ policy.

A) distributive
B) redistributive
C) regulatory
D) fiscal
E) monetary

Question 24

________ refers to the increasing purchasing power of a unit of currency.

A) Deflation
B) Stagnation
C) Stagflation
D) Conflation
E) Inflation

Question 25

For the government, regulations are ________ compared to programs like Social Security, Medicare, or national defense.

A) popular
B) necessary
C) expensive
D) inexpensive
E) unnecessary

Question 26

The city of Boston puts on a large fireworks display on the Charles River each Independence Day. The city does not charge admission to the event, and the promenade along the river is large enough to accommodate all the spectators who arrive for the show. Boston's fireworks display is a ________ good.

A) social
B) club
C) public
D) common
E) private

Question 27

Which term refers to alternating periods of economic growth and contraction?

A) economic seasons
B) growth cycle
C) economic cycle
D) business cycle
E) growth seasons

Question 28

________ policy is a government policy intended to provide benefits to a large portion of the population.

A) Redistributive
B) Distributive
C) Regulatory
D) Monetary
E) Fiscal

Question 29

Regulations in general are intended to ________.

A) protect consumers, workers, businesses, and investors
B) harm consumers, workers, businesses, and investors
C) protect consumers, while harming workers, businesses, and investors
D) protect consumers and workers, while harming businesses and investors
E) harm consumers and workers, while protecting businesses and investors

Question 30

The city of Brentwood maintains a small pavilion in its Central Park with a barbeque grill. Anyone may reserve the pavilion for an event, but the pavilion can only accommodate one event at a time. Brentwood's pavilion is a ________ good.

A) social
B) club
C) common
D) public
E) private

Question 31

________ policy is a government policy that provides benefits to a particular group or class of citizens and is paid for by another group or class of citizens.

A) Distributive
B) Fiscal
C) Regulatory
D) Redistributive
E) Monetary

Question 32

Sugar farmers receive generous subsidies from the government and benefit from high tariffs on foreign imports. These are examples of ________ policies.

A) distributive
B) redistributive
C) regulatory
D) fiscal
E) monetary

Question 33

When people and companies cannot borrow or earn enough money to make economic transactions that match the level of productivity, what is this called?

A) inflation
B) conflation
C) poverty
D) stagnation
E) deflation

Question 34

Social Security is widely understood as a distributive form of insurance, in which workers pay into the system and then receive the benefits when they retire. This perception is ________. Social Security ________.

A) false; is funded by a flat tax on the current workforce, which provides the funds for the payout to current retirees
B) true; funds are held in a trust over time and individuals receive benefits if they paid into the system while working
C) false; is funded primarily by the federal government
D) false; benefits are received only by those who paid into the system during their own careers
E) true; benefits are distributed to those who have paid into the system

Question 35

Which refers to the declining purchasing power of a unit of currency?

A) inflation
B) stagnation
C) stagflation
D) conflation
E) deflation

Question 36

The Social Security system, which taxes workers to pay cash benefits to retirees and those who cannot work due to disabilities, is an example of a ________ policy.

A) distributive
B) redistributive
C) regulatory
D) fiscal
E) monetary

Question 37

Which is a product or benefit that can be enjoyed by anyone, regardless of whether he or she has paid for it, such that its consumption by one person prevents its consumption by others?

A) social good
B) club good
C) common good
D) public good
E) private good

Question 38

The Holly Hills Country Club maintains a large swimming pool. Only dues-paying members may enter the pool, and the pool is large enough to accommodate all the club's members at once if necessary. The Holly Hills Country Club pool is a ________ good.

A) club
B) social
C) common
D) public
E) private

Question 39

According to the University of Illinois's agricultural outreach service, the average wholesale price of corn rose from $1.03 in 1960 to $2.36 in 2006. The decline in the corn purchasing power of a dollar is an example of ________.

A) inflation
B) stagnation
C) stagflation
D) conflation
E) deflation

Question 40

Which is a product or benefit that can only be enjoyed by those who pay for it, and consumption by one person does not prevent its consumption by others?

A) social good
B) club good
C) common good
D) public good
E) private good

Question 41

Consumption-based taxes, such as sales taxes, are generally considered to be ________ since lower income citizens are most heavily burdened by these taxes.

A) plenary
B) inductive
C) regressive
D) plenipotentiary
E) progressive

Question 42

By requiring banks to keep more money in their vaults, the Federal Reserve Board can effectively pull money out of the economy, thereby slowing ________. Conversely, by loosening reserve requirements, the Federal Reserve Board can pump more money into the economy, which usually leads to ________ interest rates and ________ access to loans.

A) inflation; lower; easier
B) inflation; higher; harder
C) deflation; lower; easier
D) deflation; higher; harder
E) inflation; higher; easier

Question 43

Inheritance taxes are generally ________ because only wealthy people tend to have much to pass on to heirs.

A) plenary
B) plenipotentiary
C) progressive
D) inductive
E) regressive

Question 44

A tax is ________ if it places a greater financial burden on the poor.

A) regressive
B) inductive
C) plenary
D) plenipotentiary
E) progressive

Question 45

Because people with lower incomes spend a greater portion of their money on it, sales tax is considered ________.

A) regressive
B) progressive
C) unfair
D) inherited
E) conservative

Question 46

All of the following are tools the Federal Reserve Board has at its disposal for manipulating money supply EXCEPT ________.

A) changing the discount rate
B) buying treasury bonds
C) selling treasury bonds
D) loosening restrictions on the amount of money banks have on hand
E) replacing the Federal Reserve Board chair

Question 47

Which is a network of banks chartered by the federal government that loans money to and regulates the activity of commercial banks?

A) Department of the Treasury
B) Bank of the United States
C) U.S. Mint
D) Federal Reserve System
E) International Monetary Fund

Question 48

By law, the Federal Reserve Board is supposed to be ________ political pressure, meaning that its decisions ________.

A) dependent on; need approval by the president and Congress
B) dependent on; need approval by the president but not by Congress
C) independent of; need approval by the president but not by Congress
D) independent of; do not need approval by the president or Congress
E) independent of; do not need approval by the president but do need approval by Congress

Question 49

A tax is ________ if it places a greater financial burden on the wealthy.

A) regressive
B) inductive
C) plenary
D) plenipotentiary
E) progressive

Question 50

________ is a possible result of low unemployment because wages become higher and thus the cost of goods increases.

A) Inflation
B) Deflation
C) Monetary policy
D) Regulatory policy
E) Equilibrium

Question 51

Which refers to a government policy that involves taxation or spending?

A) fiscal policy
B) causal policy
C) deterministic policy
D) monetary policy
E) constituent policy

Question 52

The federal cigarette tax is an example of a ________ policy.

A) constituent
B) causal
C) deterministic
D) fiscal
E) monetary

Question 53

Which refers to a policy that involves the supply of money in the economy?

A) monetary policy
B) redistributive policy
C) regulatory policy
D) fiscal policy
E) distributive policy

Question 54

The ________is the annual difference between revenues collected by the national government and its outlays.

A) national shortfall
B) budget gap
C) budget surplus
D) national deficit
E) national debt

Question 55

The ________ is the total amount of money owed to lenders by the U.S. government.

A) national shortfall
B) budget gap
C) budget surplus
D) national deficit
E) national debt

Question 56

Governments can ________ interest rates to make it ________ for businesses and consumers to borrow money for investments and purchases.

A) raise; easier
B) freeze; harder
C) freeze; impossible
D) lower; harder
E) lower; easier

Question 57

________ policies are more directly oriented toward encouraging growth, whereas ________ policies are oriented toward preventing volatility, which can include encouraging growth but also slowing down the economy.

A) Stabilization; promotion
B) Elevation; promotion
C) Elevation; equilibrium
D) Promotion; stabilization
E) Promotion; equilibrium

Question 58

The Federal Reserve's (the Fed's) policy of buying publicly held government debt with newly "printed" money in order to increase the amount of U.S. currency in circulation is an example of a ________ policy.

A) distributive
B) redistributive
C) regulatory
D) fiscal
E) monetary

Question 59

By and large, banks are regulated at the ________ level through the ________ system.

A) local; Local Banking
B) state; State Reserve
C) national; Federal Reserve
D) national; Federal Banking
E) state; State Banking

Question 60

Tax policies are thought to be ________ if the burden mostly falls on wealthy individuals and ________ if the less fortunate carry the bulk of the burden.

A) progressive; regressive
B) regressive; progressive
C) inherited; regressive
D) plenary; regressive
E) regressive; plenary

Question 61

Since World War II, the U.S. government has spent ________ the typical western European country on social welfare policies, nationalized health care, and public education, both on a per capita basis and as a percentage of gross domestic product.

A) less money than
B) more money than
C) about the same amount of money as
D) substantially more money than
E) less time developing strategies than

Question 62

Confidence in the dollar stems from the fact that the United States has never ________ on its bonds or experienced a serious threat to its ________ system since the mid-nineteenth century.

A) redoubled; economic
B) refinanced; constitutional
C) defaulted; economic
D) defaulted; constitutional
E) refinanced; economic

Question 63

The debt the U.S. national government owes to borrowers is ________ in comparison with other countries' debts.

A) low
B) moderate
C) high
D) unheard of
E) egregious

Question 64

Describe the federal budgetary process. When and by whom is the annual budget first proposed? How and by whom is this initial proposal changed? How and by whom is a final budget crafted and enacted?

Question 65

What are the major purposes of economic policy making? Provide an example of a federal policy that serves each of these purposes. What forces or factors prevent economic policies from achieving their goals in these areas?

Question 66

If spending reflects priorities, the main priorities in the United States are ________.

A) defense and the elderly
B) defense and veterans
C) veterans and education
D) safety net programs and defense
E) Medicaid and defense

Question 67

The federal budget ________ be signed by the president. It is a resolution, which is binding on ________ when it makes appropriations decisions.

A) must; Congress
B) does not need to; the Executive Office of the President
C) must; the Executive Office of the President
D) does not need to; Congress
E) does not need to; the Supreme Court

Question 68

Income tax rates in the United States are ________ compared to Brazil and ________ compared to Denmark.

A) higher; lower
B) lower; higher
C) about the same; lower
D) about the same; higher
E) higher; about the same

Question 69

Government can promote trade by ________ tariffs and having few or no limits on imports, or it can restrict trade by ________ tariffs.

A) implementing; raising
B) eliminating; lowering
C) implementing; eliminating
D) raising; lowering
E) lowering; raising

Question 70

By law, the ________ is required to submit a budget to Congress by the first Monday in February.

A) Speaker of the House
B) secretary of the Treasury
C) director of the Congressional Budget Office
D) chair of the Senate Budget Committee
E) president

Question 71

One motivation for crafting and ratifying the Constitution was that the states competed against one another for trade with foreign countries. If states set their own trade policies, they would all face a/an ________.

A) coordination problem
B) prisoner's dilemma
C) unstable coalition
D) principal-agent problem
E) collective action problem

Question 72

Since the 1970s, the average income of the top 1 percent of Americans has ________ compared to the average income of the remaining 99 percent.

A) grown much faster
B) slowed considerably
C) grown at the same rate
D) grown much slower
E) regressed

Question 73

Many countries base their currencies' exchange rates on the U.S. dollar because the ________.

A) U.S. dollar has never defaulted
B) United States has not experienced a serious threat to its constitutional system
C) United States has one of the most independent central banks in the world
D) debt the United States owes to other countries is much higher compared to other countries
E) U.S. dollar has never defaulted, the United States has not experienced a serious threat to its constitutional system, and the United States has one of the most independent central banks in the world

Question 74

Which refers to the total amount of goods and services produced in a year within the borders of a country?

A) total national output
B) net national product
C) gross domestic product
D) gross national product
E) total domestic product

Question 75

What is an externality? What are two examples of externalities? Why is public policy making often concerned with externalities? How might policy makers encourage activities with positive externalities and discourage activities with negative externalities?

Question 76

Subnational (state and local) governments account for approximately 40 percent of all government spending in the United States. This is a/an ________ proportion than in most other advanced industrialized democracies.

A) much higher
B) equal
C) lower
D) higher
E) much lower

Question 77

The United States spends far more on ________ than any other country.

A) social welfare policies
B) nationalized health care
C) public education
D) defense
E) food stamps

Question 78

What is the difference between fiscal policy and monetary policy? What institution(s) is/are charged with making monetary policy in the United States? What institution(s) is/are charged with making fiscal policy in the United States? How are fiscal and monetary policies used to ensure stable economic growth?

Question 79

________ is/are like a blueprint for the entire structure, while ________ is/are like detailed instructions on how to accomplish each item that makes up the overall structure.

A) The budget; budgetary allocations
B) The budget; appropriations bills
C) Appropriations bills; the budget
D) Appropriations bills; budget items
E) The budget; budget stipulations

Question 80

Because it has a history for running the economy in a ________ fashion, the reputation of the Fed is generally ________.

A) moderate; positive
B) moderate; negative
C) partisan; changing
D) partisan; conservative
E) dynamic; negative