Deck 16: Politics and the Economy

Question 1

The United States is primarily a(n)__________ economy.

A)collective
B)fiscal
C)free-market
D)individual

Answer 1

C

Question 2

What do economists use gross domestic product to measure?

A)the rate of government spending in the economy
B)the rate of tariffs applied to goods imported into the United States
C)the total impact of import revenues on the domestic economy
D)the total value of goods and services produced in the economy

Answer 2

D

Question 3

The most dramatic change in federal tax laws occurred during the years when __________ was president.

A)George H.W.Bush
B)George W.Bush
C)Gerald Ford
D)Ronald Reagan

Answer 3

D

Question 4

The total market value of all goods and services produced in an area during a year is termed which of the following?

A)greatest national product
B)gross domestic product
C)maximum national product
D)minimum domestic product

Question 5

According to the textbook,when recession threatens,how does the Fed typically respond?

A)by expanding the money supply and lowering interest rates
B)by raising the discount rate and thereby the cost of borrowing by banks
C)by raising the prices of certain products in the marketplace
D)by raising the reserve requirement of banks and thereby reducing the amount of money they have to loan out

Question 6

A system of taxation in which higher-income groups pay a larger percentage of their incomes in taxes than do lower-income groups is called __________.

A)flat taxation
B)means-tested taxation
C)progressive taxation
D)proportional taxation

Question 7

Much of the growth of federal government spending over the years is attributed to __________.

A)deficit spending
B)discretionary spending
C)entitlement programs
D)mandatory spending

Question 8

What is the source of funding for Social Security?

A)sales taxes
B)payroll taxes
C)progressive taxes
D)property taxes

Question 9

What is the primary tool that monetary policy uses to affect the overall economy?

A)foreign monetary investment
B)government spending
C)labor regulations
D)money supply

Question 10

Inflation is best understood as the rate at which __________.

A)gross domestic product expands
B)prices for goods and services decrease
C)prices for goods and services increase
D)the federal government increases taxes to raise revenue

Question 11

Medicare is what type of federal program?

A)arbitrary
B)discretionary
C)entitlement
D)in-kind

Question 12

The Constitution of the United States places all taxing,borrowing,and spending powers in the hands of __________.

A)Congress
B)the citizens
C)the federal government
D)the president

Question 13

What is the federal government's largest source of revenue?

A)corporate tax
B)discretionary spending
C)individual income taxes
D)international trade

Question 14

The size of the national debt is __________.

A)declining
B)rising
C)marginal
D)stagnating

Question 15

Which of the following strategies does monetary policy dictate in inflationary periods?

A)Congress should balance the federal budget.
B)Congress should increase spending.
C)Congress should raise taxes on citizens.
D)The Federal Reserve should raise interest rates.

Question 16

Which of the following is true about Social Security?

A)It is a form of accident insurance.
B)It is considered a means-tested program.
C)It is available only to the very wealthy.
D)It is an entitlement program.

Question 17

The main goal of fiscal policy is to __________.

A)affect how much money is available to foreign governments for investment
B)affect how much money is available to state governments for capital projects
C)determine how much interest the government will pay on the federal debt
D)use taxes and government spending to help stimulate or slow down economic growth

Question 18

Who argued that people are constrained,both morally and ethically,not to incur any debt that their own generation cannot pay?

A)George Washington
B)James Madison
C)John Adams
D)Thomas Jefferson

Question 19

Which of the following entities is responsible for determining interest rates in the United States?

A)Congress
B)the Congressional Budget Office
C)the Executive Office of the President
D)the Federal Reserve Board

Question 20

What is the main purpose of monetary policy?

A)to affect how much money is available to businesses and banks
B)to control the amount of public debt sold to foreign states
C)to control the interest rates on money lent to foreign states
D)to equalize income disparity among citizens of the United States

Question 21

In general,a recession does which of these?

A)generates a response by state governments
B)generates a response by the federal government
C)lasts at least a year
D)leads to higher inflation

Question 22

Which of the following helps explain the difficulty in solving the long-term debt problem in the United States?

A)The decline in the strength of American political parties in recent years has made compromise in this area highly unlikely.
B)The decline in social spending has reduced the level of economic growth in the United States.
C)The Democratic Party has been captured by special interest groups that benefit from high levels of debt.
D)The rise of extreme partisanship in recent years has made compromise in this area highly unlikely.

Question 23

Why are some social welfare programs referred to as entitlements?

A)because benefits are distributed automatically to citizens who qualify,based on a set of legal rights to benefits
B)because they are benefits available only to the working poor in the United States
C)because they are benefits funded through the Title 9 section of the 1965 Civil Rights Act
D)because they are benefits that are distributed on a case-by-case basis to select citizens in extreme need

Question 24

According to Figure 16.2 in your text,what is the relationship between unemployment and inflation?

A)The inflation rate is always higher than unemployment.
B)The inflation rate always increases when unemployment increases.
C)The inflation rate never declines,regardless of the unemployment rate.
D)The unemployment rate is generally higher than the inflation rate.

Question 25

Why has federal spending generally increased over the years?

A)because Democrats in Congress will not cut the defense budget
B)because of uncontrollables like discretionary spending
C)because of uncontrollables like mandatory spending
D)because the income tax rate in the United States is too high

Question 26

From a political standpoint,what may be the most important measure of the economy's performance?

A)the deficit
B)the gross domestic product
C)inflation
D)the unemployment rate

Question 27

Which of the following statements regarding the role of the federal government in the economy is correct?

A)Economic regulation of industry is the sole responsibility of the secretary of the treasury.
B)Most Americans would prefer an economy completely free of any federal regulations.
C)Since the Great Recession,the scope of federal activity in the economy has contracted.
D)Presidential election outcomes are heavily influenced by the health of the economy.

Question 28

Upon taking office in 2009,which of the following did President Obama advocate to deal with the economic crisis?

A)dropping interest rates
B)increasing government spending
C)lowering taxes
D)raising interest rates

Question 29

Which of the following is a tax expenditure?

A)a deductible contribution to an IRA
B)the estate tax
C)an excise tax
D)the Social Security payroll

Question 30

Which of the following is true regarding mandatory spending policies?

A)They are designed to increase the money supply to improve economic growth.
B)They are designed to help states avoid having a budget surplus.
C)They create a serious ongoing financial burden on the federal government.
D)They reduce the overall cost of compliance for major industrial sectors.

Question 31

Which of the following provides the greatest source of revenue for the federal government?

A)income taxes
B)Medicaid taxes
C)regressive taxes
D)Social Security taxes

Question 32

U.S.monetary policy involves which of the following?

A)import and export policies
B)interest rates and the money supply
C)supply-side economics
D)NAFTA and the balance of trade with Canada

Question 33

If the Federal Reserve wanted to slow the rate of economic growth,it would most likely __________.

A)encourage the president to lower taxes
B)increase interest rates
C)encourage the president to raise taxes
D)increase the money supply

Question 34

Consider the feature box,"The Game,the Rules,the Players: How Washington Dealt with the Financial Crisis." Which of these statements best characterizes the effects of the recent economic crisis?

A)Americans have greater trust in the ability of corporations to be self-regulating.
B)Most small businesses have experienced renewed prosperity and growth.
C)The Federal Reserve has kept interest rates high to encourage economic investment.
D)The overall influence of the federal government in the economy has increased.

Question 35

The annual shortfall between federal revenues and expenditures is known as which of the following?

A)the balance of payments
B)the budget deficit
C)the expenditure difference
D)the public/national debt

Question 36

Federal estate taxes levy a tax rate that rises to __________,but estates worth less than $5 million per person are exempt.

A)15 percent
B)25 percent
C)35 percent
D)40 percent

Question 37

What is tax avoidance?

A)falsely claiming exemptions,deductions,and special treatments
B)hiding income
C)manipulating the incidence of taxation
D)taking advantage of exemptions,exclusions,deductions,and special treatments in tax laws

Question 38

If the Federal Reserve Board needed to curb inflation,it would most likely __________.

A)lower interest rates
B)lower taxes
C)increase government spending
D)raise interest rates

Question 39

The primary purpose of the Troubled Asset Relief Program (TARP)was to __________.

A)bail out the auto industry
B)bail out the banking sector
C)reduce the annual budget deficit
D)reduce the public/national debt

Question 40

The question of the proper relationship between governments and markets is the subject of __________.

A)the American dilemma
B)great debate
C)partisan disagreement
D)political economy

Question 41

In a __________ system,both politics and markets function to transform popular demands into goods and service,to allocate costs,and to distribute goods and services.

A)collective
B)democratic
C)free-market
D)fiscal

Question 42

Which of the following is accurate with regard to the national debt?

A)The national debt as a percentage of GDP has drastically increased in recent years.
B)The national debt as a percentage of GDP has not changed in the past decade
C)The national debt is a product of balanced federal budgets.
D)The national debt is not affected by external events such as war or a natural disaster.

Question 43

Which of the following is a possible solution to the long-term problem of solvency in the Social Security program?

A)Eliminate the prescription drug program for seniors.
B)Increase the states' financial contribution.
C)Increase the minimum retirement age.
D)Lower the minimum retirement age.

Question 44

What was the purpose of the Treasury Department's Troubled Asset Relief Program (TARP)?

A)to abate criticism of the U.S.banking system
B)to bail out the nation's financial institutions
C)to decrease the Fed's control over monetary policy
D)to increase the money supply in the national marketplace

Question 45

Which of the following statements best describes the relationship between the unemployment rate and GDP growth?

A)As unemployment rates soar,the GDP follows suit.
B)GDP growth typically predicts rising unemployment rates.
C)The media focuses primarily on the unemployment rate,but the GDP is the best measure of the national economy.
D)Unemployment lags behind GDP growth,going down only after the recovery has begun.

Question 46

Which of the following transactions would be counted in calculating the GDP?

A)a pension payment
B)a payment to Social Security
C)the purchase of a new car
D)the purchase of steel by the Ford Motor Company

Question 47

Which of the following would indicate that the economy is experiencing inflation?

A)Interest rates are increasing.
B)Goods are becoming less expensive.
C)The federal government is lowering tax rates.
D)The Federal Reserve is increasing the money supply.

Question 48

Which of the following is a problem of growing concern with respect to the U.S.national debt?

A)that an increasing share of the debt is owed to foreign banks and governments
B)that there are too few people working to continue to fund the level of debt
C)that the U.S.Congress is now constitutionally forbidden from "floating" debt
D)that too much debt will cause the economy to overheat and increase unemployment levels

Question 49

Which of these statements best describes the influence of interest rate adjustments by the Federal Reserve?

A)They always lead to lower rates of marginal taxes.
B)They can lead to higher unemployment in years of budget deficits.
C)They can spur economic growth by increasing the cost of money for business.
D)They can spur economic growth by increasing the available money supply.

Question 50

If you believed strongly that initiative,enterprise,and risk taking is necessary to stimulate the economy,which form of taxation would you most likely support?

A)bracket-based taxation
B)flat taxation
C)progressive taxation
D)proportional taxation

Question 51

Which of the following was the biggest contributor to the economic crisis that began in 2008?

A)deregulation of the investment banking industry
B)high levels of government spending
C)increased wage demands by labor unions
D)inflationary policies by the Federal Reserve

Question 52

Discretionary spending includes spending on __________.

A)food stamps
B)Medicaid
C)Medicare
D)national defense

Question 53

If you believe in the marginal utility theory-that an additional dollar of income is slightly less valuable to an individual than preceding dollars-then what form of taxation would you most likely support?

A)flat taxation
B)marginal taxation
C)progressive taxation
D)proportional taxation

Question 54

__________ has the primary responsibility for determining interest rates in the United States.

A)Congress
B)Wall Street
C)The Federal Reserve Board
D)The Department of the Treasury

Question 55

If a government wanted to use monetary policy to increase economic growth,which of the following steps should be taken?

A)Decrease interest rates to increase the amount of money in supply.
B)Increase the amount of foreign currency kept on reserve in U.S.banks.
C)Increase the amount of public revenue for investment by raising taxes.
D)Increase the government spending on public works projects.

Question 56

Which of the following is an example of monetary policy?

A)decreasing federal spending
B)increasing food and drug regulations
C)increasing taxes on wealthy Americans
D)lowering interest rates

Question 57

Why is almost half of all personal income not taxed?

A)because federal tax rates only apply to adjusted gross income
B)because federal tax rates only apply to taxable income
C)because federal tax rates only apply to tax expenditures
D)because half of all income comes from capital gains,which are not taxed

Question 58

Which of the following industries was probably the biggest contributor to the economic crisis that began in 2008?

A)the airline industry
B)the energy industry
C)the investment banking industry
D)the litigation industry

Question 59

According to James Carville,what is the best predictor of presidential voting outcomes?

A)the gross domestic product
B)a prosperous economy
C)voters' perception of their own personal economic well-being
D)voters' perception of general economic conditions

Question 60

When inflation threatens,which of the following responses is the Fed likely to make?

A)expand the money supply
B)lower the discount rate and thereby the cost of borrowing by banks
C)lower interest rates
D)sell off government bonds to banks and others thereby reducing the funds banks can lend to individuals and businesses

Question 61

Inflation erodes the value of the dollar because higher prices mean that the same dollars can now purchase fewer goods and services.

Question 62

Which of the following is a nation's total production of goods and services for a single year,valued in terms of market prices?

A)gross domestic product
B)national debt
C)stimulus package
D)deficit

Question 63

Tax revenues lost to the federal government because of exemptions,exclusions,deductions,and special treatments in tax laws are called __________.

A)tax evasion
B)tax expenditures
C)tax avoidance
D)loop holes

Question 64

What is the government's use of taxation and spending policy to affect economic growth in the United States?

A)bailout
B)national debt
C)discount rate
D)fiscal policy

Question 65

__________ could include any legal measure,including taking advantage of "loopholes" such as home mortgage deductions or the transfer of money to offshore accounts or "tax shelters."

A)Tax evasion
B)Fiscal policy
C)Tax avoidance
D)Stimulus packages

Question 66

The most recent economic crisis was a depression.

Question 67

Which type of taxation takes a larger share of the income of low-income groups?

A)regressive taxation
B)progressive taxation
C)proportional (flat)taxation
D)retroactive taxation

Question 68

When spending exceeds revenues,what is the resulting imbalance in the annual federal budget?

A)an economic stimulus package
B)the national debt
C)the discount rate
D)the deficit

Question 69

Lowering the __________ reduces the cost of money,which makes borrowing easier,which increases spending,and thereby affects economic growth.

A)deficit
B)interest rate
C)national debt
D)personal income tax rate

Question 70

In the federal budget,entitlement programs are an example of __________.

A)deficit spending
B)discretionary spending
C)defense spending
D)mandatory spending

Question 71

The unemployment rate is measured each month by the U.S.Department of Commerce.

Question 72

George W.Bush came into office strongly committed to __________.

A)raising the top marginal rate to 35 percent
B)raising tax rates in an effort to compromise with the Democrats
C)restructuring rates to just three brackets-10,28,and 35 percent
D)lowering taxes

Question 73

In the federal budget,national parks and federal prisons are examples of __________.

A)deficit spending
B)discretionary spending
C)entitlement programs
D)mandatory spending

Question 74

In 2008,Congress passed the ___________ to help stabilize the investment banking sector.

A)American Recovery and Reinvestment Act of 2009
B)Emergency Economic Stabilization Act of 2008
C)Troubled Asset Relief Program (TARP)
D)Compromise Tax Package of 2010

Question 75

__________ is authorized for any spending that "serves the general welfare."

A)The Supreme Court
B)Congress
C)The Federal Reserve Board
D)The Department of the Treasury

Question 76

Which part of the federal government is responsible for monetary policy?

A)the Legislative Branch
B)the Judiciary Branch
C)the Federal Reserve Board
D)the Department of the Treasury

Question 77

Monetary economic policy uses the money supply to affect growth in the U.S.economy.

Question 78

__________ requires all income groups to pay the same percentage of their income in taxes.

A)Bracket-based taxation
B)Means-tested taxation
C)Progressive taxation
D)Proportional taxation

Question 79

The tax burden in the United States is modest compared to burdens in other advanced democracies.

Question 80

The __________ tax package contained a variety of new credits and special treatments,including a lower tax rate on corporate stock dividends.

A)Bush 2003
B)Clinton 2001
C)Reagan 1989
D)Obama 2012