Deck 17: Economic Policy

Question 1

For much of the history of the United States,______.

A) the country has been in a recession
B) economic well-being was mainly the concern of local governments rather than the federal government
C) the government has allowed the market to take care of itself, free from government restriction
D) the economic well-being of society has not been a concern of the American people
E) economic policy required a strong role for government

Answer 1

C

Question 2

Fiscal policy refers to ______.

A) the government's use of taxing and spending powers to regulate the economy
B) the use of interest rates to control the money supply in order to regulate the economy
C) policies designed to regulate business, labor, and trade
D) regulations on business, labor, and trade
E) the regulation of the market to ensure the effectiveness of social welfare policies

Answer 2

A

Question 3

A major weakness of monetary policy as a way to affect the economy is that ______.

A) it requires unpopular spending and taxing decisions
B) it is subject to pressure from business and labor interests
C) it is hard to control because small changes can have large effects
D) it tends to lead to runaway deficits
E) there is no evidence that it works

Answer 3

C

Question 4

______ caused politicians to turn to monetary policy as a way to manage the economy.

A) The Great Depression
B) An inability to keep the federal budget balanced
C) A people's revolt against taxes
D) Uncontrollable interest rates
E) High inflation and growing unemployment in the 1970s

Question 5

The heart of Keynesianism is that the government should ______.

A) run deficits during recessions and surpluses when the economy is doing well
B) run surpluses during recessions and deficits when the economy is doing well
C) run surpluses all the time
D) run deficits all the time
E) control the economy by manipulating interest rates

Question 6

The basic principles that regulate the economic market and influence the price of goods are known as laws of ______.

A) antitrust policy
B) supply and demand
C) production and consumption
D) monetary policy
E) fiscal policy

Question 7

Inflation is problematic because it ______.

A) forces people to spend more money to buy the same product
B) leads to too great a supply of goods
C) leads to too great a demand for goods
D) keeps people from looking for work
E) raises interest rates

Question 8

The cost of borrowing money calculated as a percentage of the amount borrowed is a(n)______ rate.

A) fiscal
B) inflationary
C) interest
D) deficit
E) loan

Question 9

John Maynard Keynes was an advocate of ______.

A) the theory that government should use its fiscal powers to regulate the economy
B) government elimination of social welfare policies
C) laissez-faire economic theories
D) a balanced budget
E) social welfare policies for those excluded from the traditional economy

Question 10

Which of the following statements is NOT true about economic indicators?

A) Government spending accounts for about 50 percent of the GDP.
B) When measuring GDP, it is important to put all prices on the same scale.
C) The unemployment rate can be misleading because people who have given up looking for work are not included.
D) A growth rate of 3 percent of personal disposable income is considered healthy.
E) The number of homes and motor vehicle sales are good indicators of consumer demand.

Question 11

The total market value of all goods and services produced by everyone in a particular country during a given year is the ______.

A) gross national product
B) overall consumption index
C) overall production index
D) gross domestic product
E) gross consumption product

Question 12

The laws of supply and demand state that ______.

A) consumers buy more at low prices, and producers produce more at high prices
B) producers produce more at low prices, and consumers buy more at low prices
C) the greater the supply, the greater the demand
D) the lower the supply, the greater the demand
E) people demand what they need, but producers supply what costs the least to produce

Question 13

After the Great Depression of the 1930s,government policymakers ______.

A) enacted a system of tariffs and tax incentives to ensure a balance of trade with the world
B) gave the Federal Reserve the power to control interest rates
C) believed in a new, expanded role for government to ensure steady growth in the economy
D) formed a coalition with business and labor unions to cooperate in solving economic crises
E) tied tax policy to other economic policies

Question 14

A sharp reduction in a nation's GDP for more than a year accompanied by high unemployment is a(n)______.

A) inflationary period
B) economic bust
C) depression
D) economic boom
E) recession

Question 15

______ had the largest historical impact on the U.S.government's becoming more involved in economic policy.

A) The Great Depression
B) World War II
C) The Civil War
D) The war on poverty
E) The war on drugs

Question 16

Laissez-faire is a theory that refers to ______.

A) the belief that protectionist trade policies lead to greater unemployment
B) the role of big business in controlling the market for the good of all of society
C) government support for the market to ensure economic prosperity
D) the "invisible hand" of the marketplace creating positive social and economic outcomes
E) the importance of each individual working for his or her own economic prosperity

Question 17

An economic boom is a sign that ______.

A) a recession is occurring
B) GDP is increasing
C) interest rates will rise
D) prices will drop
E) demand is low

Question 18

The use of interest rates to control the money supply in order to regulate the economy is known as ______ policy.

A) budgetary
B) monetary
C) fiscal
D) regulatory
E) antitrust

Question 19

The goal of economic policymakers is to ______.

A) increase government ownership of the means of production
B) increase the size of the swings in the business cycle
C) increase inflation without undermining the market-driven economy
D) even out the dramatic cycles of inflation and recession without undermining the vitality and productivity of a market-driven economy
E) decrease government influence on the economy

Question 20

The major weakness of fiscal policy as a way of affecting the economy is that ______.

A) it depends on consumer behavior
B) it depends on decisions made by foreign governments
C) it requires politicians to make redistributive taxing and spending decisions
D) it requires changes to be made in very narrow increments
E) there is no evidence that it works

Question 21

The federal income tax rate for those making over $357,000 is 35 percent,which means that a family whose taxable income is over $357,000 will pay ______.

A) 35 percent of their taxable income in taxes
B) 35 percent on everything they make above the tax bracket beneath them
C) more than 35 percent of their taxable income in taxes
D) more than 35 percent of their gross income in taxes
E) 35 percent of their gross income in taxes

Question 22

______ control(s)monetary policy.

A) Congress
B) Governors
C) The New York Stock Exchange Board
D) The Federal Reserve Board of Governors
E) The president

Question 23

The Social Security tax is arguably an example of a regressive tax because ______.

A) people pay taxes on only the first $118,500 of their incomes
B) only the wealthy qualify for Social Security
C) today's youth are unlikely to receive Social Security
D) the elderly are taxed at higher rates than the young
E) everyone is taxed at the same rate regardless of income

Question 24

The federal budget process involves decisions by all of the following EXCEPT ______.

A) the Federal Reserve Board of Governors
B) the federal executive branch agencies
C) the Office of Management and Budget
D) the congressional budget committees
E) the president

Question 25

A tax levied on returns from capital investments,such as profits from the sale of real estate,is a ______ tax.

A) capital gains
B) excise
C) consumption
D) value-added
E) progressive

Question 26

Low interest rates ______.

A) will likely lead to a depression
B) are dangerous to the economy because money will be taken out of circulation
C) keep people from investing
D) are a sign of inflation
E) encourage borrowing

Question 27

Democrats believe that a fair tax policy is one that ______,whereas Republicans believe that a fair tax policy is one that ______.

A) allows those who make more money the freedom to keep it; eases the tax burden on lower-income groups
B) is regressive; is progressive
C) balances the federal budget; is based on Keynesian economic theory
D) eases the tax burden on lower income groups; allows those who make more money the freedom to keep it
E) requires that the size of the federal government be decreased; allows the size of the federal government to grow

Question 28

The Gramm-Rudman Act ______.

A) called for automatic 10 percent cuts on existing programs if Congress couldn't move toward a balanced budget in a given year
B) established the House and Senate Budget Committees
C) established a flat tax
D) gave the Federal Reserve the power to control monetary policy
E) created the Office of Management and Budget

Question 29

According to supporters of supply-side economics,lowering taxation would actually create more government revenue and stimulate the economy because ______.

A) businesses would likely cut production to keep inflation from occurring
B) more investment would occur
C) people would have more trust in government
D) the spending power of the poor would increase
E) interest rates would likely drop as well

Question 30

The Troubled Assets Relief Program (TARP)in October 2008 was passed to ______.

A) bail out the auto industry
B) bail out the credit card industry
C) bail out financial institutions deemed "too big to fail"
D) bail out the oil companies
E) none of the above

Question 31

The effect of supply-side economic policies was to ______.

A) cut federal spending
B) create a recession
C) increase federal deficits
D) create high rates of inflation
E) lower interest rates

Question 32

______ is an example of a fiscal policy.

A) Collective bargaining
B) An antitrust agreement
C) Raising taxes
D) Free trade
E) Lowering interest rates

Question 33

Which of the following statements best describes John Maynard Keynes's view regarding the economy?

A) The best way to emerge from a depression is for government to spend less money.
B) A balanced budget is not essential to promote economic growth.
C) When a recession occurs, government must raise taxes to pull the country out of the recession.
D) Deficits always keep economic growth from occurring.
E) The government should have no role in regulating the economy.

Question 34

In 1998,the federal budget ______.

A) had the highest debt in American history
B) was balanced and began to run a surplus
C) comprised major tax cuts for the wealthy
D) was dominated by middle-class tax cuts
E) all of the above

Question 35

The Budget and Accounting Act of 1921 is significant because it ______.

A) requires a balanced federal budget
B) created the federal income tax
C) created the current budget process
D) requires federal agencies to submit budget proposals to Congress
E) requires the president to prepare and submit to Congress a federal budget

Question 36

Republicans are more likely than Democrats to argue that the ______ tax should be reduced.

A) value-added
B) excise
C) interest
D) capital gains
E) supply-side

Question 37

Keynesian economic policies are associated with ______.

A) monetary policy
B) balancing the federal budget
C) fiscal policy
D) supply-side economics
E) manipulating interest rates to influence the economy

Question 38

The current income tax in the United States is an example of a(n)______ tax.

A) progressive
B) supply-side
C) regressive
D) excise
E) capital gains

Question 39

The American Recovery and Reinvestment Act of 2009 (commonly known as the stimulus bill)added nearly $900 billion of spending on tax relief for individuals and businesses,extensions of unemployment insurance,infrastructure development,and various other projects.It was designed in the ______ economic tradition.

A) Keynesian
B) Adam Smith
C) John Locke
D) James Madison
E) Ronald Reagan

Question 40

Which of the following statements is NOT true regarding the politics of monetary policy?

A) Monetary policy is insulated from the turmoil of partisan politics.
B) The effects of monetary policy can be unpredictable.
C) When trying to hold back inflationary pressures, loose monetary policy is likely to be adopted.
D) The Federal Reserve sets interest rates.
E) Monetary policy can be created (or changed) faster than fiscal policy.

Question 41

Which of the following is NOT a criticism of regulations on business mentioned in the text?

A) They limit consumer choice.
B) They make prices rise.
C) They increase the cost of production.
D) They enlarge the bureaucracy.
E) They generally fall most heavily on the smallest businesses.

Question 42

A tax system in which all people pay the same percentage of their income is a(n)______ tax.

A) flat
B) excise
C) consumption
D) capital gains
E) regressive

Question 43

Raising taxes is an example of a fiscal policy.

Question 44

In 2012,President Barack Obama called for taxpayers making more than $1 million a year to pay a 30 percent minimum tax-a proposal dubbed the Buffet Rule.

Question 45

The Great Depression had the largest historical impact on the U.S.government becoming more involved in economic policy.

Question 46

The Taft-Hartley Act ______.

A) caused government to enter a recession in the early 1990s
B) was responsible for changing the direction of U.S. trade policy from protectionism to free trade
C) was a major influence in helping Congress pass balanced budgets
D) significantly restricted the power of labor unions to engage in collective bargaining
E) kept monetary policy from being dominated by politics

Question 47

Grover Norquist,president of Americans for Tax Reform,has stated that his goal is to ______.

A) make the wealthy pay their fair share of taxes
B) increase taxes so that the budget deficit disappears
C) make the poor pay a greater share of taxes
D) shrink the federal government to a size that would allow it to be eliminated
E) eliminate the federal debt

Question 48

The Wagner Act was significant mostly because it ______.

A) curtailed the power of monopolies
B) was partly responsible for the Great Depression
C) vastly expanded the power of labor unions
D) led to fifty years of protectionist trade policy
E) eliminated congressional control of monetary policy

Question 49

According to the authors of the textbook,the economic crisis that began in 2008 was caused by ______.

A) consumers being unwilling to borrow and spend
B) banks making too many risky loans and consumers going into too much debt with no means to repay it
C) the government borrowing too much money
D) the failure of foreign economies, leading to the collapse of the American economy
E) rising gas prices

Question 50

The difference between the value of the goods a country imports and what it exports is known as a trade ______.

A) surplus
B) debt
C) rate
D) index
E) deficit

Question 51

What is one reason that businesses support the regulation of business?

A) Regulation can eliminate some of the red tape that bogs down businesses.
B) Regulation will increase production because equipment will be safer.
C) Regulation will help eliminate business corruption.
D) Regulation leads to lower prices, which increases demand and profits.
E) Regulation can keep competitors from becoming too powerful.

Question 52

Government regulations that try to keep monopolies from emerging are known as antitrust policies.

Question 53

______ is the imposition of trade barriers,especially tariffs,to make trading conditions favorable to domestic producers.

A) Restrictive trade
B) Protectionism
C) Free trade
D) Fair trade
E) Open trade

Question 54

Which of the following statements is NOT true regarding trade policy?

A) The U.S. trade deficit is at an all-time low because of free-trade policies.
B) Current U.S. trade policy leans more toward free trade than protectionism.
C) Labor supports protectionist trade policies.
D) Alexander Hamilton was a strong proponent of protectionist trade policies.
E) The WTO supports free-trade policies.

Question 55

One benefit of a consumption tax is that it could ______.

A) simplify the tax code
B) raise demand for products
C) encourage spending
D) lead to unbalanced federal budgets
E) make the tax code more progressive

Question 56

Monetary policy is the product of a closely guarded elite policymaking process.

Question 57

According to the text,the main reason for regulating business is to ______.

A) reduce destructive competition
B) control corrupt business practices
C) prevent or eliminate monopolies
D) reduce union influence
E) provide worker safety

Question 58

Which of the following statements is NOT true under current federal law?

A) Under the Taft-Hartley Act, employees did not have the right to strike.
B) Unions may not create a closed shop.
C) Unions are allowed to engage in collective bargaining.
D) Companies may create "employment involvement committees."
E) Unions may not refuse to bargain with employers.

Question 59

Which of the following is NOT an argument made in favor of free trade?

A) Free trade helps promote peace.
B) Free trade discourages socialism.
C) Free trade limits retaliatory trade policies.
D) Free trade leads to more jobs.
E) Free trade leads to lower prices.

Question 60

The Reagan administration's idea that tax cuts would ultimately generate more,not less,government revenue by allowing for increased investments and productivity is known as supply-side economics.

Question 61

______ control(s)monetary policy.

Question 62

Business and labor are often at odds with each other.Each has a stake in getting the government to regulate the other.In what ways has government regulated business and labor?

Question 63

In recent years,unions have found it difficult to win congressional backing of the Employee Free Choice Act,also known as "card check." What is this bill about?

Question 64

The ______ is a twelve-bank body established in 1913 to oversee monetary policy by controlling the amount of money banks and other institutions have available to lend.

Question 65

The cost of borrowing money calculated as a percentage of the amount borrowed is a(n)______ rate.

Question 66

______ caused politicians to turn to monetary policy as a way to manage the economy.

Question 67

Explain the laws of supply and demand.

Question 68

What did trade policy look like at the beginning of the country's history? How has the government's trade policy changed?

Question 69

What are the two theories of trade policy?

Question 70

The use of interest rates to control the money supply in order to regulate the economy is known as ______ policy.

Question 71

The alternation of periods between economic peak and valley is called a ______.

Question 72

Deregulation is the imposition of trade barriers,especially tariffs,to make trading conditions favorable to domestic producers.

Question 73

A tax that,even if at a fixed rate,takes a higher proportion of lower incomes is known as a ______ tax.

Question 74

What are the two broad types of economic policy?

Question 75

What reforms have been proposed to change the current tax code? What are the pros and cons of each reform? Which reform do you think is best? Or do you believe that the tax code does not need to be changed? Why?

Question 76

A tax levied on returns from capital investments,such as profits from the sale of real estate,is a ______ tax.