Deck 16: Economic Policy

Question 1

Which of the following would a Keynesian economist believe?

A) Raise total revenue by cutting taxes
B) Address inflation by permitting a natural balance to occur between supply and demand
C) Use taxing and spending to maintain economic stability
D) Let economists set the country's budget
E) All of these are correct.

Answer 1

C

Question 2

Which of these situations is the result of a recession?

A) Long-term job prosperity
B) Growth of household income
C) Fewer jobs lost
D) Increased unemployment
E) Increase in money held in savings

Answer 2

D

Question 3

Which of the following is true of fiscal policy?

A) It is popular with conservatives.
B) It is an approach to stabilize the economy through control of the money supply.
C) It is controlled by the Federal Reserve Bank.
D) It is an approach to stabilizing the economy through government spending and taxing.
E) It requires that, during economic slowdowns, the government tighten its belt on spending.

Answer 3

D

Question 4

Which of the following policies does supply-side economics suggest the government should implement in order to control inflation?

A) Regulate imported goods
B) Increase taxes
C) Enforce stricter regulations on companies
D) Spend tax dollars to create jobs
E) Reduce regulation and cut taxes

Question 5

Which of the following would be compatible with laissez-faire economic policy?

A) Government economic involvement
B) Economic safety nets
C) Social Security
D) Free competition among individuals and businesses
E) Military-industrial complex

Question 6

Which of the following is a key difference between laissez-faire and Keynesian economic policies?

A) The level of government involvement in the nation's economy
B) The value of printed money in relation to the gold standard
C) How each deals with the issue of inflation
D) The way in which government surpluses are spent
E) The importance of easy credit for businesses

Question 7

When the U.S. government adjusts the amount of money in circulation in order to alter credit markets and employment, which of the following is the government relying on to influence the economy?

A) Domestic policy
B) Fiscal policy
C) Monetary policy
D) Regressive tax policy
E) Progressive tax policy

Question 8

Which of the following is a way of conceiving of net public debt?

A) The total amount owed by all individuals, corporations, and governments in the United States
B) The total amount owed by the federal government to individuals, businesses, and foreigners
C) Percentage of the gross national product
D) Money not available for private use
E) The total amount of all interagency borrowings within the government

Question 9

Democrats tend to subscribe to a view of the economy that supports government aid to the economically disadvantaged. What is this approach called?

A) Rising tide
B) Drop-down
C) Cascade
D) Trickle-down
E) Percolate-up

Question 10

Monetary policy includes which of the following?

A) Using changes in the amount of money in circulation to alter national economic variables
B) Using changes in the size of the federal budget deficit to alter national economic variables
C) Regulating tax rates to ensure controlled growth and low inflation
D) All economic policies of the president and Congress
E) Linking the consumer price index and the gross national product

Question 11

Which of the following would be compatible with Keynesian economic policy?

A) Regulate imported goods
B) Increase taxes
C) Enforce stricter regulations on companies
D) Spend tax dollars to create jobs
E) Reduce regulation and cut taxes

Question 12

Republicans tend to favor less government regulation and lower taxes so that the wealth of business owners and the rich create jobs and income for the less well off. What is this approach called?

A) Rising tide
B) Drop-down
C) Cascade
D) Trickle-down
E) Percolate-up

Question 13

Which of the following would involve using fiscal policy to affect changes in economic activity?

A) Altering the amount of money in circulation
B) Taxing and government spending
C) Altering interest rates
D) Court-mandated wage and price controls
E) All of these are correct.

Question 14

If government cuts taxes to encourage people to spend more money in order to stimulate economic growth, what policy is it engaging in?

A) Fiscal policy
B) Business cycling
C) Monetary policy
D) Keynesian policy
E) Subsidies

Question 15

To what does gross domestic product (GDP) refer?

A) The difference in a given year between what the government raises in taxes and fees and what it spends
B) The value of all of the goods and services produced by an economy in one year
C) The total amount owed to those who have loaned money to the government
D) An increase in the revenue from the sale of U.S. Treasury bonds
E) The average value of goods and services produced in the United States

Question 16

Which of the following are government expenditures that exceed receipts?

A) Upturns
B) Inflation
C) Surpluses
D) Deficits
E) Rebates

Question 17

The Federal Reserve System was created to do which of the following?

A) Designate certain governmental powers as reserved for the federal government
B) Provide a secondary military force in times of war
C) Pay off the national debt
D) Stabilize nationwide economic activity by controlling the amount of money in circulation
E) All of these are correct.

Question 18

What instrument does the federal government use to borrow money?

A) Market stocks
B) GNP
C) IRAs
D) Private bank loans
E) U.S. Treasury bonds

Question 19

What did Adam Smith, author of The Wealth of Nations, theorize drove economic prosperity?

A) Government economic involvement
B) Economic safety nets
C) Decisions of ruling-class elites
D) Free competition among individuals and businesses
E) Military strength

Question 20

Which of the following best describes inflation?

A) Increase in the sale of stocks on the stock market
B) Increase in the general price level of goods and services
C) Increase in currency in the money supply
D) Increase in the purchasing power of foreign currency
E) Decrease in the salaries of members of government

Question 21

The total value of all taxes collected by government at all levels-federal, state, and local-is roughly what percentage of gross domestic product?

A) 15%
B) 20%
C) 25%
D) 35%
E) 45%

Question 22

Why is it sometimes difficult to use fiscal policy to regulate the economy?

A) Federal spending cannot be easily adjusted up or down as economic conditions change.
B) Decisions about how much government should spend are made by a very small group of people.
C) Changes in spending and taxes can occur very quickly before many economists can agree on what the problem is.
D) Decisions by Congress to lower the discount rate to federal banks are a cumbersome process.
E) Checks and balances provided for in the Constitution require agreement among all three branches regarding a course of action.

Question 23

Controlling U.S. monetary policy is the responsibility of which of the following?

A) Presidency
B) Federal Deposit Insurance Corporation
C) Federal Reserve Board
D) International Monetary Fund
E) Treasury Department

Question 24

Which of the following best describes how the Social Security system is funded?

A) Fees paid to the Federal Deposit Insurance Corporation (FDIC)
B) A pay-as-you-go system where those currently working support those who are retired
C) Funded solely by employees' contributions through wages
D) Funded by a progressive tax on income
E) Essentially, a private pension fund in which employees decide how much to contribute

Question 25

Which of the following would be an example of an entitlement program?

A) Federal income tax
B) Federal student loans
C) Medicare
D) Medicaid
E) An IRA

Question 26

Which of the following best describes the Federal Reserve?

A) A partner with the U.S. Congress in determining economic volatility
B) A source of economic decision-making power in the U.S. government largely independent of the three branches of government
C) A division of the Office of Management and Budget
D) A resource for college loans and home loans
E) A diplomatic arm of the U.S. government that focuses on the foreign exchange market

Question 27

The response to the financial crisis of 2008 reflects which economic approach?

A) Rising tide
B) Supply side
C) Laissez-faire
D) Trickle down
E) Keynesian

Question 28

Individuals who meet certain requirements, such as age or income level, qualify to receive benefits under a particular federal program. What are these programs called?

A) Entitlements
B) Discretionary spending
C) Wealth redistribution
D) Pensions
E) Subsidies

Question 29

Which of the following is the only administration of recent times to actually run a budget surplus, as opposed to a deficit, in some years?

A) Jimmy Carter
B) Ronald Reagan
C) George W. Bush
D) Bill Clinton
E) Donald Trump

Question 30

Which of the following is an example of an entitlement program?

A) Amtrak
B) Title IX of the Educational Act
C) Defense spending
D) Income tax
E) Social Security

Question 31

Benefits to which every eligible person has a legal right and the government cannot deny are provided by which of the following programs?

A) Retroactive policies
B) Discretionary spending
C) Controllable spending
D) Entitlements
E) Earmarks

Question 32

Unemployment insurance is an example of what type of program that guarantees benefits to the recipients?

A) Welfare
B) Need-based
C) Means-tested
D) Altruistic
E) Entitlement

Question 33

Which of the following actions of the Obama administration reflects a Keynesian approach to the economy?

A) Increasing the Social Security taxes paid by workers on earnings
B) Reducing unemployment benefits
C) Reducing federal stimulus programs to state and local governments
D) Increasing government regulations
E) Extending the food stamp program

Question 34

Which of the following describes the cycle of the net public debt?

A) It has never been lower than at the present time.
B) It amounts to almost nothing at the present time.
C) It peaked during World War II.
D) It peaked during the Vietnam War.
E) It is always at a consistent rate.

Question 35

Social Security and Medicare are funded by taxes on which of the following?

A) Luxury items
B) Employer's gross receipts
C) An individual's salary
D) Value of an individual's personal property
E) Capital gains

Question 36

Monetary policies are largely determined by which of the following groups?

A) Presidents
B) Federal Reserve Board
C) Congress
D) Congressional Budget Office
E) Treasury Department

Question 37

What is the highest tax rate an individual pays called?

A) Primary
B) Marginal
C) Supplemental
D) Joint
E) Fiscal

Question 38

A tax provision that allows investors in oil and gas wells to reduce their taxable income is an example of which of the following?

A) Loophole
B) IRA
C) Net public debt
D) Flat tax
E) Progressive tax policy

Question 39

Warren Buffett, the billionaire CEO, has brought attention to the fact that he is taxed at a lower rate than his secretary, who pays almost 30% of her income in federal taxes each year. Why is Mr. Buffett taxed at a lower rate?

A) His salary is diverted into Roth IRA accounts, which are not taxed until the money is dispersed.
B) He has diverted 30% of his salary into U.S. Treasury bonds and those are taxed at a lower rate than salaries.
C) He has diverted 30% of his salary into pretax investment funds, which are not taxed until the money is dispersed.
D) His income comes from dividends, which are taxed at 15 to 20%.
E) He is older than his secretary and current tax rates are based on income as well as on age.

Question 40

Which of the following best reflects the purpose for which government bodies create tax exclusions and tax deductions?

A) Increase overall revenue
B) Fund entitlement programs like Social Security and Medicare
C) Fund road improvements and school construction
D) Incentivize some sectors of the economy
E) Simplify the taxation system

Question 41

Which institution is responsible for overseeing tariffs throughout the world?

A) International Monetary Fund
B) World Bank
C) Federal Reserve Board
D) World Trade Organization
E) United Nations

Question 42

Explain what makes a tax regressive and what makes a tax progressive. Discuss which of the two types you think is more fair and just.

Question 43

Describe the role of the World Trade Organization, especially as related to globalization.

Question 44

Discuss monetary policy. Explain how it compares to economic policy.

Question 45

Describe some of the ways that the Federal Reserve Board arguably affects the nation's economy more than the president can.

Question 46

Explain how an import restriction affects the price of goods in the United States.

Question 47

Explain the taxation systems used in the United States.

Question 48

Compare and contrast laissez-faire economics, Keynesian economic theory, and supply-side economics.

Question 49

Describe the historic role of the U.S. government in addressing unemployment.

Question 50

The North American Free Trade Agreement (NAFTA) created a free-trade zone between the United States and what other areas?

A) Caribbean islands except Cuba
B) El Salvador, Guatemala, Honduras, and Nicaragua
C) Mexico and Canada
D) Belize and Costa Rica
E) All of these are correct.

Question 51

Examine the federal budget deficit, why it occurred, and what measures should be taken to bring it down.

Question 52

Describe outsourcing and why it occurs. Currently, India and China are leading outsourcing destinations for American companies. Explain why that might may soon change.

Question 53

Discuss the annual deficit and the total national debt. Describe how the two are related.

Question 54

What are the goals of the Federal Reserve Board, and what tools does it use to achieve them?

Question 55

Describe the three ways the Federal Reserve System controls the money supply.

Question 56

Explain which economic sector almost every nation seeks to protect and what impact that has on the WTO.

Question 57

President George W. Bush signed the CAFTA-DR into law, despite opposition from which group?

A) Automakers
B) Bankers
C) Consumers
D) Farmers
E) Textile workers

Question 58

Explain the role of the Federal Reserve System in the United States.

Question 59

Define fiscal policy and monetary policy. Explain the tools used by the institutions of the national government to shape economic policy.

Question 60

Explain what an entitlement program is. Describe two federal entitlement programs, their purpose, and their eligibility requirements.

Question 61

Explain what an import restriction is. Give examples of policies that would have the effect of restricting imports and explain how they work to accomplish that.

Question 62

Explain what globalization is, and give examples of actions that reflect it.

Question 63

Discuss the concept of a common market. Explain whether a free trade area would be considered a type of common market.