Deck 14: Economic Policy

Question 1

If a president is attempting to stabilize the economy through a series of tax cuts and spending increases, he or she is engaged in __________ policy.

A) fiscal
B) trade
C) regulatory
D) monetary

Answer 1

fiscal

Question 2

John Maynard Keynes is the intellectual force behind __________ policy.

A) international trade
B) monetary
C) regulatory
D) fiscal

Answer 2

fiscal

Question 3

As a president who wanted to jumpstart the economy using fiscal policy, which of the following would you advocate?

A) increases in the interest rate
B) increases in spending
C) reducing regulations
D) minimizing trade barriers

Answer 3

increases in spending

Question 4

Obama's efforts to steer the nation out of the Great Recession using fiscal policy is illustrated by which of following?

A) Economic Recovery Tax Act
B) Troubled Asset Relief Program
C) American Recovery and Reinvestment Act
D) General Agreement on Tariffs and Trade

Question 5

Why was TARP a hard pill for President Bush to swallow?

A) He was an advocate for monetary policy and was convinced that the Federal Reserve should lead the recovery.
B) He was a conservative and was wary of government responses to perceived market failures.
C) He believed Congress, not the president and his cabinet, should be in charge of financial markets.
D) He was an advocate of fiscal policy and was uncomfortable with increasing the deficit.

Question 6

In general, what do the responses to the Great Recession by Bush and Obama represent?

A) They illustrate the inconsistency in policy responses to economic crisis.
B) They show that the growth of presidential power has been minimal.
C) They demonstrate a reliance on Congress to set the agenda for the recovery.
D) They reflect a long-term trend in increased presidential power and activism.

Question 7

What instigated the Great Recession of 2008?

A) deficit spending
B) a housing crisis
C) high interest rates
D) high health care costs

Question 8

Monetary policy relies heavily on the manipulation of __________ to promote economic growth.

A) taxing and spending
B) interest rates and the money supply
C) tariffs and trade barriers
D) regulations and sanctions

Question 9

The main thinker behind the ideas of monetary policy was __________.

A) Adam Smith
B) John Maynard Keynes
C) Ronald Coase
D) Milton Friedman

Question 10

Which of the following illustrates a concern of presidents in regard to government relying too heavily on monetary policy?

A) high levels of unemployment
B) increased inflation levels
C) reduced business consumption
D) lowered consumer spending

Question 11

How does monetary policy provide a possible corrective during economic recessions?

A) It provides more consumer capital by instituting steep reductions in the marginal tax rate.
B) It increases the desirability of American goods on the international markets through a reduction of tariffs.
C) It injects additional money into the economy through a lowering of interest rates to counteract the contracting market.
D) It creates a vast amount of jobs for unemployed workers through deficit spending on public works projects.

Question 12

Which statement would be an argument in favor of regulatory policy?

A) Regulations can increase business risks in the marketplace.
B) Carefully crafted regulations protect worker health and safety.
C) Regulatory action can often create negative externalities.
D) Regulatory policy reflects the current distribution of political power.

Question 13

What does the reduction of barriers in international trade encourage?

A) differentiation in economic activities in which states have high levels of taxes
B) diversification in economic activities in states with low levels of regulation
C) specialization in economic activities in which states have a comparative advantage
D) deregulation in economic activities in which states have no comparative advantage

Question 14

Which of the following illustrates industry efforts to resist free trade policies?

A) negotiation of a 350 percent tariff on foreign tobacco by the US tobacco industry
B) requirement that banks provide home loans for foreign applicants
C) advocacy by Verizon for the United States to join the World Trade Organization
D) pressure by Microsoft to reduce quotas on computer chips produced in China

Question 15

What evidence would support that claim that free trade has widespread economic benefits?

A) the creation of the Office of Management and Budget
B) the support for presidential fast-track authority in Congress
C) the rejection of fiscal policy by WTO members
D) high economic growth rates in the aftermath of GATT

Question 16

The General Agreement on Tariffs and Trade had what effect?

A) It liberalized trade policy globally.
B) It implemented monetary policy in states.
C) It required states to use fiscal policy.
D) It increased barriers in trade.

Question 17

Which statement best describes the president's role in the economy?

A) It peaked during World War I and then stalled.
B) It has remained unchanged through history.
C) It has steadily increased over time.
D) It has declined steadily in recent years.

Question 18

Which congressional act supports the claim that the president is formally recognized as the most important steward of the domestic economy?

A) Employment Act
B) Economic Opportunity Act
C) Tax Reform Act
D) National Industrial Recovery Act

Question 19

Which statement describes the key to the transformation that legitimized the acquisition of economic powers by the president?

A) Congress and the public insisted that the president solve the nation's economic problems in the aftermath of the Great Depression.
B) The Constitution contains specific language on the presidential economic policymaking powers invoked by Roosevelt.
C) The brief period of martial law at the onset of World War I allowed for a rapid concentration of economic powers in the executive branch.
D) Broad powers were granted to the president by Congress with the passage of the Economic Opportunity Act.

Question 20

Which statement provides evidence of the trend toward increasing presidential responsibility for the domestic economy?

A) The president is required by the Constitution to present a State of the Economy address in addition to the State of the Union address.
B) Congress has eliminated the CBO and relies exclusively on the executive branch for economic information.
C) The president is compelled by law to forecast the state of the economy for the upcoming year and to design policies to improve it.
D) The president has exempted any agency dealing with economic questions from congressional oversight.

Question 21

The set of domestic programs launched by Lyndon Johnson meant to alleviate a variety of social problems is known as the __________.

A) Great Experiment
B) New Nationalism
C) New Deal
D) Great Society

Question 22

Which agency was created through the Economic Opportunity Act?

A) Job Corps
B) Peace Corps
C) Conservation Corps
D) Army Corps of Engineers

Question 23

The long-term goal of the Economic Opportunity Act was to __________ in the United States.

A) eradicate racism
B) eliminate poverty
C) prevent discrimination
D) stop inflation

Question 24

Under the EOA, the federal government could bypass state and local governments by __________.

A) allowing gubernatorial vetoes of EOA actions to be overridden by the OEO director
B) prohibiting state governors from vetoing EOA grants and initiatives
C) administering the program exclusively at the federal level
D) appointing state-level program directors who were not subject to state or local controls

Question 25

What was the effect of the Vietnam War on Johnson's War on Poverty?

A) The growing public dissatisfaction with Johnson over the war led to a populist revolt against his anti-poverty policies and their eventual dissolution.
B) The impoverished state of the Vietnamese galvanized American support for Johnson's programs and led to their rapid expansion by the end of the 1960s.
C) The large numbers of Americans drafted for service in the Vietnam War resulted in a reduction of poverty rates, making Johnson's programs superfluous.
D) The cost of the war effort depleted and diverted many of the federal funds that were necessary, and the programs faltered.

Question 26

Prior to the implementation of the federal income tax, what was the primary source of revenue for the federal government?

A) property taxes
B) luxury taxes
C) trade tariffs
D) excise fees

Question 27

In the second half of the nineteenth century, the Supreme Court declared congressional attempts to introduce an income tax unconstitutional because such a tax violated the constitutional __________.

A) principle of separation of powers and federalism
B) provision that the laws be faithfully executed by Congress
C) prohibition of direct taxes unless each state pay in proportion to its income
D) prohibition of the direct taking of property by government

Question 28

The income tax was instituted by __________.

A) a constitutional amendment
B) an executive order
C) an act of Congress
D) an assortment of state laws

Question 29

Since 1950, individual income taxes have accounted for roughly what percentage of total federal revenues?

A) 30?40 percent
B) 40?50 percent
C) 60?70 percent
D) 70?80 percent

Question 30

The Tax Reform Act illustrates the __________.

A) role of the president in developing and reforming national tax policy
B) power of special interests to capture the president's economic agenda
C) ability of Congress to prevent significant presidential action on tax reform
D) need of presidents to wait for congressional action on tax reform policy

Question 31

What was the immediate impact of the Jobs and Growth Tax Relief Reconciliation Act of 2003?

A) unemployment increased
B) inflation rose
C) federal revenues dropped
D) trade stagnated

Question 32

What differentiated the actions of Barack Obama from Franklin Roosevelt with respect to the federal minimum wage?

A) Roosevelt was much more successful than Obama in expanding presidential power in the minimum wage policy arena.
B) Obama relied heavily on negotiating bipartisan support for minimum wage legislation while Roosevelt resorted to executive powers to achieve his goals.
C) Roosevelt was convinced that raising the minimum wage was a critical component to advancing his economic policy goals while Obama deferred to Congress on the matter.
D) Obama was willing to directly bypass Congress by using an executive order while Roosevelt worked to convince Congress to raise the minimum wage.

Question 33

Which of the following demonstrates the power of the presidency to bypass Congress in the implementation of economic policy?

A) Ronald Reagan's support for Bob Packwood in exchange for passing the Tax Reform Act
B) Barack Obama's executive order increasing the minimum wage for federal contractors
C) Lyndon Johnson's advocacy for the Economic Opportunity Act
D) George W. Bush's proposal for the TARP program during the Great Recession

Question 34

The claim that the state of the domestic economy bears on political decisions about the minimum wage is supported by the fact that the minimum wage __________.

A) has been increased only during periods of divided government
B) was first created during the economic boom of the 1920s
C) is only raised during major recessionary periods
D) has never been raised when unemployment stood above 7.5 percent

Question 35

Who was the first Secretary of the Treasury?

A) James Madison
B) John Adams
C) Alexander Hamilton
D) James Monroe

Question 36

The claim that when the economy enters a crisis the Treasury Department is expected to lead the response is best illustrated by __________.

A) the agency's responsibility for printing currency
B) the Treasury Department's management of TARP
C) the establishment of FinCEN within the agency
D) the role of the Inspector General in departmental oversight

Question 37

What is the role of the Federal Reserve in the US economy?

A) directing international trade policy
B) implementing fiscal policy
C) overseeing monetary policy
D) establishing regulatory policy

Question 38

Which statement best characterizes the structure of the Federal Reserve?

A) It is an entirely private entity with the sole responsibility of managing fiscal policy.
B) It is a semi-private, semi-public institution that oversees national monetary policy.
C) It is a public institution controlled by Congress that manages monetary policy.
D) It is a public government corporation that manages national fiscal policy.

Question 39

What is one way in which the Federal Reserve fulfills its function?

A) by setting the discount rate
B) by establishing the marginal tax rate
C) by dictating the debt ceiling
D) by controlling the minimum wage

Question 40

The president and the Federal Reserve are powerfully motivated to signal accord between them because discord can __________.

A) permit the politicization of economic policy
B) reduce presidential legitimacy
C) provide opportunities for congressional intervention
D) create uncertainty in markets

Question 41

The president's budget is produced by the __________.

A) Office of Management and Budget
B) Congressional Budget Office
C) Treasury Department
D) Federal Reserve

Question 42

The desire of presidents to centralize economic policymaking power is best illustrated by the __________.

A) launch of the Primary Deal Credit Facility
B) creation of the Federal Reserve Board
C) relocation of the Bureau of Budget to the EOP
D) establishment of the Office of Information and Regulatory Affairs

Question 43

George W. Bush's three-month moratorium on the creation of new regulations illustrates the president's __________.

A) commitment to preventing congressional oversight of the budget process
B) ability to change the regulatory review process to suit his or her economic agenda
C) concerns about bureaucratic drift in economic policy
D) deference to Congress with respect to economic policy implementation

Question 44

Who prepares the annual Economic Report of the President?

A) Treasury Department
B) Federal Reserve
C) Office of Management and Budget
D) Council of Economic Advisors

Question 45

With respect to the power of the presidency, what was the effect of the Reciprocal Trade Agreement Act?

A) It did not immediately augment presidential power because the president had to ask Congress for permission to engage in trade talks with other countries.
B) It greatly expanded presidential power by granting fast-track authority in trade negotiations with other states.
C) It decreased the power of the president in managing the economy by enhancing congressional oversight over trade policy.
D) It quickly expanded presidential power in economic policy through the legitimization of executive agreements.

Question 46

What is suggested by the findings of economists Alan Blinder and Mark Watson with respect to the domestic economy?

A) When factors related to presidential luck are controlled, Republican economic policies lead to more growth.
B) The partisan gap in management clearly shows that Republican presidents are more likely to be in office during periods of high consumer confidence.
C) There is no pattern outside of sheer luck that accounts for the partisan difference in economic management.
D) There is a clear partisan gap in economic performance that favors Democratic presidents.

Question 47

Which statement best describes the Office of the United States Trade Representative?

A) It exists solely to advance executive branch trade policy.
B) It serves as a focal point for inter-branch negotiations over trade.
C) It is the primary point for congressional influence over trade.
D) It reflects the dominance of the legislative branch in trade policy.

Question 48

What was an outcome of the Trade Act of 1974?

A) It established the Council of Economic Advisors.
B) It mandated the development of the annual Economic Report of the President.
C) It created the Office of Information and Regulatory Affairs.
D) It conferred fast-track authority to the president for the first time.

Question 49

Which of the following fueled arguments for increased international trade and led to the passage of the Trade Expansion Act?

A) growing markets in Europe and Japan
B) effects of the Great Recession
C) increased isolationism in Europe
D) declining US productivity

Question 50

Drawing on an example from the text, demonstrate how have presidents used fiscal policy to manage the national economy.

Question 51

What are the main policy tools available to presidents for influencing the American economy? Provide examples from the text to illustrate your points.

Question 52

With respect to economic policy, what evidence supports Edward S. Corwin's claim that the history of the presidency is the history of aggrandizement? Provide specific examples.

Question 53

The federal minimum wage continues to be an ongoing debate in American politics. What is the history of the minimum wage, what factors affect its setting, and how have presidents been involved in the process of setting the minimum wage? Use examples from the text to support your claims.

Question 54

What are the effects of partisanship on presidential stewardship of the domestic economy? Use evidence to support your points.