Deck 14: Economic and Social Policy

Question 1

Inflation can become a major economic problem for all of the following reasons EXCEPT:

A) it makes it more difficult for people to repay their debts.
B) it reduces the value of savings.
C) it leads investors to demand high interest rates.
D) it erodes the purchasing power of some people.
E) it makes it more difficult for businesses to plan their long-term future.

Answer 1

A

Question 2

Stagflation involves rising prices and high unemployment.

Answer 2

True

Question 3

A loaf of bread that costs $2 today might cost $3 in 20 years. This is an example of inflation.

Answer 3

True

Question 4

Until 2010, Congress had not passed any laws that reformed health care in the United States.

Question 5

Why is the Securities and Exchange Commission important in a free-market economy?

A) It controls inflation by setting interest rates.
B) It regulates and controls monopolies and commerce.
C) It helps provide oversight to ensure transparent capital markets.
D) It ensures fair political competition without undue influence of money and donations.
E) It enforces laws that protect property rights, allowing businesses to have confidence that another firm will not steal their trade secrets and intellectual property.

Question 6

One major critique of relying on the GDP to measure economic success is that:

A) it fails to capture a decline in well-being, as measured by sales of such products as alarms in our homes.
B) it is only able to measure economic activity in the manufacturing sector and does not include the rapidly growing service sector.
C) the statistic fails to tell us how the U.S. economy compares to the economies of other nations.
D) it relies too heavily on Wall Street activity.
E) the government frequently changes the formula for computing the GDP.

Question 7

Evaluating government bureaucracies is difficult because there is no standard by which efficacy is generally measured.

Question 8

Payroll taxes are a regressive tax.

Question 9

When the economy goes into a deep, widespread, and prolonged downturn, it is called an:

A) economic regression.
B) economic hardship.
C) economic deficit.
D) economic depression.
E) economic setback.

Question 10

The Office of Management and Budget (OMB) has the power to restrict how much money Congress is allowed to spend each fiscal year.

Question 11

The health care reform passed in 2010 can be considered part of the government's effort to provide a "social safety net."

Question 12

What does the gross domestic product (GDP) measure?

A) the annual difference between a country's imported goods and exported goods
B) a country's annual budget surplus
C) a country's economic output and activity
D) the country's total annual sales of manufactured goods
E) the goods consumed in the nation over a year

Question 13

A progressive tax means that wealthier individuals pay higher tax rates and poorer individuals pay lower tax rates.

Question 14

The Treasury Department is responsible for coordinating budget requests and aiding the president in the creation of an annual budget.

Question 15

Budgetary spending that is required by law is called "mandatory spending."

Question 16

Tax policy is inherently conflictual because:

A) America has to pay a portion of its taxes to the United Nations.
B) the federal income tax is regressive.
C) tax policy often involves redistributing money from one group to another.
D) federal taxes have increased to their highest levels in U.S. history.
E) the U.S. Constitution allows the president and Congress to pass their own separate budgets, pitting them against one another.

Question 17

Which of the following describes the top policy priorities among a political party, politicians, or a coalition of politicians?

A) social policy efforts
B) a legislative leviathan
C) a policy agenda
D) a key issue agenda
E) partisanship

Question 18

Members of the "baby-boom generation"-a term used to describe individuals born between 1946 and 1964 -will put a great deal of stress on the Social Security system when they retire.

Question 19

Supporters of the Federal Reserve System argue that it allows the president to have final influence and control over the nation's economic policies.

Question 20

The Constitution gives the executive branch the "power of the purse."

Question 21

A tax that takes a larger share of poor people's income than wealthy people's income is known as a ________ tax.

A) progressive
B) mandatory
C) discretionary
D) regressive
E) flat

Question 22

The logic behind lowering interest rates is to:

A) decrease the amount of money being borrowed.
B) lower inflation.
C) increase the amount of money being borrowed.
D) encourage people to buy government bonds.
E) control the profits that banks make.

Question 23

An omnibus reconciliation bill:

A) controls the money supply and works to control interest rates.
B) requires that government spending not exceed government spending.
C) is a single, comprehensive budget bill that requires a two-thirds majority in the House and Senate for passage.
D) is a single, comprehensive budget bill that cannot be filibustered in the Senate.
E) bridges the gap between the House budget and the Senate budget bills.

Question 24

Which agency works with the president to compose the nation's annual budget?

A) Federal Reserve Bank
B) National Budget Office
C) Federal Council on Budget Affairs
D) Office of Management and Budget
E) Internal Revenue Service

Question 25

The ________ is the total accumulation of money borrowed by the government.

A) budget deficit
B) federal debt
C) trade deficit
D) budget surplus
E) federal balance sheet

Question 26

During the nation's recent economic crisis, what would a proponent of Keynesian economics have done?

A) supported the government's entire $787 billion stimulus plan of tax cuts and government spending
B) supported the stimulus plan's tax cuts but not the increases in government spending
C) opposed the stimulus plan's tax cuts but supported the increases in government spending
D) opposed the government's entire stimulus plan because it added to the federal debt
E) supported a government stimulus plan of spending increases and tax cuts at the state level but not at the national level, because state governments tend to be more fiscally responsible

Question 27

What is it called when government spending is equal to its revenue?

A) budget making
B) balanced budget
C) budget surplus
D) budget stability
E) fiscal federalism

Question 28

Which of the following is an example of a progressive tax?

A) the income tax
B) the payroll tax
C) the excise tax
D) the gas tax
E) the cigarette tax

Question 29

Taxing and spending decisions are known as ________ policy.

A) punitive
B) mandatory
C) progressive
D) monetary
E) fiscal

Question 30

What is a major criticism of the Fed?

A) Its policies are designed to maximize GDP rather than to improve the overall quality of life for the public.
B) Its policies undermine the legislative branch's ability to affect budgetary policy.
C) It often acts in ways that are politically popular rather than in ways that are fiscally sound.
D) It is too concerned with keeping interest rates low when it should be more concerned about keeping inflation low.
E) The Fed can make decisions that damage the economy, and voters have little recourse
To hold members of the Fed accountable.

Question 31

Which of the following constitutes the highest portion of expenditures in the national budget?

A) discretionary defense spending
B) Social Security and Medicare combined
C) foreign aid
D) transportation
E) net interest paid on the national debt

Question 32

During the nation's recent economic crisis, what would a proponent of supply-side economics have done?

A) supported the government's entire $787 billion stimulus plan of tax cuts and government spending
B) supported the stimulus plan's tax cuts but not the increases in government spending
C) opposed the stimulus plan's tax cuts but supported the increases in government spending
D) opposed the government's entire stimulus plan because it added to the federal debt
E) supported a government stimulus plan of spending increases and tax cuts at the state level but not at the national level, because state governments tend to be more fiscally responsible

Question 33

What is an example of mandatory spending in the federal budget?

A) an entitlement program such as Social Security
B) national security expenditures for the Department of Homeland Security
C) funding for the national parks and forest systems
D) funding for the National Aeronautics and Space Administration (NASA)
E) funding for transportation and infrastructure

Question 34

Since 1933, money is based on:

A) gold.
B) gold, silver, and other precious metals.
C) certificates of deposit.
D) the assets held by the Federal Reserve System.
E) the trust and confidence in the banking system.

Question 35

Which of the following is a responsibility of the Treasury Department?

A) to prepare the president's budget
B) to provide Congress with economic data
C) to make changes to the U.S. tax code
D) to collect taxes, duties, and money due to the United States
E) to make recommendations to the Justice Department about prosecuting individuals
Who may have knowingly violated federal tax laws

Question 36

When the flow of money is tight, the price of short-term loans will be bid ________ and the federal fund rate (FFR) will ________.

A) up; rise
B) down; rise
C) up; fall
D) down; fall
E) up in good economic times and down in difficult economic times; vary
Depending on market forces

Question 37

The specific interest rate that banks pay to the Federal Reserve Bank for short-term loans is called a(n):

A) short-term rate.
B) emergency loan rate.
C) discount rate.
D) federal funds rate.
E) federal reserve rate.

Question 38

The theory that lowering taxes will stimulate the economy because of increased investment and spending among the public is called:

A) Keynesian economics.
B) fiscal federalism.
C) economic nationalism.
D) supply-side economics.
E) central economic planning.

Question 39

All of the following statements about the Federal Reserve (or Fed) are true EXCEPT:

A) the Fed's primary directive is to keep interest rates low.
B) the Fed's decisions are not subject to presidential review.
C) the Fed's decisions are not subject to congressional review.
D) unlike other presidential appointees, members of the Fed can only be removed
"for cause."
E) the Fed can create its own money.

Question 40

Which of the following is the most significant source of revenue for the federal government?

A) payroll taxes
B) corporate income taxes
C) excise taxes
D) individual income taxes
E) the gas tax

Question 41

The Patient Protection and Affordable Care Act is often referred to as:

A) Medicaid.
B) Social Security.
C) welfare.
D) Medicare.
E) Obamacare.

Question 42

When Congress and the president agree on federal budgets that run significant deficits over many years, what are the likely economic consequences?

A) Wages rise for workers, leading to inflation.
B) The nation depletes its reserve supply of gold and precious metals.
C) Taxes are likely to increase and become more regressive, exacerbating income inequality.
D) Interest rates might have to increase to attract investors to buy government bonds and securities.
E) The U.S. dollar will weaken, increasing the trade deficit.

Question 43

How is America's trade deficit primarily financed?

A) overseas borrowing
B) public purchases of U.S. bonds
C) budget surplus funds
D) corporate taxes
E) excise taxes

Question 44

What is a common criticism of regulation?

A) Regulations limit job growth.
B) Regulation gives businesses the incentive to focus on profits only.
C) Most regulations are highly unpopular with the American public.
D) Regulations are written in complex language.
E) Research has shown that regulations have generally failed to protect the public from the dangers they claim to prevent.

Question 45

Which of the following is most likely to influence trade policy and balance?

A) strength of the dollar compared to other currencies
B) the federal budget deficit
C) the national debt
D) interest rates
E) the status of the government-whether divided or unified

Question 46

Why are monopolies a problem sometimes?

A) They present a barrier to free trade between nations.
B) They are typically wasteful and inefficient with their resources.
C) They force people to buy products they do not want.
D) A business can raise prices without fear of losing customers to competitors.
E) Banks are less likely to make loans and free up capital for investment.

Question 47

In the post-World War II era, how has the disparity between poor people and wealthy people changed?

A) It's gotten larger.
B) It's gotten smaller.
C) It's stayed about the same.
D) It's no longer measured due to privacy concerns.
E) It's only been measured since 1970.

Question 48

What is the relationship between the relative strength of the dollar and imports and exports from the country?

A) A stronger dollar means more imports and more exports.
B) A stronger dollar means less imports and less exports.
C) A stronger dollar means more imports and less exports.
D) A stronger dollar means less imports and more exports.
E) There is no direct relationship.

Question 49

A trade deficit is determined by measuring the difference between a nation's ________ and its ________.

A) revenue; spending
B) inflation rate; unemployment rate
C) imports; exports
D) annual deficit; debt
E) foreign loans; foreign debt

Question 50

An individual making less than approximately what amount is considered below the poverty line as a single person?

A) $10,000
B) $20,000
C) $30,000
D) $40,000
E) $50,000

Question 51

In recent years, what has been the status of the U.S. trade balance?

A) a record-setting surplus
B) a record-setting deficit
C) roughly equal
D) equalized through government bailouts
E) no longer calculated because of NAFTA and other free-trade agreements

Question 52

Market failures sometimes lead to social regulation, particularly when the costs of a firm's behavior are not entirely borne by the firm but are passed on to other people. These failures are known as:

A) the free rider problem.
B) negative externalities.
C) regulatory conundrums.
D) negative market shares.
E) the free market paradox.

Question 53

Approximately what percentage of the nation's population is in poverty?

A) 50 percent
B) 35 percent
C) 26 percent
D) 15 percent
E) 2 percent

Question 54

Which of the following was a component of President George W. Bush's plan to scale back social programs?

A) end the War on Poverty
B) add a prescription drug plan to Medicare
C) privatize portions of Social Security
D) eliminate Medicaid
E) eliminate Medicare

Question 55

Under a protectionist policy of importing and exporting goods, the United States would:

A) strengthen the value of the U.S. dollar.
B) use federal law enforcement officials to ensure national security as products enter the country.
C) use federal regulatory agencies to secure the safety of imported goods such as food.
D) decrease the number of imports by implementing trade sanctions, tariffs, and quotas.
E) protect consumers from price gouging by producers of foreign imported goods.

Question 56

Which of the following negative trade-offs do people usually associate with free trade?

A) higher interest rates
B) stock market decline
C) reduction in American jobs
D) increased prices on consumer goods
E) the need for more border security

Question 57

Which of the following is an example of a negative externality?

A) power plants producing pollution as a side effect of energy production
B) Apple selling computers to Chinese consumers
C) the Fed buying assets to try to encourage the American economy out of a recession
D) investing in schools so that citizens are more productive
E) balancing the budget every year

Question 58

A "natural" monopoly occurs because:

A) monopolies are a natural consequence in free-market capitalism.
B) one company offers a product that is clearly superior to its competitors.
C) mergers occur between rival companies until only one remains.
D) one company corners the market by buying up companies in other industries that control the means of production.
E) the costs are so high to enter a specific business that only one company in the market can be profitable.

Question 59

Government assistance-usually financial assistance-to individuals in need is called:

A) block grants.
B) welfare.
C) social policy.
D) Medicare.
E) Social Security.

Question 60

The ________ was the name given to a group of government-sponsored social and economic programs developed by Franklin Roosevelt to combat the Great Depression.

A) New Deal
B) Great Society
C) Contract with America
D) 1934 Stimulus Package
E) War on Poverty

Question 61

What is a major critique of partial and full privatization of Social Security?

A) Recipients will receive less money.
B) The federal government gets to decide which private investments are made.
C) State governments would tax profits made from private investments.
D) Transition to privatization would be expensive.
E) Only wealthy people would receive benefits.

Question 62

Which areas of social policy appear to be the most conflictual? Which have been most open to compromise? Why are some areas more likely to see compromise while others remain mired in partisan differences that prevent solutions from being enacted?

Question 63

What is a monopoly and what are the major concerns with monopolies on the economy? What can the government do about monopolies? Should the federal government have the power to regulate monopolistic business practices? Beyond regulating monopolistic practices, should the government be allowed to regulate business further?

Question 64

It is widely believed that politicians seem to be less interested in social policies concerning the poor and disadvantaged because:

A) the Great Society plan solved most of this population's problems.
B) the poor and disadvantaged are not politically active.
C) the media does not report such political efforts.
D) it costs too much money to implement such policies.
E) most voters do not care about social policies.

Question 65

Who do you believe has the most influence in setting the country's fiscal policy and why? What about its monetary policy? Do you believe that is the appropriate distribution of power? Are there government players that you believe should have more or less say in fiscal or monetary policy?

Question 66

Democrats and Republicans generally have divergent views on what impact free-trade agreements, such as NAFTA, have on the United States' economic well-being. Discuss the arguments that each side typically makes concerning the impact of recent free-trade agreements on the U.S. economy. Which position makes the more compelling case, and why?

Question 67

What did the No Child Left Behind legislation do?

A) increased federal funding for education
B) expanded Head Start to every school district
C) placed national accountability and testing requirements in every school district
D) required every school district to offer special education classes
E) decreased federal funding for education

Question 68

What is income inequality? How can it be measured? Is income inequality a growing problem in the United States? Why or why not?

Question 69

What are the four major taxes collected by the federal government? Which of these taxes are regressive and which are progressive? In your answer, define the idea of regressive and progressive taxes. What do you think of the federal government's tax policies? Are they fair or unfair? Are they too much or too little?

Question 70

What is the ''individual mandate'' as it applies to health care?

A) All businesses, regardless of size, must cover their employees.
B) If individuals are not covered by their work, they are required to purchase a personal policy.
C) Courts can require certain individuals to have more expensive policies.
D) Only those who have an individual policy are able to get subsidies.
E) Businesses with 50 or more employees must offer insurance to their workers.

Question 71

The United States is currently running a trade deficit. Why is the trade deficit a potential problem? What limits the government's ability to reduce the trade deficit? If you were a member of Congress, what policies would you recommend to reduce the trade deficit? Defend your recommendations against any possible objections.

Question 72

Politicians have established a number of goals that equate to a healthy economy. Discuss some of these goals and how they positively impact the nation's economic conditions. Explain GDP and discuss whether or not it is a good measure of the nation's economic strength and well-being.

Question 73

Three major U.S. social policies are Social Security, Medicare, and Medicaid. Policy experts believe them to be in long-term financial danger. Why do they believe that and how might we fix them to make them more fiscally sustainable?

Question 74

Research on poverty has found:

A) there is no relationship between the poverty rate and the party of the president.
B) Republican and Democratic presidencies see equal reductions in the poverty rate.
C) Republican presidencies generally see a larger reduction in the poverty rates than Democratic presidencies.
D) poverty has declined every year for the past 50 years regardless of who was president.
E) Democratic presidencies generally see a larger reduction in the poverty rates than Republican presidencies.