Deck 18: Economic Policy

Question 1

Keynes would insist that there is no need for the government to

A) create public works programs.
B) cut federal expenditures.
C) increase taxes.
D) pump money into the economy.
E) balance the budget on a year-to-year basis.

Answer 1

E

Question 2

When there is an economic downturn, this economic theory argues that the proper thing for government to do is increase demand through pumping more money into the economy by spending more than it takes in in taxes and by creating public-works programs.

A) Keynesian economics
B) Monetarist economics
C) Economic planning
D) Supply-side economics
E) Credit-based economics

Answer 2

A

Question 3

The amount the government spends in excess of what it takes in each year is called the __________.

A) debt
B) unbalanced fund
C) appropriation
D) deficit
E) redline

Answer 3

D

Question 4

In 1980, about two-thirds of those who said they had become worse off economically voted for Ronald Reagan, the challenger, while over half of those who felt they had become better off voted for __________.

A) Gerald Ford
B) Walter Mondale
C) Jimmy Carter
D) George W. H. Bush
E) Bill Clinton

Question 5

The health of the American economy creates __________ politics.

A) majoritarian
B) interest group
C) client
D) entrepreneurial
E) egalitarian

Question 6

According to the monetarist theory, inflation occurs when

A) government holds down interest rates.
B) there is too little money, and interest rates are low.
C) demand exceeds supply.
D) the budget deficit exceeds the gross national product (GNP).
E) the government prints too much money.

Question 7

In 2012, the national debt rose to over $__________ trillion.

A) 3
B) 5
C) 16
D) 45
E) 112

Question 8

As a group, low-income people tend to be most concerned with __________.

A) inflation
B) education
C) economic drift
D) health
E) employment

Question 9

__________'s campaign aides often reminded each other, "It's the economy, stupid!"

A) Gerald Ford
B) Walter Mondale
C) Jimmy Carter
D) George W. H. Bush
E) Bill Clinton

Question 10

The total value of all a nation's goods and services produced each year is called

A) adjusted production value.
B) consumer price index.
C) gross domestic product.
D) goods measure.
E) international trade product.

Question 11

A twentieth-century example of government use of money to influence elections was

A) increasing the size of the military in election years.
B) increasing foreign aid in election years.
C) increasing Social Security benefits in election years.
D) reducing subsidies for mortgage insurance in election years.
E) mobilizing troops in election years.

Question 12

The huge new demands for Social Security benefits and medical payments under Medicare is largely due to

A) the population getting older.
B) increases in benefits in those programs.
C) the increasing numbers of young workers in the American economy.
D) recent changes to make the programs less generous.
E) None of the above is True.

Question 13

Elected officials are strongly tempted to take

A) a long-run view of the economy.
B) a short-run view of the economy.
C) a position in support of policies that will best satisfy the self-regarding voter.
D) positions with no regard to unemployment.
E) Both B and C are True.

Question 14

The pocketbook issue tends to preoccupy politicians most

A) early in a presidential term.
B) toward the end of a session of Congress.
C) when presidential popularity is at its peak.
D) when the economy is doing poorly.
E) just before elections.

Question 15

As a group, low-income people tend to vote

A) Republican.
B) for Democrats and Republicans at about equal levels.
C) for independent candidates.
D) Democratic.
E) for third party candidates.

Question 16

In 2010, Barack Obama became the first president since __________ to be reelected despite an unemployment rate on election day that was higher than the unemployment rate on the day of his first inaugural.

A) Herbert Hoover
B) Harry Truman
C) Jimmy Carter
D) Ronald Reagan
E) Franklin Roosevelt

Question 17

When there is an economic downturn, this economic theory argues that the proper thing for government to do is to have a steady, predictable increase in the money supply at a rate about equal to growth in the economy's productivity.

A) Keynesian economics.
B) Monetarist economics.
C) Economic planning.
D) Supply-side economics.
E) Credit-based economics.

Question 18

In 2011, Standard & Poor's, a credit ratings agency, issued

A) a warning about the U.S. housing market.
B) an opinion in support of the U.S. Congress and its efforts to lower the federal debt.
C) a first-ever warning about America's national debt.
D) a call to focus on a measure other than GDP growth.
E) a call for the U.S. federal government to spend more.

Question 19

Milton Friedman believed that inflation occurs

A) when the government does not stimulate the economy.
B) when the private sector spends too little.
C) when too much money chases too few goods.
D) when spending is higher than revenue from taxes.
E) when Republicans control the White House.

Question 20

When voting behavior and economic conditions correlate at the national but not at the individual level, it can be said that the voters are

A) heliocentric, or earth conscious.
B) sociopathic, or self-absorbed.
C) homeopathic, or group related.
D) socialistic, or ideology driven.
E) sociotropic, or other-regarding.

Question 21

According to this economic theory, cutting taxes will increase people's incentive to work, save, and invest.

A) Keynesian economics
B) Monetarist economics
C) Economic planning
D) Supply-side economics
E) Credit-based economics

Question 22

The president's adviser who provides estimates of government revenues and who recommends tax changes is the

A) chairperson of the CEA.
B) secretary of the Treasury.
C) director of the OMB.
D) chairperson of the Fed.
E) deputy director of the OMB.

Question 23

If only the economic health of the nation mattered, then __________ politics would dominate.

A) majoritarian
B) interest group
C) client
D) entrepreneurial
E) organizational

Question 24

One study found __________ separate government bureaus were engaged in making economic policy.

A) fewer than five
B) fewer than ten
C) approximately thirty
D) close to seventy-five
E) more than one hundred

Question 25

The fiscal year goes from

A) June 3 to November 15.
B) March 16 to September 29.
C) October 1 to September 30.
D) January 1 to November 30.
E) January 15 to November 15.

Question 26

The first unified presidential budget did not appear until the __________.

A) 1820s
B) 1860s
C) 1880s
D) 1920s
E) 1930s

Question 27

An economist proposes that the government should spend more on public-works programs to help increase demand for goods and services in order to improve the overall economy. Which approach would fit best with this economic theory?

A) Keynesian economics
B) Monetarist economics
C) Economic planning
D) Supply-side economics
E) Credit-based economics

Question 28

Typically, the economic adviser with the closest link to the financial community is the

A) chairperson of the CEA.
B) secretary of the Treasury.
C) director of the OMB.
D) chairperson of the Fed.
E) deputy director of the OMB.

Question 29

Republicans tend to support free trade, but George W. Bush imposed sharp increases in the taxes that must be paid on imported steel because

A) Congress pressured him to do so.
B) the CEA recommended that he do so.
C) other nations had done the same thing.
D) he wanted political support in states such as Ohio and Pennsylvania.
E) of a bargain with Democratic senators.

Question 30

In theory, the Fed is

A) the only national entity responsible for economic policy.
B) central planning body for the economy.
C) independent of both the president and Congress.
D) the main fiscal policy body in the federal government.
E) None of the above is True.

Question 31

During his presidency, Kennedy mostly picked __________ to fill key economic positions.

A) supply-siders
B) monetarists
C) keynesians
D) central planners
E) libertarians

Question 32

Reagan's strategy in the budget battle of 1981 was to

A) focus on specific controversial programs and leave remaining programs at current spending levels.
B) pass a May budget resolution that called for further cuts in most programs.
C) form a consensus of liberals and conservatives.
D) get Congress to vote for a total package of cuts before it voted for particular cuts.
E) reduce party leaders to a subordinate role in the process by insisting on particular cuts on the front end of the process.

Question 33

Since 1974, the purpose of congressional budget resolutions passed annually in May has been to

A) add up all the agreed-on expenditures.
B) set a ceiling on total spending.
C) get final authorization for all expenditures.
D) compromise over the spending measures of the two houses.
E) settle issues related to discrepancies in math.

Question 34

This federal organization is primarily responsible for monetary policy.

A) Council of Economic Advisers.
B) Treasury Department.
C) Office of Management and Budget.
D) Federal Reserve Board (Fed).
E) National Security Agency.

Question 35

When the Troubled Asset Relief Program (TARP) program began investing in __________, some Americans argued that there was potential wisdom in the planning approach.

A) the airline industry
B) banks
C) coal
D) steel
E) rubber

Question 36

The executive agency in charge of economic forecasting and preparing the president's annual economic report to Congress is the

A) Council of Economic Advisers.
B) Treasury Department.
C) Office of Management and Budget.
D) Federal Reserve Board (Fed).
E) National Security Agency.

Question 37

Voters want a balanced budget and less governmental spending, but they also believe government should spend more on education and crime control. The authors say voters are

A) baffled by polling questions.
B) hopelessly uninformed.
C) easily manipulated.
D) clearly confused.
E) not irrational.

Question 38

In this important decision, the Supreme Court ruled that the president does not have the authority to seize private steel mills even during wartime.

A) Lochner v. New York
B) Muller v. Oregon
C) West Coast Hotel Co. v. Parrish
D) Youngstown Sheet & Tube Co. v. Sawyer
E) Gibbons v. Ogden

Question 39

According to opinion polls, the public wants all of the following except

A) a balanced federal budget.
B) lowered government spending.
C) more spending on education and other programs.
D) tight trade restrictions.
E) a limited government, with no deficit.

Question 40

The Gramm-Rudman Act was passed by Congress to

A) fine-tune the existing budget procedures.
B) give more authority to the OMB.
C) eliminate deficit spending.
D) eliminate the balance-of-trade deficit.
E) eliminate tax cuts.

Question 41

The term sequester refers to

A) those budget items, such as Social Security, that are largely uncontrollable.
B) the process of protecting certain items from budgetary review.
C) freezing budget items at previous levels.
D) a limit set on the percentage of uncontrollable expenses that the budget can contain.
E) automatic, across-the-board percentage cuts in the budget.

Question 42

President ________ was notable for saying, "Read my lips. No new taxes."

A) Bill Clinton
B) Gerald Ford
C) Ronald Reagan
D) George H. W. Bush
E) John F. Kennedy

Question 43

Keeping both the tax burden and tax evasion low would be an example of __________ politics.

A) client
B) entrepreneurial
C) interest group
D) majoritarian
E) reciprocal

Question 44

If a tax is progressive,

A) the wealthiest individuals pay the lowest rate.
B) the wealthiest individuals pay the highest rate.
C) every taxpayer pays the same rate.
D) rates are lower at the lowest and highest income brackets.
E) rates are the highest for the middle class.

Question 45

The average citizen paid very little in income taxes until

A) the Great Depression.
B) the New Deal.
C) the election of Herbert Hoover.
D) the Korean War.
E) World War II.

Question 46

The Budget Enforcement Act of 1990 focused on limiting

A) travel expenses.
B) payment on the national debt.
C) existing contracts.
D) entitlements.
E) discretionary spending.

Question 47

Among the interest groups that have organized around loopholes are

A) home builders.
B) universities.
C) insurance companies.
D) automakers.
E) All of the above are True.

Question 48

High marginal tax rates have been offset by __________.

A) deductions
B) exemptions
C) exclusions
D) shelters
E) All of the above are True.

Question 49

When Congress first created a peacetime income tax (in 1895),

A) it distributed the money evenly among the states.
B) the president vetoed the legislation.
C) several states threatened to secede from the Union.
D) the deficit disappeared instantly.
E) the Supreme Court declared it unconstitutional.

Question 50

All of the following gave significant tax benefits to most taxpayers except

A) mortgage interest deductions.
B) Schedule C deductions.
C) state tax payments.
D) interest on consumer loans.
E) local tax payments.

Question 51

From the inauguration of income tax up to the 1950s, tax rates tended to rise and fall with

A) the cycles of public opinion.
B) good and bad economic times.
C) war and peace.
D) Democratic and Republican administrations.
E) critical or realigning elections.

Question 52

Loophole politics is an example of __________ politics.

A) majoritarian
B) interest group
C) entrepreneurial
D) client
E) reciprocal

Question 53

Democrats agreed to support loopholes that favored the rich in return for high marginal rates, because they feared that a combination of no loopholes and high marginal rates would

A) hurt the middle class more than it would hurt the wealthy by denying them Schedule C deductions.
B) discourage foreign investment and raise the cost of raw materials.
C) encourage foreign investment in U.S. industry, thereby hurting the economy indirectly.
D) seriously affect productivity by raising the cost of raw materials and labor.
E) hurt the economy by discouraging people and businesses from saving and investing.

Question 54

Before the creation of the federal income tax, most of the money that the government needed came from __________.

A) loans
B) state contributions
C) private wealth
D) tariffs
E) public charity

Question 55

The Budget Enforcement Act of 1990 required that all increases in nonentitlement spending be followed by

A) abolition of frivolous agencies.
B) matching funds from the states.
C) spending cuts in discretionary programs.
D) tax increases.
E) decrease in spending on other discretionary programs or increase in taxes.

Question 56

Contributing to the success of loophole politics prior to passage of the 1986 tax bill was the

A) strong support of policy entrepreneurs such as Ralph Nader.
B) existence of low marginal rates to offset revenues lost through deductions.
C) decentralized structure of Congress.
D) existence of tariff revenues to offset revenues lost through deductions.
E) strong support of the conservative coalition and Ralph Nader.

Question 57

Which statement best describes the tax burden in the United States?

A) It is lower than it is in most other democratic nations.
B) It is about the same as it is in most other democratic nations.
C) It is slightly higher than it is in most other democratic nations.
D) It is much higher than it is in most other democratic nations.
E) It has fluctuated considerably, but just about always remained higher than in most other democratic nations.

Question 58

The big losers with respect to the Tax Reform Act of 1986 were __________.

A) businesses
B) individuals
C) farmers
D) the poor
E) Both C and D are True.

Question 59

The political compromise reached on taxation in the first half of the twentieth century included

A) high marginal tax rates and numerous loopholes.
B) low marginal tax rates and numerous loopholes.
C) high marginal tax rates and few loopholes.
D) low marginal tax rates and few loopholes.
E) None of the above is True.

Question 60

In 1993, President Clinton raised the top income tax rate to over

A) 15 percent.
B) 20 percent.
C) 31 percent.
D) 39 percent.
E) 53 percent.

Question 61

Keynes was skeptical of the notion that the market would automatically operate at a full-employment, low-inflation level.

Question 62

Liberals generally believe the debt should be addressed by lowering taxes.

Question 63

The executive office in charge of forecasting economic trends is the Council of Economic Advisers.

Question 64

Keynesianism argues that lower taxes will provide incentives for people to work, save, and invest.

Question 65

Lower income earners tend to vote Democratic.

Question 66

A progressive tax is one that requires those who are better off to pay more as a percentage of their income.

Question 67

When a recession and an older population occur together, our national debt tends to increase significantly.

Question 68

The economic approach known as planning has never been popular in America.

Question 69

Sociotropic voting would involve decision making based on personal experiences rather than on perceptions of the economic health of the nation as a whole.

Question 70

The most important part of the economic policymaking machinery is Congress.

Question 71

Younger voters often worry more about inflation than unemployment.

Question 72

The federal government traditionally makes out its budget without regard for the amount of money it has to spend.

Question 73

The Tax Reform Act of 1986 called for lower tax rates but smaller and fewer deductions.

Question 74

Wage-price controls are most likely to be advocated by supply-side economists.

Question 75

The amount the government spends in excess of what it takes in each year is called the debt.

Question 76

By 2015, the federal debt is projected to reach nearly $22 trillion.

Question 77

A monetarist believes that inflation is caused by too little money chasing too many goods.

Question 78

People who tell pollsters that their families' finances have gotten worse are more likely than other people to vote against the incumbent president.

Question 79

Voters frequently endorse three inconsistent policies-lower taxes, less debt, and new programs.

Question 80

The president's troika of economic advisers includes the Federal Reserve Board, the Council of Economic Advisers, and the secretary of the Treasury.