Deck 16: Government and the Economy

Question 1

The ________ marked the major historical turning point in the relationship between the government and the marketplace.

A) Civil War
B) Depression of 1896
C) Great Depression
D) implementation of Reaganomics

Answer 1

C

Question 2

Which of the following was a driving force for economic growth during the late nineteenth century?

A) agriculture
B) manufacturing industries
C) government work projects
D) international trade

Answer 2

B

Question 3

During the New Deal, ________ theory that a government could boost employment by stimulating demand became quite influential.

A) Adam Smith's
B) Milton Friedman's
C) Friedrich Hayek's
D) John Maynard Keynes's

Answer 3

D

Question 4

The recession of 2008 led to the loss of ________ million American jobs.

A) 1
B) 5
C) 8
D) 16

Question 5

The National Science Foundation was created in ________.

A) 1790
B) 1865
C) 1928
D) 1950

Question 6

Approximately ________ percent of farms in the United States receive subsidies from the federal government, and the total cost is estimated to be________ a year.

A) 5; $10 billion
B) 10; $12 billion
C) 25; $15 billion
D) 40; $20 billion

Question 7

________ occurs when the price level of goods and services increases over several months.

A) A budget deficit
B) An open-market operation
C) Inflation
D) A recession

Question 8

One of the goals of the American Recovery and Reinvestment Act of 2009 was to

A) develop telecommunications projects and clean technology construction.
B) save existing jobs that might be lost due to the economic recession.
C) provide for a national health care system.
D) make short-term investments to encourage job creation.

Question 9

The first tax cut designed to stimulate the economy and promote full employment was enacted by President ________.

A) Lyndon B. Johnson
B) Theodore Roosevelt
C) Franklin D. Roosevelt
D) John F. Kennedy

Question 10

Something that must be supplied by the government because it cannot be provided by the marketplace is called ________.

A) a public good
B) a commodity
C) a governmental appropriation
D) pork

Question 11

Vehicle safety is one of the chief responsibilities of the Department of ________.

A) Transportation
B) Consumer Safety
C) the Interior
D) Health and Human Services

Question 12

The Human Genome Project was initiated

A) by government researchers and taken up later by private corporations.
B) by private corporations and taken up later by government researchers.
C) and completed entirely by private corporations.
D) and completed entirely by government researchers.

Question 13

An officially expressed purpose or goal backed by a sanction is a ________.

A) public policy
B) regulation
C) rule
D) bill

Question 14

________ are given to states and local governments on the condition that all expenditures are limited to the problem or group specified by law.

A) Tariffs
B) Loopholes
C) Monopolies
D) Categorical grants

Question 15

As of 2016, American immigration laws

A) do not give special priority to any individual on the basis of national origin.
B) do not place any limits on the total number of immigrants allowed into the country each year.
C) routinely give special priority to unskilled workers.
D) routinely give special priority to workers who have skills that are in demand among American employers.

Question 16

Which of the following is the best example of a public good?

A) a computer
B) the interstate highway system
C) the airline industry
D) an iPhone

Question 17

The ________ has taken the lead in conducting basic research to counter bioterrorism.

A) National Science Foundation
B) Department of Defense
C) Department of Homeland Security
D) National Institutes of Health

Question 18

Inflation reached historically ________ levels during the late 1970s, ________ ever since.

A) high; but declined by the mid-1980s and has remained low
B) low; but increased by the mid-1980s and has remained high
C) low; and has remained low
D) high; and has remained high

Question 19

The goal of the Works Progress Administration was to

A) put unemployed people to work on public projects.
B) establish federal standards for hiring, firing, and laying off employees.
C) begin the nationalization of the American labor force.
D) help distribute food and aid to unemployed workers.

Question 20

The index of the total output of goods and services produced in a national economy is called the ________.

A) inflation index
B) gross domestic product
C) monetary fund
D) consumer price index

Question 21

Upton Sinclair's 1906 exposé The Jungle revealed

A) widespread use of child labor in coal mines and factories throughout the United States.
B) violent suppression of labor unions by big business.
C) control of politicians by corporate interests who run the political machines.
D) unsanitary practices at meatpacking plants.

Question 22

The federal government's relationship with Sematech illustrates that

A) expensive government bailouts of private companies often increase the national debt by a large amount.
B) partnerships between the federal government and private industry never succeed in saving vulnerable sectors of the economy.
C) government policies promoting private industry can successfully protect and develop vulnerable sectors of the economy.
D) private companies often fail, despite receiving considerable financial support from federal grants and tax breaks.

Question 23

Which of the following are the three basic prerequisites for economic growth?

A) domestic investment, foreign investment, and government regulation
B) foreign investment, productive workforce, and economic regulation
C) public investment, government investment, and financial stability
D) public investment, innovation, and a productive workforce

Question 24

Which of the following does the Small Business Administration provide?

A) insurance
B) legal counsel
C) disaster assistance
D) subsidies

Question 25

What is the most important way that government officials affect personal and corporate investments?

A) granting tax breaks for stock gains and losses
B) promoting investor confidence through policies enforcing stability and regard for the law
C) allowing Social Security pensions to be invested in the stock market
D) bailing out corporations like General Motors that are considered "too big to fail"

Question 26

Which president contended with double-digit inflation?

A) John Kennedy
B) Jimmy Carter
C) George H. W. Bush
D) Bill Clinton

Question 27

Before the 1930s, relations between labor and management in the United States were ________.

A) defined by peaceful negotiations
B) among the most violent in the world
C) dependent on labor unions for stability
D) stable

Question 28

Why do many businesses prefer Congress to regulate the economy?

A) Regulations are more cost-effective in the long run.
B) One national regulation is better than the inconsistencies and disparities of different state laws.
C) Businesses argue that regulations help to increase their market share.
D) Regulations help businesses net more profit.

Question 29

In the 1800s, Congress ________ the creation of the railroad system ________.

A) supported; by providing categorical grants to the state and local governments that were placed in charge of constructing rail lines
B) supported; by paying for the construction of all rail lines and starting a national railcar service
C) supported; by granting more than 100 million acres of public-domain land to railroad interests
D) opposed; and did nothing to support it

Question 30

The Great Depression and World War II

A) made Americans realize that unemployment was an unfortunate but largely irremediable occurrence.
B) made Americans realize that unemployment could only be solved by a major international crisis, such as a war.
C) showed that the government could help to ensure full employment.
D) showed that ill-advised government programs could cause large increases in unemployment.

Question 31

During the 1960s, Ralph Nader was influential as a(n) ________.

A) environmental activist
B) consumer advocate
C) presidential candidate
D) member of Congress

Question 32

The National Labor Relations Act was designed to

A) oversee union elections and collective bargaining between labor and industry.
B) prohibit workers from forming unions.
C) establish a national minimum hourly wage.
D) limit the amount of money labor unions and corporations could donate to political parties.

Question 33

According to many analysts, the spurt of economic growth in 2003 illustrates that

A) the federal government can always produce large levels of economic growth if the right decisions are made regarding deficit spending.
B) inflation is always a problem that government officials should attempt to solve.
C) inflation is not a problem that government officials should attempt to solve.
D) some kinds of public investment, such as military spending on wars, can produce economic growth as a by-product of pursuing other more central objectives.

Question 34

The Fair Labor Standards Act was significant because it

A) created the National Labor Relations Board (NLRB) to oversee union elections and collective bargaining between labor and industry.
B) created the minimum wage.
C) made changes in the American financial regulatory environment that affect all federal financial regulatory agencies and almost every part of the nation's financial services industry.
D) outlawed the so-called closed shop, but permitted the "union shop" in those states that had right-to-work laws.

Question 35

The federal government

A) determines which classes will be taught in colleges and universities, but provides no financial assistance for higher education.
B) provides all of the funding for higher education, but state and local governments are placed in charge of operating colleges and universities.
C) supports higher education through educational grants, tax breaks, and loans.
D) is in charge of running the day-to-day operations of every public college and university around the country.

Question 36

The federal minimum wage was last raised in ________.

A) 2001
B) 2004
C) 2009
D) 2012

Question 37

Beginning in the late 1950s, the federal government

A) refused to pay any of the costs associated with highway construction.
B) began paying for 100 percent of highway construction costs.
C) agreed to pay 10 percent of highway construction costs on the condition that each state provide 90 percent of the costs of any portion of a highway built within its boundaries.
D) agreed to pay 90 percent of highway construction costs on the condition that each state provide 10 percent of the costs of any portion of a highway built within its boundaries.

Question 38

Which of the following actions marked a decisive break with the tradition of the federal government promoting compromises between labor and management?

A) President Ronald Reagan firing striking air traffic controllers and hiring permanent replacements to fill their jobs in 1981.
B) President Reagan sending in the National Guard to break up picketing in front of major defense contractors in 1985.
C) Congress passing and George H. W. Bush signing legislation dismantling the National Labor Relations Board in 1992.
D) The National Labor Relations Act setting up a framework for labor relations in 1935.

Question 39

Which of the following has been a fundamental goal of the government's involvement in the economy?

A) promoting economic equality
B) encouraging investment in businesses abroad
C) stimulating economic growth
D) reducing imports from foreign economies

Question 40

The Securities and Exchange Commission was established

A) at the same time as stocks were publicly bought and sold.
B) after the stock market crash of 1929.
C) at the same time as the International Monetary Fund.
D) after the terrorist attacks of 2001.

Question 41

The key argument of John Maynard Keynes is that

A) government can pull an economy out of a recession by stimulating demand and creating a cycle of increased production and jobs.
B) government regulations during economic depressions must be lifted because they destroy the already slim profit margin.
C) the economy of size shows that monopolies are the most efficient way to distribute goods throughout a national marketplace.
D) government can rectify a falling economy by regulating the money supply.

Question 42

Supply-side economics is the idea that

A) the best method of producing high levels of economic growth is to engage in high levels of government spending.
B) the government should impose heavy tariffs on imported goods in order to protect domestic suppliers.
C) the government's role in the economy should be strictly limited to regulating the supply of money.
D) reducing the marginal rate of taxation will create a productive economy by promoting levels of work and investment that would otherwise be discouraged by higher taxes.

Question 43

The most consistently powerful nongovernment actors in determining economic policy are ________.

A) labor unions
B) environmental groups
C) business organizations
D) foreign nations

Question 44

________ once said, "Now I am a Keynesian."

A) Herbert Hoover
B) Dwight Eisenhower
C) Richard Nixon
D) Ronald Reagan

Question 45

Which of the following is the best description of the changing expectations of government's role in the economy since the 1930s?

A) People hold government officials responsible for a healthy economy.
B) People demand that government officials provide health insurance.
C) People expect that government officials will engage in deficit spending.
D) People expect government officials to print more money in times of inflation.

Question 46

Classic laissez-faire theory is based on the idea that

A) government monopolies stimulate economic growth.
B) self-interest does nothing to promote the public good.
C) a truly efficient government allows private enterprise to provide all government services.
D) economic competition unleashes growth and innovation.

Question 47

The Bank of the United States was terminated during the administration of

A) Alexander Hamilton
B) Andrew Jackson
C) Thomas Jefferson
D) Ronald Reagan

Question 48

The American Recovery and Reinvestment Act of 2009 is a good example of ________ principles.

A) laissez-faire
B) Keynesian
C) supply-side economic
D) Neo-Malthusian

Question 49

According to the nonpartisan Congressional Budget Office, the Troubled Asset Relief Program (TARP) will ultimately cost taxpayers about

A) $900 billion more than initially expected.
B) $665 billion more than initially expected.
C) $900 billion less than initially expected.
D) $665 billion less than expected.

Question 50

The idea that the government can stimulate a slow economy by increasing public spending or cutting taxes is called ________.

A) laissez-faire economics
B) Keynesianism
C) social democracy
D) Monetarism

Question 51

Which president rejected the theory of Keynesian economics?

A) John Kennedy
B) Lyndon Johnson
C) Richard Nixon
D) Ronald Reagan

Question 52

The nonpartisan Congressional Budget Office estimated that the American Recovery and Reinvestment Act of 2009

A) increased the number of full-time jobs by about 3.3 million.
B) increased the number of full-time jobs by about 500,000.
C) had no effect on the overall number of full-time jobs in the United States.
D) decreased the number of full-time jobs by about 500,000.

Question 53

The constitutional source of Congress's monetary and fiscal powers is in

A) Article I, Section 4.
B) Article I, Section 8.
C) the Tenth Amendment.
D) Article II, Section 4.

Question 54

The power to raise or lower the tax rate is part of ________.

A) fiscal policy
B) monetary policy
C) the contracting power
D) budgetary policy

Question 55

The federal minimum wage was ________ an hour in 2014.

A) $6.50
B) $7.25
C) $9.10
D) $15.00

Question 56

Today, labor unions represent about ________ percent of the labor force.

A) 50
B) 35
C) 25
D) 10

Question 57

Adam Smith's theory of ________ maintains that many individual economic transactions come together to create a greater good for all.

A) rational expectations
B) the prisoner's dilemma
C) the invisible hand
D) trickle-down economics

Question 58

Those who believe in the theory of ________ maintain that the government's role in regulating the economy should be focused on lowering taxes and creating incentives for a more productive and efficient use of resources.

A) Keynesianism
B) supply-side economics
C) fiscalism
D) laissez-faire capitalism

Question 59

Which of the following statements about the American Recovery and Reinvestment Act of 2009 is most accurate?

A) The law was passed with widespread bipartisan support in Congress.
B) No Republicans in the House and only three in the Senate voted to support the 2009 stimulus package.
C) No Democrats in the House and only three in the Senate voted to support the 2009 stimulus package.
D) The act was an executive order issued by President Obama without explicit congressional approval.

Question 60

The minimum wage was first enacted in ________.

A) 1879
B) 1901
C) 1938
D) 1995

Question 61

While the Federal Reserve's decision to cut the federal funds rate is expected to ________ economic growth, its decision to raise the federal funds rate is expected to________ economic growth.

A) speed up: slow down
B) slow down: speed up
C) have no effect on: speed up
D) have no effect on: slow down

Question 62

The Sixteenth Amendment allows

A) state governments the power to collect income taxes.
B) Congress the power to collect income taxes.
C) Congress the power "to regulate commerce with foreign nations, and among the several states."
D) the popular election of U.S. senators by the people of the states.

Question 63

Approximately ________ percent of the federal budget is in the mandatory spending category.

A) 25
B) 33
C) 50
D) 65

Question 64

The federal funds rate refers to the

A) percentage of federal spending that is made up of "uncontrollables," budget items that cannot be controlled through the regular budget process.
B) percentage of federal spending on programs that are controlled through the regular budget process.
C) congressionally determined limit on the amount of national debt that can be issued by the U.S. Treasury.
D) interest rate on loans between banks.

Question 65

A way to reduce the disparities in wealth between the rich and poor is called a(n) ________.

A) entitlement program
B) tariff
C) regressive tax policy
D) policy of redistribution

Question 66

The tax reform laws of 1981 and 1986 were significant because they

A) lowered the federal funds rate.
B) made budget deficits illegal.
C) significantly reduced the progressiveness of the federal income tax.
D) significantly increased the progressiveness of the federal income tax.

Question 67

The Federal Reserve Board is composed of ________ members who are appointed to ________ year terms.

A) 7; 4
B) 7; 14
C) 9; 4
D) 9; 14

Question 68

The ________ insures bank deposits up to $250,000.

A) Federal Reserve Board
B) Federal Deposit Insurance Corporation
C) U.S. Department of Treasury
D) Office of Management and Budget

Question 69

________ are government grants of cash or other valuable commodities such as land that are used to promote activities desired by government leaders.

A) Contracts
B) Business development funds
C) Categorical grants
D) Subsidies

Question 70

Sales taxes are ________, and most income taxes are ________.

A) regressive; regressive
B) progressive; progressive
C) progressive; regressive
D) regressive; progressive

Question 71

________ were the centerpiece of George W. Bush's economic policy.

A) Protective tariffs
B) Tax cuts
C) Agriculture subsidies
D) Categorical grants

Question 72

Between September 2007 and December 2008, the Federal Reserve

A) did not change interest rates at all.
B) raised interest rates from nearly 0 percent to 4.75 percent.
C) raised interest rates from 4.75 percent to 9.5 percent.
D) cut interest rates from 4.75 percent to nearly 0 percent.

Question 73

________ policies are designed to eliminate the abuses of powerful ________.

A) Redistributive; tariffs
B) Fiscal; loopholes
C) Antitrust; monopolies
D) Monetary; interest groups

Question 74

________ taxation occurs when people in lower income brackets pay a larger percentage of their income in taxes.

A) Progressive
B) Regressive
C) Redistributive
D) Distributive

Question 75

Congress was granted the power to tax personal income in ________.

A) 1789
B) 1846
C) 1913
D) 1943

Question 76

During the nineteenth century, the federal government received most of its revenue from ________.

A) corporate taxes
B) personal income taxes
C) social insurance taxes
D) tariffs

Question 77

A ________ is an incentive in the tax code for individuals and corporations to invest their money in ways that government officials desire in exchange for a reduction in tax liabilities.

A) categorical grant
B) loophole
C) block grant
D) subsidy

Question 78

What was the principal cause of the economic recession of 2008?

A) too much government spending on social welfare programs
B) not enough government spending on social welfare programs
C) the high prices Americans pay for health care and health insurance
D) excessive risk-taking by investors

Question 79

Open-market operations describe the

A) government policy, beginning in the 1950s, of reducing tariffs on foreign products.
B) requirement that publicly owned businesses honestly report their earnings and losses.
C) method by which the Federal Reserve buys and sells government securities to increase or decrease the supply of money in the economy.
D) policy of deregulation pursued during the 1980s by the Reagan administration.

Question 80

The ________ is the amount by which government spending exceeds government revenue in a fiscal year.

A) budget deficit
B) inflation rate
C) gross domestic product
D) reserve requirement