Deck 18: Economic Policy Economic Policy

Question 1

 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.

Answer 1

C

Question 2

 In 2015,the national debt rose to over $__________ trillion. 

A) 3 
B) 5 
C) 18 
D) 44 
E) 102

Answer 2

C

Question 3

 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.

Answer 3

E

Question 4

 When voting on economic issues,most voters 

A) primarily consider their own economic well-being. 
B) vote for Democrats. 
C) vote for Republicans. 
D) consider the economic well-being of the entire nation. 
E) vote against incumbents.

Question 5

 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 6

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

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

Question 7

 As a general rule,Americans want 

A) less spending, less taxes, and a smaller government. 
B) less spending and a smaller government, but no change in taxes. 
C) more spending and a bigger government, but not more taxes. 
D) more spending and more taxes, but not a bigger government. 
E) more spending without more taxes or a bigger government.

Question 8

 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 9

 Public opinion strongly encourages American elected officials to  

A) balance the budget. 
B) deficit-spend. 
C) reduce federal spending. 
D) raise taxes. 
E) None of these are correct.

Question 10

 Americans generally support higher taxes that 

A) pay for better health care for everyone. 
B) are paid by someone else. 
C) pay for improvements to the nation's crumbling infrastructure. 
D) improve the quality of American education. 
E) are used to ensure personal liberties.

Question 11

 Americans generally __________ cutting spending on federal programs. 

A) support 
B) oppose 
C) are divided by party on 
D) prefer raising taxes to 
E) Want to pair tax cuts with

Question 12

 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.

Question 13

 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 14

 The health of the American economy creates __________ politics. 

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

Question 15

 During a presidential election,people who think their own economic circumstances have deteriorated are more likely to vote 

A) for no one. 
B) Republican. 
C) Democratic. 
D) for the incumbent. 
E) against the incumbent.

Question 16

 When there is an economic downturn,this economic theory argues that the government should pump money into the economy by spending more than it collects in taxes. 

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

Question 17

 The huge new demands for Social Security benefits and medical payments under Medicare are 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 these are correct.

Question 18

 In normal economic times,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 19

 In the 2008 presidential election,71% of people who said that their financial situation had gotten worse voted for  

A) John McCain 
B) John Kerry 
C) Barrack Obama 
D) George W. Bush 
E) Mitt Romney

Question 20

 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 21

 The fiscal year goes from 

A) June 3 to June 2 (of the next year). 
B) March 16 to March 15 (of the next year). 
C) October 1 to September 30. 
D) January 1 to December 31. 
E) January 15 to January 14 (of the next year).

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

 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 24

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

A) add up all of 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 25

 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 26

 The first unified presidential budget did not appear until the 

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

Question 27

 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 28

 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 29

 The chairman of the Council of Economic Advisers,director of the Office of Management and Budget,and the secretary of the treasury are collectively called 

A) the professionals. 
B) the three musketeers. 
C) the troika. 
D) the Council of Economic Advisers. 
E) Executive Office of the President's Economic Council.

Question 30

 In theory,the Fed is 

A) the only national entity responsible for economic policy. 
B) the 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 these are correct.

Question 31

 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 32

 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 33

 Entitlements,including Social Security,Medicare,and veterans' benefits,are the majority of 

A) discretionary spending. 
B) mandatory spending. 
C) sequestrations. 
D) debt payments. 
E) Treasury bond payments.

Question 34

 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 35

 The number of separate parts of government that take part in economic policy is 

A) fewer than five. 
B) fewer than ten. 
C) approximately thirty. 
D) almost fifty. 
E) dozens, possibly hundreds.

Question 36

 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 37

 Which of the following factors contributes to income inequality? 

A) The rising premium attached to jobs requiring a higher education. 
B) The decline of high-wage manufacturing jobs. 
C) The decline of unions. 
D) Tax and spending policies that disproportionately favor the well-off. 
E) All of these are correct.

Question 38

 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 39

 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 40

 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 41

 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 gradually disappeared. 
E) the Supreme Court declared it unconstitutional.

Question 42

 Until 1986,debates over taxes focused primarily on  

A) government grants. 
B) tariffs. 
C) interest rates. 
D) marginal tax rates. 
E) deductions.

Question 43

 In America,the bottom half of earners pay __________ of the total income taxes collected by the government. 

A) less than a fiftieth 
B) less than a twentieth 
C) less than a tenth 
D) about a quarter 
E) about half

Question 44

 For most of the 20th century,regular taxpayers benefitted significantly from tax loopholes pertaining to 

A) mortgage interest. 
B) local tax payments. 
C) state tax payments. 
D) interest on consumer loans. 
E) All of these are correct.

Question 45

 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 46

 Paul Ryan's efforts to restrain government spending are an example of __________ politics. 

A) interest-group 
B) majoritarian 
C) entrepreneurial 
D) client 
E) supply-side

Question 47

 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 48

 The Budget Enforcement Act of 1990 required that all increases in non-mandatory spending be followed by 

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

Question 49

 If a tax is progressive, 

A) the wealthiest individuals pay the lowest marginal rate. 
B) the wealthiest individuals pay the highest marginal 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 50

 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 51

 The main beneficiaries of the deductions left after the 1986 tax reform act were 

A) individuals. 
B) universities. 
C) insurance companies. 
D) automakers. 
E) All of these are correct.

Question 52

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

A) It is lower than that of most other democratic nations. 
B) It is about the same as that of most other democratic nations. 
C) It is slightly higher than that of most other democratic nations. 
D) It is significantly higher than that of most other democratic nations. 
E) It fluctuates considerably, so comparing it to that of other democratic nations is impossible.

Question 53

 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 54

 For most of the 20th century,Democrats and Republicans agreed that  

A) high marginal tax rates without loopholes would hurt the economy by discouraging people and businesses from saving and investing. 
B) tax cuts for the rich improve the economy by enabling America's wealthiest investors to make greater investments in small businesses. 
C) etax cuts for the rich improve the economy by enabling America's wealthiest investors to make greater investments in small businesses. 
D) tax cuts for the rich improve the economy by enabling America's biggest earners to create more jobs. 
E) None of these are correct.

Question 55

 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 these are correct.

Question 56

 The marginal tax rates for the wealthiest Americans are currently at the levels set by 

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

Question 57

 George H.W.Bush,who famously said,"Read my lips.No new taxes," 

A) kept his promise, but it cost him reelection. 
B) closed down many loopholes, which was equivalent to raising taxes. 
C) attempted to prevent new taxes, but Congress overruled his veto. 
D) kept his promise, thereby improving the economy. 
E) approved new taxes.

Question 58

 From the inauguration of the 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 59

 Tax loopholes are a quintessential example of __________ politics. 

A) client 
B) entrepreneurial 
C) interest-group 
D) majoritarian 
E) sociotropic

Question 60

 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 61

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

Question 62

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

Question 63

 In 2015,the federal debt rose to over 18 trillion. 

Question 64

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

Question 65

 Sociotropic voting involves making decisions based on personal experiences rather than on perceptions of the economic health of the nation as a whole. 

Question 66

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

Question 67

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

Question 68

 Voting behavior and economic conditions are strongly correlated at the individual level but not at the national level. 

Question 69

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

Question 70

 Voters frequently endorse three inconsistent policies¾lower taxes,less debt,and new programs. 

Question 71

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

Question 72

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

Question 73

 Tea Party members are more likely than Republicans to support spending cuts in every category. 

Question 74

 Americans generally do not support increasing taxes on millionaires. 

Question 75

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

Question 76

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

Question 77

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

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

 American voters vote only their own economic interest. 

Question 80

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