Deck 4: Economic Issues: Taxing, Spending, and Budgeting

Question 1

A primary goal of the Fed is to regulate the economy through control over the money supply.

Answer 1

True

Question 2

Tax reductions in the form of tax incentives can encourage corporations to

A)hire more people
B)spend more money
C)save more money.
D)invest in plant expansion.

Answer 2

D

Question 3

The Federal Reserve Board oversees the operations of banks that participate in the Federal Reserve System.It has the power to do the following except:

A)lend member banks money.
B)control the amount of money a bank has on reserve.
C)print money.
D)buy up governmental bond held by investors.

Answer 3

C

Question 4

When government expenditures exceed revenues,we have

A)cost-push inflation
B)monetary policy
C)recession
D)deficit spending

Question 5

The value of American currency is dependent on the reserves of gold held by the U.S.Treasury Department.

Question 6

The Federal Reserve Board has the power to

A)Expand or contract the amount of money in circulation
B)Stabilize the economy through regulation
C)Pursue monetary policies that conflict with either the President or Congress
D)All of the above
E)A and C only

Question 7

Which values establishes the boundaries of government activities and provide policy direction for public officials?

A)inflation and interest rates
B)white collar crime rate
C)employment and unemployment rates
D)All of the above
E)A and C only

Question 8

Monetary policy is the efforts of government to control the supply and flow of __________ in the economy.
A)Collateral
A)Credit

A)Money
B)Trade

Question 9

According to economists ________ percent unemployment is an appropriate definition of full employment

A)10
B)0
C)5
D)None of the above

Question 10

Deficit spending without fueling inflation is possible through government borrowing.This approach was used by all recent presidents except for:

A)George W.Bush
B)Ronald Reagan
C)Jimmy Carter
D)Barack Obama

Question 11

Which of the following is NOT part of fiscal policy?

A)tax policy
B)open market operations
C)government expenditures
D)deficit changes

Question 12

The use of monetary policy and fiscal policy are the federal government's two primary instruments of accomplishing macroeconomic goals and achieving economic stability.

Question 13

Who most influences the money supply?

A)President
B)Congress
C)Federal Reserve Board

Question 14

Keynes argues that government deficit spending

A)causes economic recession
B)stimulates a sluggish economy and prevents recessions
C)can balance the budget
D)causes increased taxes

Question 15

Liberals/progressive and conservatives agree on the legitimacy of government involvement in economic policy.
C.True
D.False

Question 16

Traditional Keynesian fiscal and monetary policy focuses on the supply of goods and services.

Question 17

Fiscal policy includes:

A)open market operations
B)control of the money supply
C)changes in the federal deficit
D)control of the reserve requirement
E)regulation of interest rates

Question 18

In macroeconomic policy,which of the following is/are highly influential?

A)President
B)Congress
C)Federal Reserve Board
D)all of the above
E)(A) and (B) only

Question 19

The discount rate is the rate of interest charged by the feds on loans to banks.It is used as a tool by the feds to:

A)Control the money supply
B)Encourage people to spend money
C)Make it more costly to borrow
D)Stimulate or cool off the economy

Question 20

Policy which encompasses government taxing and spending is:

A)fiscal policy
B)monetary policy
C)antitrust policy
D)Federal Reserve Board policy

Question 21

Which of the following is NOT a cause of inflation?

A)increase in demand
B)increase in cost of production
C)increase in supply

Question 22

Supply-side tax cuts focus on upper-income levels,especially corporate profits and capital gains because

A)they are the most likely to make political contributions
B)they are the most likely to create jobs
C)they are the most likely sources of significant investment
D)they are the majority of population

Question 23

A number of cabinet-level department share responsibility for developing federal economic policy.Which department does NOT have economic policy responsibility?

A)Labor Department
B)Department of the Interior
C)Commerce Department
D)Treasury Department

Question 24

Interest payments on the national debt became a major part of federal budgets during the 1980s.

Question 25

During the Clinton Administration (1992-2000)the federal budget deficit

A)increased slowly
B)increased rapidly
C)remained the same
D)decreased rapidly

Question 26

The impact of entitlement programs is an obstacle to effective economic policy.Which of the following are considered entitlement programs?

A)Social Security and Teach for America
B)Social Security, Medicare and Medicaid
C)Medicare, Peace Corps, and Social Security

Question 27

Efficiency was a significant goal of the 1986 Tax Reform Act.It sought to diminish the importance of tax laws in business decision making.

Question 28

President Reagan administration's supply-side policies resulted in a 5 percent and 10 percent cuts in personal income taxes.

Question 29

During the 1980s the national debt

A)rose substantially
B)rose steadily as a percentage of GDP
C)was fueled by a steadily falling budget deficit
D)(a) and (b) only

Question 30

A basic recommendation of "supply-side economics" is:

A)decrease the budget deficit to raise interest rates
B)cut taxes to increase investment and employment
C)government should focus its spending on the military rather than on income support
D)an increase in supply will cause a decrease in demand

Question 31

The American Taxpayer Relief Act of 2012 allowed the Payroll Tax Holiday to expire but

A)increased the tax rate on the income of those making $200,000 or more
B)eliminated corporate tax loopholes
C)allowed the Bush era tax cuts to expire
D)continued the provision of the Tax Relief Act of 2010

Question 32

Fragmentation of responsibility for economic policy exists at the federal level.

Question 33

During the 1990s the U.S.experienced

A)economic growth
B)low unemployment
C)low interest rates
D)all of the above
E)none of the above

Question 34

Supply-side economics supporters believe all but:

A)tax cuts can raise tax revenue
B)tax cuts reduce deficits
C)willingness to invest is a direct function of the tax rate
D)prosperous taxpayers prefer saving their income

Question 35

Which of the following U.S.presidents LEFT office with a budget surplus?

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

Question 36

The Reagan Administration advocated a departure from Keynesian economics to engage in:

A)nationalization of some public services
B)supply-side economics
C)promoting an industrial policy
D)introducing antitrust policies

Question 37

Fragmentation within the executive branch of government is an obstacle to developing economic policy.Which of these cabinet-level departments does not have responsibility for economic policy?

A)Treasury Department
B)Office of Management and Budget
C)Labor Department
D)Commerce Department

Question 38

Borrowing is now the largest source of income for the federal government.T/F

Question 39

The Balanced Budget Act of 1997 and the performance of the economy in the 1990s produced the result that the federal budget deficit in the late 1990s

A)rose rapidly
B)rose slowly
C)became a surplus
D)stayed about the same

Question 40

A progressive tax

A)takes a higher percentage from higher incomes
B)takes a higher percentage from lower incomes
C)takes a lower percentage from higher incomes
D)takes the same percentage from all incomes

Question 41

The annual budget deficit grew from $80 billion in 1981 to $290 billion in 1992.Which of the following was NOT a factor in increasing the deficit?

A)large tax cuts in 1981-1983
B)Increased levels of defense spending in the 1980s
C)federally funded bailout of savings and loan institutions
D)federal spending on programs such as crime, transportation and education

Question 42

•Name and define the component parts of Monetary Policy and Fiscal Policy.
•Name and discuss the sources of federal revenue and federal spending.Which are the biggest contributors to revenue or spending?
•Name and define the types of taxation that currently exist in the United States.Identify two different proposed changes to the tax system.
•Discuss how each of the five values influence the economic policy directions of government officials
•Discuss how the economic policies of the state are impacted by the economic policies of the federal government
•Explain how budget priorities of the executive branch differ from the those of the legislative branch
•Provide two or three suggestions for cuts in entitlement program spending and explain how you would implement it
•What are the differences in fiscal policy between President Clinton and President George W.Bush? What are the similarities?
•Explain the Federal Reserve Act of 1913 and the role of the Federal Reserve Board
•What was the purpose of TARP and has it been successful?

Question 43

Budget deficits reappeared in 2002 as a result of a number of factors.Those factors include all but

A)an economic downturn due to the September 11, 2001 terrorist attack
B)increased spending for Homeland Security efforts
C)the financial costs associated with Operation Iraqi Freedom
D)the increased cost of a barrel of oil from OPEC

Question 44

The terms "tax reform" and "tax cuts" refer to the same thing.

Question 45

The Balanced Budget and Emergency Deficit Control Act of 1985,known as the Gramm-Rudman included two significant changes in the federal budget process.

A)balanced budget requirement and national debt reduction
B)across the board budget cuts and agreement between Congress and the president
C)targeted deficit levels requirements and triggered automatic spending cuts
D)defense and domestic spending cuts

Question 46

Progressives tend to favor limited governmental use of monetary and fiscal policies while conservatives favor a managed economy.

Question 47

The largest portion of the federal budget goes to

A)Defense
B)Medicare
C)Social Security
D)Foreign aid

Question 48

Because of its proportion of federal expenditures,substantially limiting federal spending requires cutting spending on _____.

A)defense
B)foreign aid
C)welfare spending
D)education

Question 49

The process of automatic spending cuts is called

A)Deficit Control
B)Gramm-Rudman Act
C)Sequestration
D)Balancing the Budget

Question 50

All other things being equal,a tax increase is likely to:

A)decrease inflation
B)increase inflation
C)cause the money supply to rise
D)cause the reserve requirement to decrease
E)encourage banks to loan more money

Question 51

The primary source of federal revenue is

A)the corporate income tax
B)the individual income tax
C)excise taxes
D)Social Security taxes

Question 52

_____________ is the rise in price of goods and services,even though the actual value of those goods and services does not increase.

A)Recession
B)Depression
C)Inflation
D)Deregulation

Question 53

The shift from budget deficits to budget surpluses in 1998 was due to several factors.Which of the following was NOT a factor?

A)A strengthened economy and low inflation rate reduced the rate of increase in entitlement programs
B)The private sector experienced significant economic growth
C)Defense spending on the Persian Gulf War
D)The booming stock market in the 1990s meant higher state and federal revenues from capital gains

Question 54

The federal budget acts as a component of fiscal policy by

A)stimulating the economy as deficits are reduced
B)stimulating the economy as deficits are increased
C)controlling the growth of the money supply
D)changing the discount rate

Question 55

Budget deficits after the passage of the Gramm-Rudman deficit control law:

A)increased
B)decreased
C)remained constant
D)disappeared

Question 56

Economist John Galbraith and Milton Friedman agree that government controls help businesses operate profitably.

Question 57

A rise in the price of goods and services while the actual value of the goods and services remains the same is known as

A)recession
B)jawboning
C)stagflation
D)inflation

Question 58

With the federal government adopting a program of spending with annual budget deficits exceeding those fo the past,the national debt will increase to ______ percent of the gross domestic product.

A)10
B)35
C)61
D)75

Question 59

One way to stimulate growth in the economy is to

A)have a high trade deficit
B)raise taxes
C)increase the size of the federal deficit
D)increase unemployment

Question 60

Troubled Asset Relief Program (TARP)was created in part in response to the practice of lending institutions having allowed individuals to borrow money for homes well beyond their ability to repay which resulted in an escalation of mortgage defaults.