Deck 9: Economic Growth and Stability: Can We Maintain High and Steady Rates of Economic Growth

Question 1

Which of the following actions would not be supported by Conservatives?

A) Reductions in corporate income taxes.
B) Balancing the federal budget.
C) Increasing the income ceiling for social security taxes.
D) Eliminating the capital gains tax.

Answer 1

C

Question 2

Liberals believe that

A) supply-side tax cuts have produced economic contractions not stimulation.
B) Congress should pass a Constitutional amendment that requires a balanced federal budget each year.
C) monetary policy always favors bondholders over other citizens.
D) None of the above.

Answer 2

D

Question 3

To conservatives, Liberal efforts at "stabilizing fiscal policy" have meant

A) growing federal debt via increased government spending.
B) frequent interest rate adjustments.
C) increased private-sector spending.
D) tax increases.

Answer 3

A

Question 4

"Inflation is a small price to pay for full employment" is most likely to be the statement of a

A) Conservative.
B) Liberal.
C) Radical.
D) None of the above.

Question 5

Across-the-board tax cuts may not have the desired result because

A) people do not spend any of their additional income.
B) tax cuts are perceived not to increase purchasing power.
C) people with different incomes spend differing amounts of additional income.
D) tax cuts have an immediate effect on saving.

Question 6

President Bush's tax cuts of 2001, 2002, and 2003

A) reversed the higher tax rates enacted during the Clinton presidency.
B) was opposed by most Conservatives.
C) was intended to balance the federal budget.
D) None of the above.

Question 7

The radical argument against increased government stabilization efforts is that

A) they are biased toward low-income workers.
B) spending cannot be targeted.
C) the level of government spending is too low to impact most Americans.
D) government spending is not politically neutral.

Question 8

Liberals argue that one of the noticeable effects of sharply reduced government spending is

A) lower prices.
B) higher interest rates.
C) a significant increase in the unemployment rate.
D) no effect.

Question 9

The "tax wedge" argument holds that

A) taxes have cost-push effects on prices, thus lowering aggregate demand.
B) tax rates do not increase sharply enough.
C) lower taxes will encourage excessive spending.
D) None of the above.

Question 10

The squeezing out of private borrowers from financial markets due to increasing government debt is known as the

A) trickle-down theory.
B) investment-saving gap.
C) functional finance theory.
D) crowding-out effect.

Question 11

Conservatives argue that to spur national growth, restrictions on business investment and risk-taking should be reduced. Therefore, they would support

A) increasing the minimum wage and unemployment insurance.
B) creating a new federal agency to support research and development in biotechnology.
C) establishing tax credits for research and development.
D) increasing the tax life of an investment.

Question 12

Conservatives, Liberals, and Radicals would all agree that stabilization policy

A) should be demand-based in the long run.
B) should be supply-side based in the long run.
C) should be an equal balance of both cost and demand-side approaches.
D) has made government the main feature in the capitalist economy.

Question 13

According to Marx's analysis of competition, capitalists strive to increase their rate of profit by

A) mechanizing production.
B) lengthening the workday.
C) monitoring and scrutinizing employees.
D) All of the above.
E) None of the above.

Question 14

The "Rule of 72" allows a quick approximation of

A) equipment lives.
B) the number of years it will take for something to double if it grows at a given percentage rate.
C) whether economic conditions are better or worse than 1972.
D) the number of months in an average cyclical expansion.

Question 15

Which of the following measures is a common gauge of an economy's living standards?

A) Industrial production.
B) Inflation rates.
C) GDP per capita.
D) Children per household.

Question 16

Liberals take the position that productivity and economic growth can be accelerated through

A) less government intervention.
B) government expenditures, tax incentives, and policies that stimulate research and development and investment in human capital.
C) allowing only the market to determine economic performance.
D) a huge deregulation campaign.

Question 17

If GDP per capita grows at an average annual rate of 2 percent, how many years will it take for living standards to double?

A) Light years.
B) Less than a year.
C) About 36 years.
D) About 72 years.
E) Cannot be determined from the data given.

Question 18

Market economies tend to under invest in research and development (R&D) largely because

A) firms do not like to hire scientists.
B) Americans are not good inventors.
C) there is not enough demand for high-technology products in the U.S. economy.
D) the payoff from R&D investment may be risky and uncertain.
E) high-technology stocks tend to be poor investments.

Question 19

The Great Stagflation of the 1970s was very similar to that of the Great Depression of the 1930s except that inflation decelerated in the 1970s and increased during the 1930s.

Question 20

According to Say's Law, there is no such thing as a long-term involuntary unemployment.

Question 21

"Fine tuning" refers to fiscal and monetary policy efforts to maintain targeted economic goals.

Question 22

Deficit spending has been used to lower inflation pressures.

Question 23

Radicals, like Liberals, view the Conservative dominance of economic policy since 1980 as a sharp break with policies from the past.

Question 24

In some respects, tax cutting at a time of chronic budget deficits seems contradictory to the policies of fiscal Conservatives.

Question 25

Radicals oppose the supply-side and demand-side theories and support the trickle-down theories that will ultimately help the neediest Americans.

Question 26

Inflation rates fell during the recessions of 1981-1982 and 1990-1991.

Question 27

Conservatives believe that we must sacrifice our growth objectives in the long run.

Question 28

Conservatives would restrict the Federal Reserve Board's discretion over the money supply to solely expanding it at the trend rate of growth.

Question 29

The crowding-out effect deals with the way government debt financing allegedly causes interest rates to rise.

Question 30

Supply-side tax cuts made the tax rate structure more progressive.

Question 31

President Bush's three tax cuts have increased the federal deficit.

Question 32

Current social welfare spending as a share of GDP is about equal to that of the early 1930s.

Question 33

For Radicals, savings, not profits or aggregate demand, is the real determinant of investment.

Question 34

The War in Iraq is being deficit financed.