Deck 17: Economic Policy

Question 1

Unemployment is the percentage of people who

A) are not drawing an income from a job.
B) are seeking work but cannot find it.
C) do not receive a pension when they retire.
D) have quit their jobs in the last quarter.
E) are receiving welfare.

Answer 1

are seeking work but cannot find it.

Question 2

Inflation is a(n)

A) artificial increase in the value of the dollar.
B) general rise in prices over time.
C) tax on imported goods.
D) means by which the government can control the value of the dollar against foreign currencies.
E) unimportant factor in determining the overall state of the economy.

Answer 2

general rise in prices over time.

Question 3

Fiscal policy mainly concerns

A) the variety of ways by which government policies affect markets for goods and services.
B) the supply of money and the level of interest rates.
C) spending and taxes.
D) the total value of goods and services that people produce in the nation.
E) imports and exports.

Answer 3

spending and taxes.

Question 4

The main concerns of monetary policy are

A) the variety of ways by which government policies affect markets for goods and services.
B) the supply of money and the level of interest rates.
C) spending and taxes.
D) the total value of goods and services that people produce in the nation.
E) imports and exports.

Question 5

Regulatory and trade policy concerns

A) the variety of ways by which government policies affect markets for goods and services.
B) the supply of money and the level of interest rates.
C) spending and taxes.
D) the total value of goods and services that people produce in the nation.
E) the level of unemployment.

Question 6

The Federal Reserve has primary responsibility for

A) monetary policy.
B) protectionism.
C) regulatory and trade policy.
D) tax policy.
E) the federal deficit.

Question 7

The provision in the Constitution that Congress could establish "post offices and post roads" signaled that the federal government would foster economic growth through

A) efficient systems of communication and transportation.
B) international alliances.
C) private postal institutions.
D) regulation of commerce between states.
E) stamps and other postal services.

Question 8

During the early nineteenth century, the federal government supported some internal improvements but these projects encountered general criticism about

A) a powerful national government.
B) reliance on foreign laborers.
C) technology used in constructing roads.
D) effects of transportation improvements on international trade.
E) the placement of canals.

Question 9

When first established, the Bank of the United States made it easier for the government to manage

A) campaign expenses.
B) Civil War debt.
C) foreign assistance for the costs of the War of 1812.
D) income tax revenues.
E) Revolutionary War debt.

Question 10

Who tended to resent the power of the first Bank of the United States?

A) Alexander Hamilton
B) James Madison
C) Prominent Congressmen
D) Rural voters
E) Wealthy businessmen

Question 11

Difficulty in financing the War of 1812 revived support for

A) the Federal Reserve.
B) the Articles of Confederation.
C) a second national bank.
D) the gold standard.
E) the Whig party.

Question 12

Many victims of the Panic of 1819 blamed

A) Congress' failure to renew the charter for the Bank of the United States.
B) high interest rates set by Congress.
C) international trade alliances.
D) the government's failure to regulate banks.
E) tight credit policies of the national Bank.

Question 13

How did economic policy deepen the split between North and South during the Civil War?

A) Northern voters supported higher taxes, while southern voters supported the abolition of all federal taxes.
B) The North backed high tariffs, while the South opposed tariffs.
C) The North opposed tariffs, while the South lobbied for protective tariffs.
D) The North supported a national bank, while the South opposed it.
E) The northern states supported more government regulation of industry, while the southern states wanted less regulation.

Question 14

Although most wartime taxes of the Civil War were gone by the early 1870s, they set a precedent for

A) a federal income tax.
B) a laissez-faire economic approach.
C) a stronger federal government.
D) supply-side economics.
E) the national bank.

Question 15

Before the Civil War, the government issued

A) both paper money and coins.
B) coins but not paper money.
C) federal savings bonds instead of standard currency.
D) no official form of currency.
E) paper money but not coins.

Question 16

After the fall of the second Bank of the United States, banks were supervised by

A) state governments.
B) the federal government.
C) the Federal Reserve Board.
D) the Secretary of the Treasury.
E) the Securities and Exchange Commission.

Question 17

In response to the high costs of the Civil War and a shortage of hard currency, Congress passed laws providing for uniform national currency and

A) a federal income tax.
B) a new system of nationally chartered banks.
C) an alternative minimum tax.
D) standard interest rates.
E) the Federal Open Market Committee.

Question 18

Which of the following was not an economic innovation of the Progressive Movement?

A) A uniform national currency
B) The Sixteenth Amendment
C) The Clayton Antitrust Act
D) The Federal Reserve System
E) The Federal Trade Commission Act

Question 19

What new method did the Wilson administration employ to finance war debts?

A) Congress established a national bank.
B) Congress instituted a war-time tax.
C) Congress levied the first federal income taxes.
D) The administration borrowed heavily from foreign investors.
E) The government sold small bonds to ordinary people.

Question 20

Passed in 1921, the Budget and Accounting Act required

A) Congress to pass an annual budget.
B) Congressional approval before the president could accept foreign funds.
C) the government to operate without a deficit.
D) the government to pay off all its debts.
E) the president to submit an annual budget proposal.

Question 21

The Budget and Accounting Act created the _____________ to help the White House draw up budget proposals.

A) Bureau of the Budget
B) General Accounting Office
C) Federal Reserve System
D) National Bank
E) Liberty Loan Office

Question 22

John Maynard Keynes revolutionized economic thought by suggesting that sometimes the government should revive the economy by

A) eliminating its debt.
B) lowering the interest rate.
C) printing more money.
D) purposely running a deficit.
E) raising taxes.

Question 23

John Maynard Keynes' theories provided a rationale for

A) a uniform currency.
B) high tariffs.
C) the Bank of the United States.
D) the Federal Reserve System.
E) the New Deal.

Question 24

Congress lowered the threshold for the income tax in 1942 in order to

A) fund the Federal Reserve.
B) raise the inflation rate.
C) secure the money needed to fund Social Security.
D) reduce the deficit created by the New Deal.
E) pay for the war effort.

Question 25

Tax collection became easier and governmental cash flow became steadier when Congress authorized

A) Social Security payments.
B) tax withholding.
C) the Bank of the United States.
D) the Federal Reserve System.
E) the New Deal.

Question 26

What deliberative purpose does the Council of Economic Advisors serve?

A) Congress must clear all its spending bills with the council.
B) It offers the president objective advice and supplies Congress with detailed information about the economy.
C) It oversees the development of the federal budget each year and supplies the president with an account of all new spending bills.
D) It writes the tax codes.
E) The CEA establishes the federal budget.

Question 27

Prior to the 1970s, economists had assumed that inflation and unemployment forces pushed

A) down the poverty line.
B) in opposite directions.
C) in the same direction.
D) out foreign competition.
E) up interest rates.

Question 28

Friedrich Hayek and Milton Friedman argued that government economic planning threatened

A) foreign exports.
B) individual liberty.
C) the banking industry.
D) the stability of the workplace.
E) the stock market.

Question 29

The school of thought that believes high taxes hurt economic growth by discouraging savings and investment is called

A) budget reconciliation.
B) laissez-faire.
C) offshoring.
D) protectionism.
E) supply-side economics.

Question 30

The rate on one's last dollar of taxable income is called the

A) tax bracket.
B) internal tax.
C) deduction.
D) final tax exemption.
E) marginal income tax rate.

Question 31

Subtracting the interest on a mortgage from one's taxable income is an example of a(n)

A) credit.
B) deduction.
C) exemption.
D) security.
E) withholding.

Question 32

A tax credit is a sum that is subtracted from

A) what one owes in taxes.
B) the tax exempt portion of one's income.
C) one's gross income.
D) one's net income for certain expenses.
E) the amount one paid in interest on loans.

Question 33

The complexity of the tax codes is largely due to the

A) aggressive nature of interest groups.
B) huge number of people and situations in the nation.
C) large number of tax code writers.
D) need to create loopholes for large corporations.
E) scarcity of qualified accountants and tax specialists.

Question 34

The alternative minimum tax is the parallel tax system with

A) a more limited set of tax preferences than the regular income tax.
B) more allowable deductions and credits.
C) a lower rate of taxation, designed for individuals falling below the poverty line.
D) limits on the rate at which students are taxed on summer employment.
E) greater flexibility for the wealthy.

Question 35

Congress passed the alternative minimum tax in order to

A) impose a tax on needy families without taxing their actual income.
B) keep individuals from exploiting deductions and credits to cut their income tax below what is appropriate for their income.
C) prevent large corporations from offshoring to reduce their taxes.
D) reduce the tax burden on low income families.
E) reduce the tax burden on the wealthy.

Question 36

Tax systems that operate by taking proportionately more from the income of affluent people than from lower-income people are called

A) excise.
B) flat.
C) income.
D) progressive.
E) regressive.

Question 37

Taxes that apply to net income or profits with deductions for business costs are ________ taxes.

A) income
B) excise
C) progressive
D) corporate
E) executive

Question 38

Because the poor pay a greater portion of their income for Social Security than the rich, Social Security payments are called a(n) ________ tax.

A) alternative minimum
B) estate
C) marginal income
D) progressive
E) regressive

Question 39

Sales taxes are established by

A) Congress.
B) states and localities.
C) the Council of Economic Advisors.
D) the Federal Reserve Board.
E) the president.

Question 40

Most of the tax on gasoline is set aside for

A) alternative energy solutions.
B) environmental research.
C) mass transit.
D) oil production.
E) the federal highway trust fund.

Question 41

The tax on people's right to transfer property at death is called a(n) ______ tax.

A) alternative
B) estate
C) excise
D) marginal income
E) security

Question 42

The president's budget proposal is issued by the

A) Council of Economic Advisors.
B) Federal Reserve.
C) Office of Management and Budget.
D) Treasury Department.
E) vice president.

Question 43

Once the president approves a budget proposal, it is submitted to

A) Congress.
B) the Federal Reserve.
C) the Office of Management and Budget.
D) the Secretary of the Treasury.
E) the vice president.

Question 44

A budget resolution is the document drafted by Congress that

A) supplies money to federal agencies.
B) spells out spending and revenue targets for the coming fiscal year.
C) alters revenue levels.
D) determines the debt level.
E) supplies stopgap funding.

Question 45

A continuing resolution is a(n)

A) proposal for a budget reconciliation bill.
B) alternative to a budget resolution when Congress is unable to reach an agreement.
C) stopgap measure that provides for spending until Congress passes a regular appropriations bill.
D) amendment to the president's budget proposal that would increase revenues to various agencies and programs.
E) recommendation from congressional subcommittees for spending on individual projects.

Question 46

The time period between the creation of a policy and its implementation is called

A) budget gap.
B) entitlement.
C) inflation.
D) offshoring.
E) policy lag.

Question 47

An example of "mandatory spending" is

A) cost-of-living adjustments for Social Security benefits.
B) federal grants for scientific research.
C) funding for the FBI.
D) humanitarian aid to foreign nations.
E) pay increases for troops serving overseas.

Question 48

Discretionary spending refers to federal funds that are

A) protected from the annual process of appropriations.
B) subject to the annual process of appropriations.
C) tied to entitlement programs.
D) earmarked for special projects within a representative's district.
E) left up to the states to spend as needed.

Question 49

The purpose of the Federal Reserve System is to

A) establish the annual federal budget.
B) help manage the supply of money and credit.
C) print currency.
D) reduce the federal deficit.
E) spur inflation.

Question 50

What is one way in which the Federal Reserve's Board of Governors is politically insulated?

A) Members are elected by the people rather than appointed by the president.
B) The members rely on Congress for their salaries.
C) The members serve life terms.
D) The president cannot fire any member before the end of the 14-year term.
E) They receive their authority from the international economic community.

Question 51

After the FOMC sets a target for the federal funds rate, how does the New York Federal Reserve Bank nudge the rate toward that target?

A) It begins the process of refinancing mortgages it holds.
B) It buys or sells securities.
C) It directs all nationally chartered banks to adjust their rates accordingly.
D) It holds a press conference.
E) It instructs Congress on drafting the appropriate funds rate bill.

Question 52

When the New York Federal Reserve Bank buys securities, it causes the federal funds rate to

A) fluctuate unpredictably.
B) go down.
C) go up.
D) hold steady.
E) vanish.

Question 53

Which of the following is not one of the main goals of regulation of the financial marketplace?

A) Ensuring the integrity of markets to prevent fraud and manipulation
B) Ensuring the stability of the overall financial system
C) Monitoring the safety and soundness of institutions
D) Preventing the rise of unemployment
E) Protecting consumers from fraud deception, or unfair practices

Question 54

The primary regulator of national banks is the

A) Office of the Comptroller of the Currency.
B) Federal Reserve.
C) Treasury Department.
D) Federal Deposit Insurance Corporation.
E) Office of Budget and Management.

Question 55

In an effort to help American businesses during the Depression, the ________ raised tariffs.

A) World Trade Organization.
B) Federal Deposit Insurance Corporation
C) Federal Reserve System
D) Smoot-Hawley Act
E) General Agreement on Tariffs and Trade

Question 56

The North American Free Trade Agreement cut or ended

A) illegal smuggling within Mexico, Canada, and the United States.
B) minimum wage laws.
C) most tariffs on trade among Mexico, Canada, and the United States.
D) offshoring.
E) the impact of the World Trade Organization.

Question 57

The practice by which American or multinational firms delegate work to lower-wage laborers overseas is called

A) exempting.
B) job sourcing.
C) offshoring.
D) wage reducing.
E) withholding.

Question 58

Although the president must consult with Congress during trade talks, once an agreement comes up for a vote, the lawmakers are

A) able to make up to three changes.
B) encouraged to conduct trade talks of their own.
C) not permitted to read the entire document.
D) unable to amend it.
E) able to vote down certain provisions.

Question 59

Milton Friedman argued that economic freedom promotes political freedom because

A) a nation that has limited economic freedom cannot enjoy political freedom.
B) economists are better politicians than those of other professions.
C) free trade encourages political freedom in other countries.
D) it separates economic power from political power and allows the former to offset the latter.
E) political freedom is a condition for economic freedom.

Question 60

How have intellectual trends and historical events affected economic policy?

Question 61

What are the costs and benefits of the complex income tax code?

Question 62

How can changes to corporate taxes affect other parts of the economy?

Question 63

What debate exists regarding the relationship of taxes and freedom?

Question 64

What role do the executive and legislative branches play in deliberating about fiscal policy?

Question 65

How does the Federal Reserve seek to maintain economic stability?

Question 66

What is the appropriate role for the government in policing economic activity? What controversies exist in determining its appropriate role?

Question 67

In what way might international agreements infringe on American sovereignty? What controversy exists over the issue of free trade?