Deck 18: Making Economic Policy

Question 1

An estimate of the total output of all U.S.economic activity is the

A)GDP.
B)GAO.
C)OMB.
D)VAT.
E)None of the above

Answer 1

A

Question 2

A _______________ tax is a tax whereby people with lower incomes pay a higher fraction of their income than people with higher incomes.

A)liberal
B)flat
C)regressive
D)socialist
E)progressive

Answer 2

C

Question 3

Fiscal policy is the government's attempt to manage the economy by controlling taxing and spending.

Answer 3

True

Question 4

Federal taxing and spending is considered _______ policy.

A)fiscal
B)laissez-faire
C)monetary
D)regressive
E)regulatory

Question 5

The Walsh-Healey Act of 1936, the Fair Labor Standards Act of 1938, and the Occupational Safety and Health Act of 1936 are all examples of

A)federal regulations to protect workers.
B)antitrust legislation.
C)labor injunctions.
D)trade agreements.
E)deregulation.

Question 6

A general tax on sales transactions, sometimes exempting such items as food and drugs, is called a(n) __________ tax.

A)sin
B)expenditure
C)sales
D)income
E)value-added

Question 7

Raising taxes and cutting spending are examples of monetary policy.

Question 8

Which of the following is an example of mandatory spending?

A)Defense spending
B)Spending on Social Security
C)Foreign aid
D)Infrastructure projects
E)Research on renewable energy sources

Question 9

The international organization derived from the General Agreement on Tariffs and Trade (GATT) that promotes free trade around the world is the

A)United Nations.
B)World Protectionism Agency.
C)International Association of Trade Partners.
D)World Trade Organization.
E)Global Free Trade Regime.

Question 10

The type of policy that promotes cutback in the amount of federal regulation in specific areas of economic activity is

A)deregulation.
B)anti-regulation.
C)deficit spending.
D)social responsibility.
E)stagflation.

Question 11

The _________________ is an agency of Congress that analyzes presidential budget recommendations and estimates the costs of proposed legislation.

A)Joint Committee on the Budget
B)Office of Management and Budget
C)Legislative Research Commission
D)Congressional Budget Office
E)Permanent Task Force on Revenue and Appropriations

Question 12

_______________ refers to attempts to manage the economy by controlling the money supply and thus interest rates.

A)Monetary policy
B)Bank policy
C)Fiscal policy
D)Inflation policy
E)Regulatory policy

Question 13

In times of recession, Keynes advocated

A)increased government spending.
B)tax cuts.
C)increased tariffs.
D)dramatic reductions in government programs.
E)All of the above

Question 14

The task of setting America's monetary policy falls to the

A)Federal Reserve Board.
B)Office of Management and Budget.
C)Congressional Budget Office.
D)President's Council of Economic Advisors.
E)Government Accountability Office.

Question 15

The United States has for many years now has imported much more than it has exported.This means that the country has been running

A)unfair trade practices.
B)international trade agreements.
C)trade deficits.
D)subsidization lapses.
E)budget deficits.

Question 16

______________________________ are federal laws that try to prevent a monopoly from dominating an industry and restraining trade.

A)Antitrust legislation
B)Anti-dumping statutes
C)Restrictive trade legislation
D)Unlimited competition statutes
E)Regulatory practices legislation

Question 17

Value-added tax and sales tax are the same.

Question 18

A company in which new employees must join a union within a stated time period is called a(n)

A)right to work corporation.
B)organized employee industry.
C)union shop.
D)monopoly.
E)open shop.

Question 19

A regressive tax is a tax in which poorer people pay a larger share of their income than wealthier people.

Question 20

A loss of tax revenue due to federal laws that provide special tax incentives or benefits to individuals or businesses is known as a(n)

A)appropriations limit.
B)tax expenditure
C)budget shortfall.
D)windfall profit.
E)tax haven.

Question 21

The two most common yardsticks for measuring the performance of the economy are

A)expansion and contraction.
B)inflation and unemployment.
C)fiscal and monetary policy.
D)trade deficits and national debt.
E)budget deficits and gross national product.

Question 22

____________________ refers to the number of Americans who are out of work but actively looking for a job.

A)Hardship
B)Unemployment
C)Welfare
D)Inflation
E)Recession

Question 23

According to the Constitution, the authority to regulate commerce between states and with foreign nations is held by the U.S.Trade Office.

Question 24

A combination of an increase in the number of workers looking for jobs and a rise in prices is called

A)good news.
B)unemployment.
C)stagflation.
D)regulation.
E)a tariff.

Question 25

Which of the following economic policy-making powers is held by the president?

A)The power to borrow money
B)The power to regulate commerce with foreign countries
C)The power to negotiate treaties
D)The power to print money
E)All of the above

Question 26

Inflation is measured using

A)international exchange rates.
B)the gross domestic product.
C)the consumer price index.
D)the unemployment rate.
E)the annual growth rate.

Question 27

Paying agricultural subsidies to domestic farmers and imposing tariffs on imported steel are policies more consistent with a free trade position.

Question 28

A(n) _______________ tax is a tax on a specific kind of merchandise, such as tobacco.

A)flat
B)excise
C)progressive
D)property
E)import

Question 29

In 2008, the United States experienced significantly rising prices at the same time that many people were out of work.This is an example of

A)socialism.
B)regulation.
C)depression.
D)expansion.
E)stagflation.

Question 30

Which of the following is NOT one of the stages of the normal business cycle identified by economists?

A)Recovery
B)Recession
C)Contraction
D)Inflation
E)Expansion

Question 31

The Federal Reserve System consists of 50 banks, one for each state.

Question 32

Government policy that attempts to manage the economy by controlling taxing and spending is known as

A)public policy.
B)monetary policy.
C)budgetary policy.
D)regulatory policy.
E)fiscal policy.

Question 33

In its simplest terms, monetary policy involves managing the

A)supply of money.
B)federal deficit.
C)relationship between taxation and spending.
D)balance of trade.
E)All of the above

Question 34

Inflation is usually a more serious danger during periods of economic

A)expansion.
B)contraction.
C)uncertainty.
D)volatility.
E)None of the above

Question 35

The federal government has been involved in economic policy since the

A)end of the Revolutionary War.
B)New Deal of the 1930s.
C)end of the Civil War.
D)end of World War II.
E)beginning of the Gulf War.

Question 36

The value of all goods and services produced by an economy during a specific period of time such as a year is called the

A)budget production.
B)growth rate.
C)economic output.
D)gross domestic product.
E)consumer price index.

Question 37

The right to organize unions and bargain collectively was guaranteed by the Wagner Act.

Question 38

A rise in the general price level (and decrease in dollar value) owing to an increase in the volume of money and credit in relation to available goods is called

A)recession.
B)bankruptcy.
C)a budget deficit.
D)unemployment.
E)inflation.

Question 39

The economic theory that opposes governmental interference in economic affairs beyond what is necessary to protect life and property is known as laissez-faire economics.

Question 40

If a country exports $100 billion worth of goods and imports $120 billion worth of goods in a given year, that country is said to have a trade deficit.

Question 41

When Congress and the president cannot use their discretion to change the spending rates it is called

A)mandatory spending.
B)automatic spending.
C)irrational spending.
D)required spending.
E)defense spending.

Question 42

When you go to the store to purchase a new MP3 player or cell phone you typically must pay a tax in addition to the listed retail price.This tax is an example of

A)a value-added tax.
B)a sin tax.
C)an excise tax.
D)a sales tax.
E)a tariff.

Question 43

The _________________ is a presidential staff agency that serves as a clearinghouse for budgetary requests and management improvements for government agencies.

A)Office of Management and Budget
B)Council of Economic Advisers
C)White House staff
D)Office of Administration
E)Cabinet

Question 44

A sales tax on items such as clothing and food purchases by all individuals is an example of

A)a regressive tax.
B)monetary policy.
C)inflation.
D)an excise tax.
E)deficit spending.

Question 45

A(n) ____________ tax is a tax on increased value of a product at each stage of production and distribution rather than just at the point of sale.

A)value-added
B)production
C)stage
D)sin
E)excise

Question 46

The first step in the budget process, which actually begins almost two years prior to the relevant budget, is

A)passage of appropriations bills by Congress.
B)the transmission of a budget proposal to Congress by the OMB.
C)congressional review of the president's proposed budget.
D)the development of requests for funds by executive branch departments and agencies.
E)None of the above

Question 47

Approximately _________ % of the federal government revenue for 2008 came from individual income taxes.

A)95
B)20
C)80
D)40
E)5

Question 48

What is the primary source of revenue in the government budget?

A)Excise taxes
B)Corporate income taxes
C)Borrowing
D)Payroll taxes
E)Individual income taxes

Question 49

Individual income taxes are due on what date each year?

A)December 31
B)October 1
C)July 4
D)December 25
E)April 15

Question 50

The _____________ Amendment, ratified in 1913, allowed the federal government to levy individual income taxes.

A)Third
B)Sixth
C)Sixteenth
D)Twenty-Ninth
E)Twenty-Third

Question 51

The annual budget of the United States is drawn up by the

A)Office of Management and Budget.
B)Treasury Department.
C)General Accounting Office.
D)Congressional Budget Office.
E)Government Accountability Office.

Question 52

According to the Constitution, ________________ "shall have Power to lay and collect Taxes, Duties, Imposts, and Excises."

A)Congress
B)the president
C)the states
D)the department of state
E)the U.S.trade representative

Question 53

The fiscal year for the federal government begins on

A)January 1.
B)October 1.
C)July 1.
D)the day after election day in November.
E)April 15.

Question 54

When the government runs a budget deficit it must make up for the shortfall in revenues by

A)increasing spending.
B)borrowing.
C)cutting taxes.
D)increasing unemployment.
E)maintaining inflation.

Question 55

When the federal government raises less money than it spends in a year it is called

A)recession.
B)inflation.
C)the national debt.
D)stagflation.
E)a budget deficit.

Question 56

The national debt refers to

A)when the federal government raises less money than it spends in a given year.
B)the amount of money the federal government gives state governments.
C)the combination of inflation and lack of economic growth.
D)the amount of money collected in taxes by the federal government.
E)the total amount of money the federal government has borrowed.

Question 57

Taxes on imports from other countries are known as

A)shipping fees.
B)excise taxes.
C)sin taxes.
D)executive agreements.
E)tariffs.

Question 58

A tax graduated so that people with higher incomes pay a larger fraction of their income than people with lower incomes is called a _______________ tax.

A)regressive
B)flat
C)Republican
D)progressive
E)None of the above

Question 59

During his administration, President George W.Bush was successful in getting Congress to pass tax incentives that resulted in a loss of tax revenue for the federal government.This is an example of

A)socialist economics.
B)the national debt.
C)earmark spending.
D)a windfall profit.
E)a tax expenditure.

Question 60

Under the Constitution, _______________ has the authority for raising revenue and appropriating funds.

A)the cabinet
B)the Congressional Budget Office
C)the president
D)the Office of Management and Budget
E)Congress

Question 61

The ______________________ was signed by the United States, Canada, and Mexico in 1992 to form the largest free trade zone in the world.

A)Western Hemisphere Free Trade Agreement
B)Tri-Country Free Trade Agreement
C)General Agreement on Tariffs and Trade
D)Good Faith Trade Pact
E)North American Free Trade Agreement

Question 62

Which of the following is true regarding the North American Free Trade Agreement?

A)Its signatories are the United States, Argentina, and Brazil.
B)It was passed by Congress over the veto of President Clinton.
C)It has had virtually no impact on the economies of the participating countries.
D)It created the largest geographical free trade zone in the world.
E)It was negotiated and signed by Ronald Reagan.

Question 63

The Budget and Impoundment Control Act of 1974

A)was designed to strengthen the role of Congress in the budget process.
B)became law after Congress overrode the veto of President Kennedy.
C)abolished the Congressional Budget Office.
D)eliminated all capital gains taxes.
E)included a provision requiring a two-thirds vote in both chambers for the passage of any future tax expenditures.

Question 64

Which of the following is true regarding the Federal Reserve System?

A)It consists of 12 regional banks
B)It is the primary institution responsible for fiscal policy
C)It is composed of members of the House and Senate banking committees
D)Its Board of Governors is elected by governors of the ten states with the greatest number of chartered banks
E)None of the above

Question 65

An imbalance in international trade in which the value of imports exceeds the value of exports is called a(n)

A)exchange rate adjustment.
B)regulatory regime.
C)unfair tariff.
D)monopoly.
E)trade deficit.

Question 66

The spending category that accounts for the largest percentage of the federal budget is

A)social programs, such as Social Security.
B)defense.
C)interest on the national debt.
D)transportation needs.
E)None of the above

Question 67

The marginal rate of a new tax increases by 1% for every $10,000 increase in income.Such a tax is considered

A)progressive.
B)universal.
C)gradual.
D)fair.
E)regressive.

Question 68

The General Agreement on Tariffs and Trades

A)is an agreement signed by the United States, Canada, and Mexico in 1992.
B)is a treaty signed by 50 of the most advanced democracies in the world establishing strict quotas on imports from one another.
C)is an international trade organization with more than 130 members that seeks to encourage free trade by lowering tariffs and other trade restrictions.
D)was ruled to be unconstitutional by the Supreme Court in the 1998 case, Exxon v.Office of the U.S.Trade Representative
E)None of the above

Question 69

The economist who first urged that government should fill any gaps left by a deficit of private spending and investment was

A)Adam Smith.
B)John K.Galbraith.
C)John M.Keynes.
D)Paul Samuelson.
E)Ronald Reagan

Question 70

A new tax takes in 25% of the income of people making more than $50,000 per year and 35% of the income of people making less than $50,000 per year.Such a tax is considered to be

A)regressive.
B)progressive.
C)universal.
D)gradual.
E)stagnant.

Question 71

The primary reason for the persistent trade deficits of the United States is

A)the fact that the U.S.exports too little.
B)Democratic control of the White House for most of the period since 1971.
C)the failure of the Senate to ratify the North American Free Trade Agreement.
D)control of the World Trade Organization by Cuba and other communist countries.
E)excessive subsidization of American agricultural products by the government.

Question 72

The Federal Reserve banks serve all of the following functions EXCEPT

A)insuring bank deposits.
B)regulating banks.
C)determining money supply in the economy.
D)influencing interest rates.
E)All of the above are functions

Question 73

The alternative to economic regulation is

A)socialism.
B)laissez-faire capitalism.
C)mercantilism.
D)Keynesian economics.
E)communism.

Question 74

The amount of interest banks charge for loans to each other is known as the

A)federal reserve requirement.
B)federal funds rate.
C)federal circulation rate.
D)federal banking provision.
E)federal monetary rule.

Question 75

The economic theory that opposes governmental interference in economic affairs beyond what is necessary to protect life and property is known as

A)trickle-down theory.
B)protectionism.
C)laissez-faire economics.
D)socialism.
E)Keynesianism.

Question 76

Which of the following is a way in which the Federal Reserve System can influence the economy?

A)Raising income taxes
B)Cutting government spending on Social Security and Medicare
C)Directly changing the mortgage rate that private lenders charge borrowers for home loans
D)Entering trade agreements with foreign countries
E)Changing interest rates banks must pay for borrowing money

Question 77

___________ is the practice of selling products below the cost of manufacturing or below their domestic price with the intention of driving other producers out of the market and then raising prices to profitable levels.

A)Subsidizing
B)Deficit trading
C)Dumping
D)Protectionism
E)Deregulation

Question 78

The system created by Congress in 1913 to establish banking practices and regulate currency in circulation and the amount of credit available is called the

A)Banking Oversight Commission.
B)Monetary Policy Review Board.
C)Federal Reserve System.
D)Congressional Budget Office.
E)Securities and Exchange System.

Question 79

The policy of erecting trade barriers to protect domestic industry is known as

A)deregulation.
B)protectionism.
C)free-trade economics.
D)monetary policy.
E)dumping.

Question 80

The economic theory arguing that government spending should increase during business slumps and be curbed during booms is called

A)laissez-faire economics.
B)supply-side economics.
C)libertarian economics.
D)Keynesian economics.
E)free trade economics.