Question 1

Inflation is best described as ______.

Accepted Answer

Inflation is a period of rising consumer prices, as measured by the consumer price index (CPI).

Question 2

Before a society can create an economic policy, it must first ______.

Accepted Answer

Before a society can create an economic policy, it must first examine the proper role of government in regulating economic activity. This involves questions such as how involved the government should be in regulating markets, what types of taxes and subsidies are appropriate, and how to balance economic growth with social and environmental concerns. The other options are not necessarily prerequisites to creating an economic policy.

Question 3

What is one of the criticisms of the Federal Reserve System?

Accepted Answer

One criticism of the Federal Reserve System is that it is not truly independent of politics. While it is meant to operate without political influence, the members of the Board of Governors are appointed by the President and approved by the Senate, and the Chairman of the Board is appointed by the President. This can make it difficult for the Fed to make decisions that may be unpopular with the current administration.

Question 4

An economic policy in which a government dictates much of a nation's economic activity, including levels of production and prices, would best be described as a ______ economy.

Accepted Answer

A command-and-control economy is one in which the government exerts a high level of control over the economy, often dictating levels of production and setting prices. This is in contrast to a laissez-faire economy, in which the government takes a hands-off approach and allows the market to dictate economic activity. A mixed economy combines elements of both command-and-control and laissez-faire, while a socialist economy involves government ownership and control of much of the means of production.

Question 5

Guiding the nation's economy through decisions on spending and taxation is called ______.

Accepted Answer

Guiding the nation's economy through decisions on spending and taxation is known as fiscal policy. Monetary policy refers to the actions taken by a central bank to manage the supply of money in the economy, while economic growth is the increase in the production of goods and services in an economy over a period. Cap and save is not a recognized economic term.

Question 6

What is inflation?

Accepted Answer

Inflation is defined as the rate at which the general level of prices for goods and services is rising, and it is caused by an increase in the supply of money circulating in the economy. As more money becomes available, the purchasing power of each unit of currency decreases, leading to a rise in prices. Inflation can be measured by calculating the percentage increase in the consumer price index (CPI) over a period of time.

Question 7

A(n) ______ indicates a private sector that is cutting back and not hiring or is laying off workers.

Accepted Answer

An increase in the unemployment rate indicates that there is a private sector that is cutting back and not hiring, or laying off workers. This is a sign of an economic downturn and decreased economic activity. Decrease in the consumer price index, increase in gross domestic product, and decrease in the inflation rate do not necessarily indicate a private sector that is cutting back on hiring or laying off workers.

Question 8

The percentage of the total labor force that is without a job can best be described as the ______.

Accepted Answer

The unemployment rate is the percentage of the total labor force that is without a job, making it the best choice to describe this concept. A is incorrect as it refers to the total amount of people available to work. C and D are unrelated to the concept of unemployment.

Question 9

"Reaganomics" is a form of what?

Accepted Answer

Reaganomics is another name for supply-side theory, which advocates for lower taxes and less government regulation, which in theory will stimulate economic growth and increase revenue for the government.

Question 10

______ is the primary federal agency tasked with cleaning up and protecting the environment.

Accepted Answer

The Environmental Protection Agency (EPA) is the primary federal agency tasked with ensuring that laws and regulations are put in place to protect the environment and public health. It is responsible for enforcing laws such as the Clean Air Act, the Clean Water Act, and the Resource Conservation and Recovery Act, among others. The agency's mission is to protect human health and the environment.

Question 11

The ratification of the 16th Amendment made it constitutional to do what?

Accepted Answer

The ratification of the 16th Amendment in 1913 gave the federal government the power to impose a tax on the incomes of Americans, making it constitutional for the government to collect income tax.

Question 12

The fluctuation of economic activity around a long-term trend, with periods of expansion and contraction, is best described as the ______.

Accepted Answer

The fluctuation of economic activity around a long-term trend, with periods of expansion and contraction, is commonly known as the business cycle.

Question 13

The author of the foundational publication An Inquiry Into the Nature and Causes of the Wealth of Nations in 1776 was ______

Accepted Answer

Adam Smith is widely recognized as the author of An Inquiry Into the Nature and Causes of the Wealth of Nations, which is considered one of the most important works in the development of modern economics.

Question 14

______ is one of the most important jobs tasked to the federal government.

Accepted Answer

Formulating and implementing the nation's economic policy is one of the most important jobs tasked to the federal government.

Question 15

In a laissez-fair economy, governments ______.

Accepted Answer

In a laissez-fair economy, governments intrude as little as possible in economic transactions. This means that the government does not intervene with the market system by imposing regulations, taxes, or protectionist measures. The government's role is limited to maintaining law and order, protecting property rights, and providing a stable legal environment for economic transactions to occur.

Question 16

Which institution is the most important player in charting national monetary policy?

Accepted Answer

The Federal Reserve is the most important player in charting national monetary policy. It is responsible for regulating the country's money supply and interest rates, and takes actions to stabilize the economy during times of inflation or recession. Citibank is a commercial bank and does not have the authority to chart national monetary policy. The Congressional Budget Office is responsible for providing economic data and analysis to Congress, but does not set monetary policy. There is no such institution as the American Financial Affairs Board.

Question 17

Which of the following utilized a command-and-control economy?

Accepted Answer

The Soviet Union was known for its command-and-control economy, where the government made all economic decisions and controlled all industries.

Question 18

In 1936, a broad theory of business cycles proposed by ______ was applied during the depths of the Great Depression.

Accepted Answer

John Maynard Keynes's General Theory of Employment, Interest, and Money, which proposed government intervention in the economy during times of economic downturn, was widely applied during the Great Depression to combat high unemployment and low economic growth.

Question 19

The efforts of government to regulate and support the economy in order to protect and expand citizens' financial well-being and economic prospects, as well as supporting businesses in the global financial system, is best defined as ______ policy.

Accepted Answer

The definition given in the question matches the definition of economic policy, which involves government actions that affect economic activities such as production, consumption, savings, and investments. Fiscal policy refers to the specific use of government spending and taxation to influence the economy, and while social welfare programs may be a part of economic policy, they do not encompass the full range of actions taken to support the economy. Domestic policy is a broader category that includes economic policy but also covers issues such as education, healthcare, and environmental regulations. Therefore, the best choice is B.

Question 20

Monetarists tend to focus their attention on the ______.

Accepted Answer

Monetarists believe that changes in the money supply have a direct impact on economic activity, so they tend to focus on analyzing and controlling the money supply.

Quiz 13: Public Policy: Promoting the General Welfare and Advancing Americans Interests