Question 1

A ______ tax is one in which the rate of taxation is higher for individuals who earn higher incomes.

Accepted Answer

A progressive tax system is one in which the tax rate increases as the income of the individual or entity being taxed increases. Progressivity is intended to distribute the tax burden more fairly, with higher earners carrying a greater proportion of the overall tax burden. This approach is generally used to address issues of income inequality and is seen as a way to promote social equity.

Question 2

Which branch of government typically initiates the budgetary process?

Accepted Answer

The executive branch, typically led by the president or head of state, initiates the budgetary process by proposing a budget to the legislative branch for approval and adjustments.

Question 3

Today, entitlement programs consume roughly ______% of the federal budget.

Accepted Answer

Entitlement programs, such as Social Security, Medicare, and Medicaid, consume roughly 60% of the federal budget.

Question 4

As a part of the federal budgeting process, an executive agency called the ______ reviews all agency budgets and ensures that they conform to the intent of the policy.

Accepted Answer

The Office of Management and Budget (OMB) is responsible for reviewing agency budgets and ensuring that they align with the policy objectives set by the administration. This process is a crucial part of the federal budgeting process and helps to ensure that taxpayer dollars are being used effectively and efficiently.

Question 5

The economic policy goal of ______ refers to policies that are designed to increase productivity, commerce, sales, employment, and the general pace of activity within the economy.

Accepted Answer

The economic policy goal described in the question is economic growth. The other choices, full employment, low levels of inflation, and managing debts and deficits, are also important economic policy goals, but they do not specifically address the goal of increasing productivity, commerce, sales, employment, and activity within the economy.

Question 6

A ______ tax refers to a situation in which all individuals have the same rate of taxation regardless of income.

Accepted Answer

A regressive tax is a tax where the tax rate decreases as the taxable base increases. In other words, everyone pays the same amount of tax regardless of their income level, which means that low-income individuals pay a higher percentage of their income in taxes compared to high-income individuals.

Question 7

______ are individuals who are concerned about the negative balance of trade.

Accepted Answer

Protectionists are individuals who believe in protecting domestic industries through the use of tariffs and other trade barriers. One of the reasons for their belief is the concern about the negative balance of trade, which means that a country imports more goods and services than it exports, resulting in a loss of money and jobs.

Question 8

What is the major instrument through which any government sets its overall economic policy each year?

Accepted Answer

The federal budget is the major instrument through which any government sets its overall economic policy each year. It outlines the government's planned spending and revenue for the fiscal year and serves as a tool for fiscal policy to influence economic growth, employment, inflation, and other macroeconomic variables. The Federal Reserve Board is responsible for monetary policy, which includes manipulating interest rates and controlling the money supply, but it does not set overall economic policy. The Economic Stimulus Program is a temporary measure to provide a boost to the economy, but it is not the primary tool for setting economic policy.

Question 9

The government shutdown of October 2013 was due to ______.

Accepted Answer

The government shutdown of October 2013 was primarily due to the political disagreement over the Affordable Care Act, commonly known as Obamacare, and the federal budget deficit. The Republicans, particularly the Tea Party wing, sought to use the government funding bill as leverage to defund or delay the implementation of the healthcare law. The Democrats refused to accept any condition that undermined the core pillar of their signature legislative achievement, leading to a stalemate that halted non-essential government services and furloughed hundreds of thousands of federal workers.

Question 10

The ______ is a measure that represents the average change in price over time of a market basket of consumer goods and services.

Accepted Answer

The Consumer Price Index (CPI) is a measure that represents the average change in price over time of a market basket of consumer goods and services. The other options, Fed, GDP, and CBO, are not measures of changes in prices of consumer goods and services. The Fed is the Federal Reserve System responsible for monetary policy, GDP is the Gross Domestic Product which measures the economic output of a country, and CBO is the Congressional Budget Office which provides analysis and forecasts of the federal budget and economic trends.

Question 11

Which of the following is NOT a goal of economic policy?

Accepted Answer

Increasing imports is not a goal of economic policy. The other three, economic growth, full employment, and low inflation, are common goals of economic policy.

Question 12

Which of the following terms refers to the ability of a method of taxation to keep up with inflation and economic growth?

Accepted Answer

Buoyancy refers to the ability of a tax system to generate revenue in line with overall economic growth, while keeping pace with inflation. Vertical equity refers to the fairness in how taxes are distributed across different income levels. Redistributive effects refer to the impact of a tax on income inequality, and progressive taxation refers to a system where higher income earners pay a higher rate of taxation.

Question 13

An entitlement program refers to ______.

Accepted Answer

An entitlement program refers to a program for which people are eligible based on their economic status or age, such as Medicaid, Social Security, or SNAP. These programs provide assistance to individuals and families who meet certain criteria, regardless of how much funding is available.

Question 14

Which of the following is NOT a tool of economic policy making?

Accepted Answer

Efficiency is not a tool of economic policy making, it is rather an outcome or goal of economic policy making. Regulation, taxation, and establishment of the budget are all tools that can be used to achieve economic policy goals.

Question 15

Regulation is defined as ______.

Accepted Answer

Regulation is the act of the government requiring specific activities to be done and imposing penalties if they are not. Options A, B, and C refer to different tools or tactics that governments use, but not to the concept of regulation per se.

Question 16

What is the difference between the national deficit and the national debt?

Accepted Answer

The national deficit is the yearly amount in which government expenses exceed revenue, while the national debt is the accumulation of those yearly deficits over time. It is important to note that the deficit can contribute to the growth of the debt, but they are not the same thing.

Question 17

The economic goal of stable prices is typically measured using the ______.

Accepted Answer

The Consumer Price Index (CPI) measures the changes in the price of a basket of goods and services typically consumed by households. It is commonly used to track inflation and as an indicator of the stability of prices.

Question 18

One of largest challenges facing the Obama administration has been ______, which led to the government shutdown in October 2013.

Accepted Answer

The growing federal deficit was a major issue that led to political gridlock and the government shutdown in October 2013 as Republicans and Democrats disagreed on how to address the issue. Education reform, unemployment, and foreign policy were also important issues during Obama's presidency, but they did not directly lead to the government shutdown.

Question 19

______ policy refers to the government's budgetary process and includes the sum total of taxing and spending.

Accepted Answer

Fiscal policy refers to the government's budgetary process, which includes taxation and spending. Regulatory policy refers to government policies that regulate industries, markets, and activities, such as environmental regulations or financial regulations. Monetary policy refers to the actions taken by a central bank to manage the money supply and interest rates. Distributive policy refers to government policies that allocate resources or benefits to certain groups or regions, such as agricultural subsidies or disaster relief.

Question 20

The distributive effects of a tax are ______.

Accepted Answer

The distributive effects of a tax refer to the impact the tax has on different groups in terms of how much they have to pay or how much their income is affected. It is not necessarily related to fairness, loopholes, or the actual results of collecting the tax.

Quiz 7: Economic and Budgetary Policy