Question 1

Inflation can become a major economic problem for all of the following reasons EXCEPT:

Accepted Answer

Inflation actually makes it easier for people to repay their debts because the value of the money they owe is less in real terms.

Question 2

Stagflation involves rising prices and high unemployment.

Accepted Answer

Stagflation is a phenomenon where the economy experiences both inflation (rising prices) and stagnant economic growth, which often leads to high unemployment.

Question 3

A loaf of bread that costs $2 today might cost $3 in 20 years. This is an example of inflation.

Accepted Answer

Inflation refers to the increase in the general level of prices of goods and services in an economy over a period of time. The example given in the statement shows an increase in the price of bread over 20 years, which is a result of inflation.

Question 4

Until 2010, Congress had not passed any laws that reformed health care in the United States.

Accepted Answer

The answer of Until 2010, Congress had not passed any...

Question 5

Why is the Securities and Exchange Commission important in a free-market economy?

Accepted Answer

The Securities and Exchange Commission (SEC) helps provide oversight to ensure transparent capital markets. In a free-market economy, it is important that information is available to investors so they can make informed decisions. The SEC plays a crucial role in regulating securities and enforcing laws to ensure that market participants are following the rules and that investors have access to accurate and timely information.

Question 6

One major critique of relying on the GDP to measure economic success is that:

Accepted Answer

The GDP fails to capture non-monetary aspects of well-being, such as quality of life, safety, and environmental sustainability. The sales of products such as home alarms may increase due to a decline in well-being, such as an increase in crime rates, but the GDP does not reflect the negative impact on society's well-being.

Question 7

Evaluating government bureaucracies is difficult because there is no standard by which efficacy is generally measured.

Accepted Answer

There is no universally accepted definition or criteria for evaluating the effectiveness of government bureaucracies, which makes it a complex and challenging task. Different stakeholders may have their own expectations and standards for evaluating the performance of bureaucracies, which further complicates the process.

Question 8

Payroll taxes are a regressive tax.

Accepted Answer

Payroll taxes, such as Social Security and Medicare taxes, are regressive because everyone pays the same percentage of their income regardless of how much they earn. This means that lower-income individuals pay a higher percentage of their income towards payroll taxes compared to higher-income individuals.

Question 9

When the economy goes into a deep, widespread, and prolonged downturn, it is called an:

Accepted Answer

An economic depression is the most appropriate choice for a deep, widespread, and prolonged economic downturn. The term "depression" connotes a severe and extended period of economic decline that affects many industries and individuals. It is characterized by a significant decrease in economic activity, high levels of unemployment, and a decrease in consumer and business confidence. The Great Depression of the 1930s is an example of an economic depression.

Question 10

The Office of Management and Budget (OMB) has the power to restrict how much money Congress is allowed to spend each fiscal year.

Accepted Answer

The answer of The Office of Management and Budget (OMB)...

Question 11

The health care reform passed in 2010 can be considered part of the government's effort to provide a "social safety net."

Accepted Answer

The health care reform passed in 2010, also known as the Affordable Care Act, aimed to improve access to affordable health care for all Americans and can be considered part of the government's efforts to provide a social safety net.

Question 12

What does the gross domestic product (GDP) measure?

Accepted Answer

The gross domestic product (GDP) measures a country's economic output and activity, which includes the total value of goods and services produced within its borders during a specific period, usually a year. It is a measure of a country's overall economic performance and is used to compare the economic growth of different countries. The other options do not accurately describe what GDP measures.

Question 13

A progressive tax means that wealthier individuals pay higher tax rates and poorer individuals pay lower tax rates.

Accepted Answer

A progressive tax system is designed to have wealthier individuals pay a higher percentage of their income in taxes than poorer individuals. This is typically achieved through a system of tax brackets, where individuals are taxed at increasing rates as their income rises.

Question 14

The Treasury Department is responsible for coordinating budget requests and aiding the president in the creation of an annual budget.

Accepted Answer

The Office of Management and Budget (OMB) is responsible for coordinating budget requests and aiding the president in the creation of an annual budget, not the Treasury Department. However, the Treasury Department plays a role in implementing and enforcing the budget once it is passed by Congress.

Question 15

Budgetary spending that is required by law is called "mandatory spending."

Accepted Answer

This is correct. Mandatory spending is spending that is required by law, such as Social Security and Medicare.

Question 16

Tax policy is inherently conflictual because:

Accepted Answer

Tax policy often involves redistributing money from one group to another, which creates conflict between those who benefit from the redistribution and those who do not. This conflict is especially pronounced when tax policy is used to address issues of income inequality or social welfare. The other answer choices are either incorrect or do not provide a comprehensive explanation of why tax policy is conflictual.

Question 17

Which of the following describes the top policy priorities among a political party, politicians, or a coalition of politicians?

Accepted Answer

A policy agenda refers to the set of issues or problems that political leaders prioritize and aim to address through legislative or governmental action.

Question 18

Members of the "baby-boom generation"-a term used to describe individuals born between 1946 and 1964 -will put a great deal of stress on the Social Security system when they retire.

Accepted Answer

The baby-boom generation is a large cohort and as they age, a significant number of individuals will be eligible for Social Security benefits, putting strain on the system.

Question 19

Supporters of the Federal Reserve System argue that it allows the president to have final influence and control over the nation's economic policies.

Accepted Answer

The Federal Reserve System is designed to be an independent entity and is accountable to Congress, not the president. Its decisions regarding monetary policy are made independently and are not subject to presidential influence or control.

Question 20

The Constitution gives the executive branch the "power of the purse."

Accepted Answer

The power of the purse is actually given to the legislative branch, specifically the House of Representatives, which has the power to initiate revenue bills and appropriate funds.

Quiz 14: Economic and Social Policy