Question 1

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?
A) the President and his cabinet
B) the Federal Reserve Board
C) the House of Representatives
D) the Senate

Accepted Answer

The Federal Reserve Board is primarily responsible for implementing monetary policy, not fiscal policy. The other options (A, C and D) are all directly involved in formulating U.S. fiscal policy.

Question 2

The purpose of the Employment Act of 1946 was to
A) establish goals for the federal government that would promote maximum employment, purchasing power, and production.
B) establish an unemployment compensation system.
C) set up the Federal Reserve System.
D) set targets for the unemployment rate to be achieved by the president.

Accepted Answer

The Employment Act of 1946 was passed to promote maximum employment, production, and purchasing power. It established the responsibility of the federal government to use all possible measures to promote these goals. The act did not establish an unemployment compensation system or set up the Federal Reserve System. It also did not set specific targets for the unemployment rate to be achieved by the president.

Question 3

The Council of Economic Advisors advises the
A) President.
B) Congress.
C) Senate.
D) House of Representatives.

Accepted Answer

The Council of Economic Advisors advises the President of the United States on economic policy.

Question 4

Fiscal policy
A) is enacted by the Federal Reserve.
B) involves changing interest rates.
C) involves changing taxes and government spending.
D) involves changing the money supply.

Accepted Answer

Fiscal policy involves changing taxes and government spending, while monetary policy (not mentioned in the choices) involves changing interest rates and the money supply, which are enacted by the Federal Reserve.

Question 5

The use of the U.S. federal budget to help stabilize the economy grew in reaction to the ________ and is known as ________.
A) stagflation of the 1970s; fiscal policy
B) Great Depression of the 1930s; fiscal policy
C) stagflation of the 1970s; government policy
D) Great Depression of the 1930s; monetary policy

Accepted Answer

The use of the U.S. federal budget to help stabilize the economy grew in reaction to the Great Depression of the 1930s and is known as fiscal policy.

Question 6

Which of the following is the largest source of federal government revenue?
A) corporate income taxes
B) Social Security taxes
C) personal income taxes
D) borrowing

Accepted Answer

Personal income taxes are the largest source of federal government revenue. They account for approximately 50% of all revenue collected by the federal government.

Question 7

Changes in which of the following is included as part of fiscal policy?
A) the quantity of money
B) the level of interest rates
C) monetary policy
D) tax rates

Accepted Answer

Fiscal policy refers to changes in government spending and taxation, so the only choice that falls under this category is D, tax rates. Choices A, B, and C are all related to monetary policy, which is controlled by the central bank, not the government through fiscal policy.

Question 8

The government receives tax revenues from several sources. Rank the following sources from largest to the smallest.
I.corporate income taxes
II.personal income taxes
III.Social Security taxes
A) I, II, III
B) II, III, I
C) I, III, II
D) III, II, I

Accepted Answer

According to the latest data from the Congressional Budget Office, the largest source of federal tax revenue is personal income taxes, followed by Social Security taxes and then corporate income taxes. Therefore, the correct ranking is II, III, I, making choice B the best fit.

Question 9

Prior to the Great Depression, the purpose of the federal budget was to ________.
A) stabilize the economy
B) finance the activities of the government
C) maintain low interest rates
D) decrease unemployment

Accepted Answer

Prior to the Great Depression, the primary purpose of the federal budget was to finance the activities of the government such as national defense, infrastructure investment, and public services. The idea of using the federal budget to stabilize the economy and decrease unemployment did not become prominent until the New Deal era in response to the economic crisis. Maintaining low interest rates was not a primary focus of the federal budget during this time.

Question 10

Which branches of the government play a role in the enacting of the federal budget?
I.the President.
II.the House of Representatives.
III.the Senate.
A) I and II
B) II and III
C) I, II and III
D) I

Accepted Answer

The President, the House of Representatives, and the Senate all play a role in the enacting of the federal budget. The President proposes a budget, while the House and Senate review, debate, and ultimately pass or reject the budget. Therefore, all three branches play a critical role in the budget-making process.

Question 11

The Employment Act of 1946 states that it is the responsibility of the federal government to
A) promote maximum employment.
B) promote economic equality.
C) maintain the inflation rate at below 10 percent per year.
D) All of the above answers are correct.

Accepted Answer

The Employment Act of 1946 primarily focuses on promoting maximum employment. While it does mention the maintenance of stable prices and economic growth, these are ultimately in service of achieving the goal of maximum employment. The act does not prioritize economic equality specifically. Therefore, option A is the best choice as it accurately reflects the main goal of the act.

Question 12

What is the largest source of revenue for the federal government?
A) Social Security taxes
B) corporate income taxes
C) personal income taxes
D) sales tax

Accepted Answer

Personal income taxes are the largest source of revenue for the federal government, accounting for approximately 50% of total federal revenue. Social Security taxes and corporate income taxes are also significant sources of revenue, but they make up a smaller percentage of the total. Sales tax is not a source of revenue for the federal government, as it is collected at the state and local level.

Question 13

The Employment Act of 1946 made it the responsibility of the federal government to
A) balance its budget because that policy would create the maximum level of employment.
B) promote maximum employment.
C) provide full employment and a stable balance of payments.
D) improve the distribution of income.

Accepted Answer

The Employment Act of 1946 made it the responsibility of the federal government to promote maximum employment. The act aimed to achieve and maintain full employment and keep the economy stable.

Question 14

Fiscal policy includes
A) only decisions related to government expenditure on goods and services.
B) only decisions related to government expenditure on goods and services and the value of transfer payments.
C) only decisions related to the value of transfer payments and tax revenue.
D) decisions related to government expenditure on goods and services, the value of transfer payments, and tax revenue.

Accepted Answer

Fiscal policy includes decisions about government spending on goods and services, value of transfer payments, and tax revenue. All three components are important in determining the overall fiscal stance of the government and its impact on the economy.

Question 15

Fiscal policy attempts to achieve all of the following objectives EXCEPT ________.
A) a stable money supply
B) price level stability
C) full employment
D) sustained economic growth

Accepted Answer

Fiscal policy does not aim to achieve a stable money supply. This is the objective of monetary policy, which is controlled by the central bank. Fiscal policy, on the other hand, focuses on government spending and taxation to achieve macroeconomic objectives such as price level stability, full employment, and sustained economic growth.

Question 16

The largest source of government revenues is ________.
A) personal income taxes
B) indirect taxes
C) corporate income taxes
D) Social Security taxes

Accepted Answer

Personal income taxes are the largest source of government revenues in many countries, including the United States, due to the broad base of individuals who pay these taxes.

Question 17

The budget process includes the
A) President proposing the budget and the Congress passing the budget.
B) President passing the budget as proposed by Congress.
C) House of Representatives proposing the budget and the Senate passing the budget.
D) Senate proposing the budget and the House of Representatives passing the budget.

Accepted Answer

The budget process begins with the President submitting their proposed budget to Congress, which includes recommendations for spending and revenue. Congress then goes through a series of steps to consider and pass a budget resolution, which outlines the overall funding priorities for the fiscal year. The budget resolution then goes through even more steps, where Congress determines how much will be spent on specific programs and agencies through appropriations bills. Ultimately, the budget must be passed by both the House of Representatives and Senate before being signed into law by the President.

Question 18

Fiscal policy involves
A) the use of interest rates to influence the level of GDP.
B) the use of tax and spending policies by the government.
C) decreasing the role of the Federal Reserve in the everyday life of the economy.
D) the use of tax and money policies by government to influence the level of interest rates.

Accepted Answer

Fiscal policy refers to the use of government's tax and spending policies to influence the level of economic activity and stabilize the economy. It is different from monetary policy, which involves the use of interest rates and money supply to achieve similar goals.

Question 19

The Council of Economic Advisers
A) proposes the president's budget each year.
B) approves fiscal policy changes.
C) helps the president and the public stay informed about the state of the economy.
D) helps the president make changes in monetary policy.

Accepted Answer

The Council of Economic Advisers helps the president and the public stay informed about the state of the economy. It does not propose the president's budget, approve fiscal policy changes, or help the president make changes in monetary policy.

Question 20

All of the following are part of fiscal policy EXCEPT
A) setting tax rates.
B) setting government spending.
C) choosing the size of the government deficit.
D) controlling the money supply.

Accepted Answer

Controlling the money supply falls under monetary policy, which is separate from fiscal policy. Fiscal policy refers specifically to government spending and taxation policies.

Quiz 13: Fiscal Policy

Which of the following government bodies does NOT participate directly in formulating U.S. fiscal policy?

The purpose of the Employment Act of 1946 was to

The Council of Economic Advisors advises the

Fiscal policy

The use of the U.S. federal budget to help stabilize the economy grew in reaction to the and is known as .

Which of the following is the largest source of federal government revenue?

Changes in which of the following is included as part of fiscal policy?

The government receives tax revenues from several sources. Rank the following sources from largest to the smallest. I.corporate income taxes II.personal income taxes III.Social Security taxes

Prior to the Great Depression, the purpose of the federal budget was to ________.

Which branches of the government play a role in the enacting of the federal budget? I.the President. II.the House of Representatives. III.the Senate.

The Employment Act of 1946 states that it is the responsibility of the federal government to

What is the largest source of revenue for the federal government?

The Employment Act of 1946 made it the responsibility of the federal government to

Fiscal policy includes

Fiscal policy attempts to achieve all of the following objectives EXCEPT ________.

The largest source of government revenues is ________.

The budget process includes the

Fiscal policy involves

The Council of Economic Advisers

All of the following are part of fiscal policy EXCEPT