Question 1

An analysis of large declines in the stock market since the Great Depression indicates that

Accepted Answer

A)  the stock market crash in October 1929 was more severe than subsequent crashes. 
B)  a prolonged recession will always follow a large decline in the stock market. 
C)  almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months, and in some cases, no recession at all. 
D)  the only way to recover from a stock market crash is through government spending, increased regulation, and tax-increases. 
A)  the stock market crash in October 1929 was more severe than subsequent crashes. 
B)  a prolonged recession will always follow a large decline in the stock market. 
C)  almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months, and in some cases, no recession at all. 
D)  the only way to recover from a stock market crash is through government spending, increased regulation, and tax-increases.

Question 2

Most economists believe the severity and duration of the Great Depression was primarily the result of

Accepted Answer

A)  the large budget deficits of the federal government. 
B)  the reduction in tariffs and the influx of foreign imports during the early 1930s. 
C)  the excessive use of credit cards. 
D)  a sharp contraction in the money supply. 
A)  the large budget deficits of the federal government. 
B)  the reduction in tariffs and the influx of foreign imports during the early 1930s. 
C)  the excessive use of credit cards. 
D)  a sharp contraction in the money supply.

Question 3

Public choice theory suggests politicians will be most likely to favor redistribution of income from

Accepted Answer

A)  the rich to the poor. 
B)  unorganized taxpayers to well-organized interest groups. 
C)  middle-income taxpayers to both the rich and the poor. 
D)  well-organized businesses and labor groups to consumers. 
A)  the rich to the poor. 
B)  unorganized taxpayers to well-organized interest groups. 
C)  middle-income taxpayers to both the rich and the poor. 
D)  well-organized businesses and labor groups to consumers.

Question 4

Which of the following is true?

Accepted Answer

A)  The incentives to engage in rent-seeking activities increase with the ease with which the political process can provide personal gain at the expense of others. 
B)  The amount of resources devoted toward rent seeking generally has no impact on the economic prosperity of a nation. 
C)  Income transfers directed toward the poor constitute about half of all income transfers in the United States. 
D)  All of the above are correct. 
A)  The incentives to engage in rent-seeking activities increase with the ease with which the political process can provide personal gain at the expense of others. 
B)  The amount of resources devoted toward rent seeking generally has no impact on the economic prosperity of a nation. 
C)  Income transfers directed toward the poor constitute about half of all income transfers in the United States. 
D)  All of the above are correct.

Question 5

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

Accepted Answer

A)  potato farmers who own land that wouldn't be irrigated by the project. 
B)  taxpayers who would pay for the project. 
C)  consumers of potatoes who might benefit from an expansion in supply and slightly lower potato prices. 
D)  potato farmers who own the land to be irrigated. 
A)  potato farmers who own land that wouldn't be irrigated by the project. 
B)  taxpayers who would pay for the project. 
C)  consumers of potatoes who might benefit from an expansion in supply and slightly lower potato prices. 
D)  potato farmers who own the land to be irrigated.

Question 6

As methods of economic organization, the market and the public sector are similar in which of the following ways?

Accepted Answer

A)  Income and power are distributed equally in both sectors. 
B)  In both sectors, economic activity is undertaken only when it satisfies the criterion for economic efficiency. 
C)  In both sectors, economic exchange is completely voluntary. 
D)  Someone must cover the cost associated with the provision of scarce goods in both sectors. 
A)  Income and power are distributed equally in both sectors. 
B)  In both sectors, economic activity is undertaken only when it satisfies the criterion for economic efficiency. 
C)  In both sectors, economic exchange is completely voluntary. 
D)  Someone must cover the cost associated with the provision of scarce goods in both sectors.

Question 7

In 2012, the combined expenditures of federal, state, and local governments in the United States were approximately

Accepted Answer

A)  9 percent of GDP. 
B)  24 percent of GDP. 
C)  38 percent of GDP. 
D)  45 percent of GDP. 
A)  9 percent of GDP. 
B)  24 percent of GDP. 
C)  38 percent of GDP. 
D)  45 percent of GDP.

Question 8

When the federal government becomes heavily involved in programs that favor well-organized business interest at the expense of others, the expected result is

Accepted Answer

A)  more rapid economic growth, because programs of this type are generally productive. 
B)  a reduction in rent seeking activities because political decision-makers will want to promote smaller, innovative firms rather than large firms that are a major source of political contributions. 
C)  less innovation because political decision-makers will tend to favor older firms with a stronger record of providing political support rather than newer, innovative start-up firms. 
D)  a decline in the competitiveness of elections, because politicians will find it more difficult to raise campaign contributions. 
A)  more rapid economic growth, because programs of this type are generally productive. 
B)  a reduction in rent seeking activities because political decision-makers will want to promote smaller, innovative firms rather than large firms that are a major source of political contributions. 
C)  less innovation because political decision-makers will tend to favor older firms with a stronger record of providing political support rather than newer, innovative start-up firms. 
D)  a decline in the competitiveness of elections, because politicians will find it more difficult to raise campaign contributions.

Question 9

In 2015, government income transfers redistributed what percentage of national income?

Accepted Answer

A)  1.1 percent 
B)  7.7 percent 
C)  17.3 percent 
D)  25.5 percent 
A)  1.1 percent 
B)  7.7 percent 
C)  17.3 percent 
D)  25.5 percent

Question 10

Which of the following is accurate regarding government expenditures in the United States?

Accepted Answer

A)  The federal government spends considerably more than state and local governments combined. 
B)  The federal government spends more than local governments but less than state governments. 
C)  Local governments spend more than state governments, which in turn, spend more than the federal government. 
D)  Since 1930, total government expenditures as a share of GDP have declined. 
A)  The federal government spends considerably more than state and local governments combined. 
B)  The federal government spends more than local governments but less than state governments. 
C)  Local governments spend more than state governments, which in turn, spend more than the federal government. 
D)  Since 1930, total government expenditures as a share of GDP have declined.

Question 11

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression, policy makers

Accepted Answer

A)  reduced tax rates and increased the money supply. 
B)  increased tax rates and reduced the money supply. 
C)  increased both tax rates and the money supply. 
D)  reduced both the tax rates and the money supply. 
A)  reduced tax rates and increased the money supply. 
B)  increased tax rates and reduced the money supply. 
C)  increased both tax rates and the money supply. 
D)  reduced both the tax rates and the money supply.

Question 12

The fact that voters perceive their votes as unlikely to actually change the outcome of an election causes

Accepted Answer

A)  voters to have little incentive to become informed about candidates and political issues. 
B)  voters to spend a great deal of effort becoming informed about candidates and political issues. 
C)  the percent of people who actually turn out to cast a vote on election day to be very high. 
D)  people to be extremely reluctant to "waste" their votes on a third-party candidate. 
A)  voters to have little incentive to become informed about candidates and political issues. 
B)  voters to spend a great deal of effort becoming informed about candidates and political issues. 
C)  the percent of people who actually turn out to cast a vote on election day to be very high. 
D)  people to be extremely reluctant to "waste" their votes on a third-party candidate.

Question 13

Which of the following contributed to the severity of the Great Depression in the 1930s?

Accepted Answer

A)  Constant structural changes that created uncertainty and undermined markets. 
B)  The Fed's policy of rapid monetary expansion during the early 1930s. 
C)  A reduction in tariffs protecting many U.S. industries. 
D)  A substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s. 
A)  Constant structural changes that created uncertainty and undermined markets. 
B)  The Fed's policy of rapid monetary expansion during the early 1930s. 
C)  A reduction in tariffs protecting many U.S. industries. 
D)  A substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s.

Question 14

Subsidizing coal mining and orange growing have both been found to be economically inefficient in that the costs outweigh the benefits. However, a subsidy on coal mining would help the coal producers in West Virginia and a subsidy on orange growing would help the orange farmers in Florida. So the senator from West Virginia approaches the senator from Florida and says that he will vote for the orange subsidy if the Florida senator votes for the coal-mining subsidy. The Florida senator agrees. Which term best describes what just happened?

Accepted Answer

A)  the shortsightedness effect 
B)  logrolling 
C)  the use of user charges 
D)  the political voter theory 
A)  the shortsightedness effect 
B)  logrolling 
C)  the use of user charges 
D)  the political voter theory

Question 15

When the government both provides a service and covers its costs through taxation,

Accepted Answer

A)  the government has a strong incentive to supply consumers with desired goods at a low cost. 
B)  consumers are in a weak position to either discipline the suppliers or alter the quantity or quality of the service provided. 
C)  the invisible hand will direct decision makers toward the most efficient level of output. 
D)  Consumers have strong incentive to be cost conscious. 
A)  the government has a strong incentive to supply consumers with desired goods at a low cost. 
B)  consumers are in a weak position to either discipline the suppliers or alter the quantity or quality of the service provided. 
C)  the invisible hand will direct decision makers toward the most efficient level of output. 
D)  Consumers have strong incentive to be cost conscious.

Question 16

Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.

Accepted Answer

The country would be divided into thirds

Question 17

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

Accepted Answer

A)  real output increased. 
B)  the general level of prices increased. 
C)  the velocity of money increased by a proportional amount. 
D)  unemployment increased. 
A)  real output increased. 
B)  the general level of prices increased. 
C)  the velocity of money increased by a proportional amount. 
D)  unemployment increased.

Question 18

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

Accepted Answer

A)  economize on their spending so more funds will be available for other government programs. 
B)  ensure that their budget is exactly the size that would be considered economically efficient. 
C)  expand their budgets to sizes beyond what would be considered economically efficient. 
D)  keep individual legislators fully informed as to every expenditure. 
A)  economize on their spending so more funds will be available for other government programs. 
B)  ensure that their budget is exactly the size that would be considered economically efficient. 
C)  expand their budgets to sizes beyond what would be considered economically efficient. 
D)  keep individual legislators fully informed as to every expenditure.

Question 19

During 1929-1933, monetary policy was

Accepted Answer

A)  highly expansionary and this led to an increase in the general level of prices. 
B)  characterized by steady monetary growth, which resulted in price stability. 
C)  characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output. 
D)  highly expansionary and this led to a reduction in the general level of prices. 
A)  highly expansionary and this led to an increase in the general level of prices. 
B)  characterized by steady monetary growth, which resulted in price stability. 
C)  characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output. 
D)  highly expansionary and this led to a reduction in the general level of prices.

Question 20

The rapid growth in stock prices during the 1920s was due in large part to

Accepted Answer

A)  the expansionary monetary policy of the Federal Reserve. 
B)  the wartime demand for military equipment and supplies. 
C)  the artificially high value of the dollar, which eventually led to the stock market crash of 1929. 
D)  the technological innovations of the decade, which spurred economic growth. 
A)  the expansionary monetary policy of the Federal Reserve. 
B)  the wartime demand for military equipment and supplies. 
C)  the artificially high value of the dollar, which eventually led to the stock market crash of 1929. 
D)  the technological innovations of the decade, which spurred economic growth.

An analysis of large declines in the stock market since the Great Depression indicates that

Most economists believe the severity and duration of the Great Depression was primarily the result of

Public choice theory suggests politicians will be most likely to favor redistribution of income from

Which of the following is true?

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

As methods of economic organization, the market and the public sector are similar in which of the following ways?

In 2012, the combined expenditures of federal, state, and local governments in the United States were approximately

When the federal government becomes heavily involved in programs that favor well-organized business interest at the expense of others, the expected result is

In 2015, government income transfers redistributed what percentage of national income?

Which of the following is accurate regarding government expenditures in the United States?

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression, policy makers

The fact that voters perceive their votes as unlikely to actually change the outcome of an election causes

Which of the following contributed to the severity of the Great Depression in the 1930s?

When the government both provides a service and covers its costs through taxation,

Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

During 1929-1933, monetary policy was

The rapid growth in stock prices during the 1920s was due in large part to

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 6: The Economics of Political Action

An analysis of large declines in the stock market since the Great Depression indicates that

Most economists believe the severity and duration of the Great Depression was primarily the result of

Public choice theory suggests politicians will be most likely to favor redistribution of income from

Which of the following is true?

If a federal agency requested funds to build a dam on an Idaho river to irrigate nearby farmland used for growing potatoes, the most active support for the project probably would come from

As methods of economic organization, the market and the public sector are similar in which of the following ways?

In 2012, the combined expenditures of federal, state, and local governments in the United States were approximately

When the federal government becomes heavily involved in programs that favor well-organized business interest at the expense of others, the expected result is

In 2015, government income transfers redistributed what percentage of national income?

Which of the following is accurate regarding government expenditures in the United States?

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression, policy makers

The fact that voters perceive their votes as unlikely to actually change the outcome of an election causes

Which of the following contributed to the severity of the Great Depression in the 1930s?

When the government both provides a service and covers its costs through taxation,

Suppose domestic automobiles were allocated in the United States the way public education is allocated. Describe how this system might work.

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

Public choice analysis suggests that bureaucrats and public-sector managers have a strong incentive to

During 1929-1933, monetary policy was

The rapid growth in stock prices during the 1920s was due in large part to

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters