Question 1

The primary reason for the persistent trade deficits of the United States is

Accepted Answer

A) the fact that the U.S.exports too little. 
B) Democratic control of the White House for most of the period since 1971. 
C) the failure of the Senate to ratify the North American Free Trade Agreement. 
D) control of the World Trade Organization by Cuba and other communist countries. 
E) excessive subsidization of American agricultural products by the government. 
A) the fact that the U.S.exports too little. 
B) Democratic control of the White House for most of the period since 1971. 
C) the failure of the Senate to ratify the North American Free Trade Agreement. 
D) control of the World Trade Organization by Cuba and other communist countries. 
E) excessive subsidization of American agricultural products by the government.

Question 2

A sales tax on items such as clothing and food purchases by all individuals is an example of

Accepted Answer

A) a regressive tax. 
B) monetary policy. 
C) inflation. 
D) an excise tax. 
E) deficit spending. 
A) a regressive tax. 
B) monetary policy. 
C) inflation. 
D) an excise tax. 
E) deficit spending.

Question 3

A business cycle has eight stages.

Accepted Answer

A) True 
 B)False

Question 4

The United States has for many years now has imported much more than it has exported.This means that the country has been running

Accepted Answer

A) unfair trade practices. 
B) international trade agreements. 
C) trade deficits. 
D) subsidization lapses. 
E) budget deficits. 
A) unfair trade practices. 
B) international trade agreements. 
C) trade deficits. 
D) subsidization lapses. 
E) budget deficits.

Question 5

Value-added tax and sales tax are the same.

Accepted Answer

A) True 
 B)False

Question 6

A(n) ________________________ is required by federal law from all agencies for any project using federal funds to assess the potential effect of the new construction or development on the environment.

Accepted Answer

A) environmental impact statement 
B) global warming assessment 
C) environmental cost-benefit analysis 
D) pay-as-you-go report 
E) House Environment Oversight Committee evaluation 
A) environmental impact statement 
B) global warming assessment 
C) environmental cost-benefit analysis 
D) pay-as-you-go report 
E) House Environment Oversight Committee evaluation

Question 7

Monetary policy is handled primarily by the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 8

___________ is the practice of selling products below the cost of manufacturing or below their domestic price with the intention of driving other producers out of the market and then raising prices to profitable levels.

Accepted Answer

A) Subsidizing 
B) Deficit trading 
C) Dumping 
D) Protectionism 
E) Deregulation 
A) Subsidizing 
B) Deficit trading 
C) Dumping 
D) Protectionism 
E) Deregulation

Question 9

A method whereby representatives of the union and employer determine wages, hours, and other conditions of employment through direct negotiation is known as

Accepted Answer

A) a labor injunction. 
B) deregulation. 
C) collective bargaining. 
D) advantage seeking. 
E) mediation. 
A) a labor injunction. 
B) deregulation. 
C) collective bargaining. 
D) advantage seeking. 
E) mediation.

Question 10

Which of the following is NOT one of the stages of the normal business cycle identified by economists?

Accepted Answer

A) Recovery 
B) Recession 
C) Contraction 
D) Inflation 
E) Expansion 
A) Recovery 
B) Recession 
C) Contraction 
D) Inflation 
E) Expansion

Question 11

A recession is a general decline in the level of economic activity.

Accepted Answer

A) True 
 B)False

Question 12

The economic theory arguing that government spending should increase during business slumps and be curbed during booms is called

Accepted Answer

A) laissez-faire economics. 
B) supply-side economics. 
C) libertarian economics. 
D) Keynesian economics. 
E) free trade economics. 
A) laissez-faire economics. 
B) supply-side economics. 
C) libertarian economics. 
D) Keynesian economics. 
E) free trade economics.

Question 13

The Federal Reserve System consists of 50 banks, one for each state.

Accepted Answer

A) True 
 B)False

Question 14

The first step in the budget process, which actually begins almost two years prior to the relevant budget, is

Accepted Answer

A) passage of appropriations bills by Congress. 
B) the transmission of a budget proposal to Congress by the OMB. 
C) congressional review of the president's proposed budget. 
D) the development of requests for funds by executive branch departments and agencies. 
E) None of the above 
A) passage of appropriations bills by Congress. 
B) the transmission of a budget proposal to Congress by the OMB. 
C) congressional review of the president's proposed budget. 
D) the development of requests for funds by executive branch departments and agencies. 
E) None of the above

Question 15

The primary source of revenue in the federal budget is corporation taxes.

Accepted Answer

A) True 
 B)False

Question 16

The system created by Congress in 1913 to establish banking practices and regulate currency in circulation and the amount of credit available is called the

Accepted Answer

A) Banking Oversight Commission. 
B) Monetary Policy Review Board. 
C) Federal Reserve System. 
D) Congressional Budget Office. 
E) Securities and Exchange System. 
A) Banking Oversight Commission. 
B) Monetary Policy Review Board. 
C) Federal Reserve System. 
D) Congressional Budget Office. 
E) Securities and Exchange System.

Question 17

In periods of rapid inflation, most people will seek to put as much money into savings as possible.

Accepted Answer

A) True 
 B)False

Question 18

A tax graduated so that people with higher incomes pay a larger fraction of their income than people with lower incomes is called a _______________ tax.

Accepted Answer

A) regressive 
B) flat 
C) Republican 
D) progressive 
E) None of the above 
A) regressive 
B) flat 
C) Republican 
D) progressive 
E) None of the above

Question 19

A progressive tax is designed so that people with higher incomes pay a larger fraction of their income than people with lower incomes.

Accepted Answer

A) True 
 B)False

Question 20

Raising interest rates and limiting the money supply are examples of fiscal policy.

Accepted Answer

A) True 
 B)False

Exam 18: Making Economic Policy

The primary reason for the persistent trade deficits of the United States is

A sales tax on items such as clothing and food purchases by all individuals is an example of

A business cycle has eight stages.

The United States has for many years now has imported much more than it has exported.This means that the country has been running

Value-added tax and sales tax are the same.

A(n) ________________________ is required by federal law from all agencies for any project using federal funds to assess the potential effect of the new construction or development on the environment.

Monetary policy is handled primarily by the Federal Reserve System.

___________ is the practice of selling products below the cost of manufacturing or below their domestic price with the intention of driving other producers out of the market and then raising prices to profitable levels.

A method whereby representatives of the union and employer determine wages, hours, and other conditions of employment through direct negotiation is known as

Which of the following is NOT one of the stages of the normal business cycle identified by economists?

A recession is a general decline in the level of economic activity.

The economic theory arguing that government spending should increase during business slumps and be curbed during booms is called

The Federal Reserve System consists of 50 banks, one for each state.

The first step in the budget process, which actually begins almost two years prior to the relevant budget, is

The primary source of revenue in the federal budget is corporation taxes.

The system created by Congress in 1913 to establish banking practices and regulate currency in circulation and the amount of credit available is called the

In periods of rapid inflation, most people will seek to put as much money into savings as possible.

A tax graduated so that people with higher incomes pay a larger fraction of their income than people with lower incomes is called a _______________ tax.

A progressive tax is designed so that people with higher incomes pay a larger fraction of their income than people with lower incomes.

Raising interest rates and limiting the money supply are examples of fiscal policy.

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