Question 1

Less than one-quarter of the federal budget consists of mandatory spending priorities.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following actions marked a decisive break with the tradition of the federal government promoting compromises between labor and management?

Accepted Answer

A)  In 1981, Ronald Reagan fired striking air traffic controllers and hired permanent replacements to fill their jobs. 
B)  In 1985, Reagan sent in the National Guard to break up picketing in front of major defense contractors, such as Lockheed and Boeing. 
C)  In 1992, Congress passed and George H. W. Bush signed legislation dismantling the National Labor Relations Board. 
D)  In 1994, Congress passed and Bill Clinton signed legislation permitting companies to shut down without giving their employees advance notification. 
E)  The 1934 National Labor Relations Act set up a framework for labor relations. 
A)  In 1981, Ronald Reagan fired striking air traffic controllers and hired permanent replacements to fill their jobs. 
B)  In 1985, Reagan sent in the National Guard to break up picketing in front of major defense contractors, such as Lockheed and Boeing. 
C)  In 1992, Congress passed and George H. W. Bush signed legislation dismantling the National Labor Relations Board. 
D)  In 1994, Congress passed and Bill Clinton signed legislation permitting companies to shut down without giving their employees advance notification. 
E)  The 1934 National Labor Relations Act set up a framework for labor relations. A

Question 3

Classic laissez-faire theory argues all of the following except that

Accepted Answer

A)  government monopolies depress economic growth. 
B)  people's selfishness can promote the public good. 
C)  a truly efficient government allows private enterprise to provide all government services. 
D)  economic competition unleashes growth and innovation. 
E)  government should stay out of the private sector except when providing a select number of public goods. 
A)  government monopolies depress economic growth. 
B)  people's selfishness can promote the public good. 
C)  a truly efficient government allows private enterprise to provide all government services. 
D)  economic competition unleashes growth and innovation. 
E)  government should stay out of the private sector except when providing a select number of public goods. C

Question 4

Which of the following does the Small Business Administration (SBA) provide?

Accepted Answer

A)  insurance 
B)  legal council 
C)  disaster assistance 
D)  subsidies 
E)  grants 
A)  insurance 
B)  legal council 
C)  disaster assistance 
D)  subsidies 
E)  grants

Question 5

Something that must be supplied by the government because it cannot be provided by the marketplace is called

Accepted Answer

A)  a public good. 
B)  a commodity. 
C)  a governmental appropriation. 
D)  pork. 
E)  public option. 
A)  a public good. 
B)  a commodity. 
C)  a governmental appropriation. 
D)  pork. 
E)  public option.

Question 6

Adam Smith's theory of ______ argues that many individual economic transactions come together to create a greater good for all.

Accepted Answer

A)  rational expectations 
B)  the prisoner's dilemma 
C)  the invisible hand 
D)  trickle-down economics 
E)  collective action 
A)  rational expectations 
B)  the prisoner's dilemma 
C)  the invisible hand 
D)  trickle-down economics 
E)  collective action

Question 7

Which of the following statements best describes the federal government's role in higher education?

Accepted Answer

A)  The federal government determines which classes will be taught in colleges and universities but provides no financial assistance for higher education. 
B)  The federal government provides all of the funding for higher education, but state and local governments are placed in charge of operating colleges and universities. 
C)  The federal government supports higher education through educational grants, tax breaks, and loans. 
D)  The federal government is in charge of running the day-to-day operations of every college and university around the country. 
E)  The federal government plays no role whatsoever in higher education. 
A)  The federal government determines which classes will be taught in colleges and universities but provides no financial assistance for higher education. 
B)  The federal government provides all of the funding for higher education, but state and local governments are placed in charge of operating colleges and universities. 
C)  The federal government supports higher education through educational grants, tax breaks, and loans. 
D)  The federal government is in charge of running the day-to-day operations of every college and university around the country. 
E)  The federal government plays no role whatsoever in higher education.

Question 8

Which of the following is not an example of mandatory spending?

Accepted Answer

A)  farm price supports 
B)  Social Security payments 
C)  defense spending 
D)  Medicare 
E)  interest payments on the national debt 
A)  farm price supports 
B)  Social Security payments 
C)  defense spending 
D)  Medicare 
E)  interest payments on the national debt

Question 9

A tax on imported goods is called a

Accepted Answer

A)  regressive tax. 
B)  public good. 
C)  tariff. 
D)  monopoly tax. 
E)  progressive tax. 
A)  regressive tax. 
B)  public good. 
C)  tariff. 
D)  monopoly tax. 
E)  progressive tax.

Question 10

What did the Great Depression and World War II do to the public's expectations regarding employment?

Accepted Answer

A)  They made Americans realize that unemployment was an unfortunate but largely irremediable occurrence. 
B)  They made Americans realize that unemployment could only be solved by a major international crisis, such as a war. 
C)  They showed that the government could help to ensure full employment. 
D)  They showed that the government could only solve unemployment when inflation levels were kept high. 
E)  They showed that ill-advised government programs could cause large increases in unemployment. 
A)  They made Americans realize that unemployment was an unfortunate but largely irremediable occurrence. 
B)  They made Americans realize that unemployment could only be solved by a major international crisis, such as a war. 
C)  They showed that the government could help to ensure full employment. 
D)  They showed that the government could only solve unemployment when inflation levels were kept high. 
E)  They showed that ill-advised government programs could cause large increases in unemployment.

Question 11

Which of the following was not a major form of economic promotion by the federal government in the nineteenth century?

Accepted Answer

A)  land grants to railroad companies 
B)  agricultural subsidies 
C)  public works projects 
D)  tariffs 
E)  building roads and canals to tie states and regions together 
A)  land grants to railroad companies 
B)  agricultural subsidies 
C)  public works projects 
D)  tariffs 
E)  building roads and canals to tie states and regions together

Question 12

Which of the following statements about the relationship between government and capitalism is false?

Accepted Answer

A)  Government makes it possible for markets to function efficiently. 
B)  Government rule-making means that people no longer need to rely on personal trust when conducting business. 
C)  Before the Progressive era, the marketplace was untouched by government interference. 
D)  Markets break down in nations that have weak governments. 
E)  There is much disagreement among the public and politicians over the extent of the role the government should play in the economy. 
A)  Government makes it possible for markets to function efficiently. 
B)  Government rule-making means that people no longer need to rely on personal trust when conducting business. 
C)  Before the Progressive era, the marketplace was untouched by government interference. 
D)  Markets break down in nations that have weak governments. 
E)  There is much disagreement among the public and politicians over the extent of the role the government should play in the economy.

Question 13

Which of the following is the best description of the changing expectations of government's role in the economy since the 1930s?

Accepted Answer

A)  People hold the government responsible for a healthy economy. 
B)  People demand that the government provide health insurance. 
C)  People expect that the government will engage in deficit spending for the public welfare. 
D)  People expect the government to print more money in times of inflation. 
E)  People expect the government to stay completely out of the economy. 
A)  People hold the government responsible for a healthy economy. 
B)  People demand that the government provide health insurance. 
C)  People expect that the government will engage in deficit spending for the public welfare. 
D)  People expect the government to print more money in times of inflation. 
E)  People expect the government to stay completely out of the economy.

Question 14

The Interstate Commerce Act and the Sherman Antitrust Act are examples of the federal government's attempt to

Accepted Answer

A)  control discretionary spending. 
B)  deregulate the economy. 
C)  regulate large businesses that established monopolies. 
D)  control mandatory spending. 
E)  close tax loopholes. 
A)  control discretionary spending. 
B)  deregulate the economy. 
C)  regulate large businesses that established monopolies. 
D)  control mandatory spending. 
E)  close tax loopholes.

Question 15

Who was the most prominent monetarist in the United States?

Accepted Answer

A)  John Locke 
B)  Adam Smith 
C)  John Maynard Keynes 
D)  Milton Friedman 
E)  Joseph Schumpeter 
A)  John Locke 
B)  Adam Smith 
C)  John Maynard Keynes 
D)  Milton Friedman 
E)  Joseph Schumpeter

Question 16

All of the following are strategies to combat inflation except

Accepted Answer

A)  pushing up interest rates in order to restrain the amount of credit in the economy. 
B)  increasing the amount of government spending on public works projects. 
C)  instituting wage and price controls. 
D)  cutting taxes. 
E)  raising Social Security taxes. 
A)  pushing up interest rates in order to restrain the amount of credit in the economy. 
B)  increasing the amount of government spending on public works projects. 
C)  instituting wage and price controls. 
D)  cutting taxes. 
E)  raising Social Security taxes.

Question 17

Public goods are products or services provided by the government because they cannot be effectively supplied by the marketplace.

Accepted Answer

A) True 
 B)False

Question 18

A(n) ______ is an incentive in the tax code for individuals and corporations to invest their money in ways the government desires in exchange for a reduction in tax liabilities.

Accepted Answer

A)  categorical grant 
B)  loophole 
C)  federal funds rate 
D)  open-market operation 
E)  subsidy 
A)  categorical grant 
B)  loophole 
C)  federal funds rate 
D)  open-market operation 
E)  subsidy

Question 19

The Securities and Exchange Commission was established

Accepted Answer

A)  at the same time as stocks were publicly bought and sold. 
B)  after the stock market crash of 1929. 
C)  at the same time as the International Monetary Fund. 
D)  after the market crash of 1987. 
E)  after the terrorist attacks of 2001. 
A)  at the same time as stocks were publicly bought and sold. 
B)  after the stock market crash of 1929. 
C)  at the same time as the International Monetary Fund. 
D)  after the market crash of 1987. 
E)  after the terrorist attacks of 2001.

Question 20

Why do many businesses prefer Congress to regulate the economy?

Accepted Answer

A)  Regulations are more cost-effective in the long run. 
B)  One national regulation is better than the inconsistencies and disparities of different state laws. 
C)  Businesses argue that regulations help to increase their market share. 
D)  Regulations lead to a fairer and more equitable marketplace. 
E)  Regulations help businesses net more profit. 
A)  Regulations are more cost-effective in the long run. 
B)  One national regulation is better than the inconsistencies and disparities of different state laws. 
C)  Businesses argue that regulations help to increase their market share. 
D)  Regulations lead to a fairer and more equitable marketplace. 
E)  Regulations help businesses net more profit.

Exam 16: Government and the Economy

Less than one-quarter of the federal budget consists of mandatory spending priorities.

Which of the following actions marked a decisive break with the tradition of the federal government promoting compromises between labor and management?

Classic laissez-faire theory argues all of the following except that

Which of the following does the Small Business Administration (SBA) provide?

Something that must be supplied by the government because it cannot be provided by the marketplace is called

Adam Smith's theory of ______ argues that many individual economic transactions come together to create a greater good for all.

Which of the following statements best describes the federal government's role in higher education?

Which of the following is not an example of mandatory spending?

A tax on imported goods is called a

What did the Great Depression and World War II do to the public's expectations regarding employment?

Which of the following was not a major form of economic promotion by the federal government in the nineteenth century?

Which of the following statements about the relationship between government and capitalism is false?

Which of the following is the best description of the changing expectations of government's role in the economy since the 1930s?

The Interstate Commerce Act and the Sherman Antitrust Act are examples of the federal government's attempt to

Who was the most prominent monetarist in the United States?

All of the following are strategies to combat inflation except

Public goods are products or services provided by the government because they cannot be effectively supplied by the marketplace.

A(n) ______ is an incentive in the tax code for individuals and corporations to invest their money in ways the government desires in exchange for a reduction in tax liabilities.

The Securities and Exchange Commission was established

Why do many businesses prefer Congress to regulate the economy?

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