Question 1

According to many analysts, the spurt of economic growth in 2003 illustrates that

Accepted Answer

A)  the federal government can always produce large levels of economic growth if it makes the right decisions regarding deficit spending. 
B)  inflation is always a problem that government should attempt to solve. 
C)  inflation is not a problem that government should attempt to solve. 
D)  some kinds of public investment, such as military spending on wars, can produce economic growth as a byproduct of pursuing other, more central objectives. 
E)  public investment always reduces economic growth and should, therefore, be eliminated. 
A)  the federal government can always produce large levels of economic growth if it makes the right decisions regarding deficit spending. 
B)  inflation is always a problem that government should attempt to solve. 
C)  inflation is not a problem that government should attempt to solve. 
D)  some kinds of public investment, such as military spending on wars, can produce economic growth as a byproduct of pursuing other, more central objectives. 
E)  public investment always reduces economic growth and should, therefore, be eliminated.

Question 2

The first national regulatory policy was established during the Great Depression.

Accepted Answer

A) True 
 B)False

Question 3

Before World War II, ______ of federal revenue was generated from individual income taxes.

Accepted Answer

A)  less than 15 percent 
B)  a quarter 
C)  half 
D)  80 percent 
E)  100 percent 
A)  less than 15 percent 
B)  a quarter 
C)  half 
D)  80 percent 
E)  100 percent

Question 4

The tax reform laws of 1981 and 1986 were significant because they

Accepted Answer

A)  permanently increased the reserve requirement. 
B)  lowered the federal funds rate. 
C)  made budget deficits illegal. 
D)  significantly reduced the progressiveness of the federal income tax. 
E)  significantly increased the progressiveness of the federal income tax. 
A)  permanently increased the reserve requirement. 
B)  lowered the federal funds rate. 
C)  made budget deficits illegal. 
D)  significantly reduced the progressiveness of the federal income tax. 
E)  significantly increased the progressiveness of the federal income tax.

Question 5

Inflation in the United States has maintained a steady rate of 11 percent for the past two decades.

Accepted Answer

A) True 
 B)False

Question 6

______ are government grants of cash or other valuable commodities, such as land, used to promote activities desired by the government.

Accepted Answer

A)  Contracts 
B)  Tax credits 
C)  Business development funds 
D)  Categorical grants 
E)  Subsidies 
A)  Contracts 
B)  Tax credits 
C)  Business development funds 
D)  Categorical grants 
E)  Subsidies

Question 7

Open-market operations describe the

Accepted Answer

A)  government policy, beginning in the 1950s, of reducing tariffs on foreign products. 
B)  requirements that publicly owned businesses honestly report their earnings and losses. 
C)  method by which the Federal Reserve buys and sells government securities to increase or decrease the supply of money in the economy. 
D)  policy of deregulation pursued during the 1980s by the Reagan administration. 
E)  way in which the U.S. government purchases stocks and bonds from foreign corporations. 
A)  government policy, beginning in the 1950s, of reducing tariffs on foreign products. 
B)  requirements that publicly owned businesses honestly report their earnings and losses. 
C)  method by which the Federal Reserve buys and sells government securities to increase or decrease the supply of money in the economy. 
D)  policy of deregulation pursued during the 1980s by the Reagan administration. 
E)  way in which the U.S. government purchases stocks and bonds from foreign corporations.

Question 8

The Federal Reserve System is the chief institution for the establishment of monetary policy.

Accepted Answer

A) True 
 B)False

Question 9

The power to raise or lower the tax rate is part of

Accepted Answer

A)  fiscal policy. 
B)  monetary policy. 
C)  the contracting power. 
D)  discretionary spending policy. 
E)  budgetary policy. 
A)  fiscal policy. 
B)  monetary policy. 
C)  the contracting power. 
D)  discretionary spending policy. 
E)  budgetary policy.

Question 10

The goal of the Works Progress Administration (WPA) was to

Accepted Answer

A)  put unemployed persons to work on public projects. 
B)  establish federal standards for hiring, firing, and laying off employees. 
C)  begin the nationalization of the American labor force. 
D)  help distribute food and aid to unemployed workers. 
E)  require companies to hire laid-off workers who had been out of work for six months or more. 
A)  put unemployed persons to work on public projects. 
B)  establish federal standards for hiring, firing, and laying off employees. 
C)  begin the nationalization of the American labor force. 
D)  help distribute food and aid to unemployed workers. 
E)  require companies to hire laid-off workers who had been out of work for six months or more.

Question 11

The theory of laissez-faire argues that economic growth increases when government leaves the marketplace alone.

Accepted Answer

A) True 
 B)False

Question 12

Historically, Americans have been more concerned with economic liberty than economic equality.

Accepted Answer

A) True 
 B)False

Question 13

What economic development, according to many critics, has made Keynesian economics less useful?

Accepted Answer

A)  the end of the Cold War 
B)  the rise of international trade 
C)  the Internet 
D)  the rise of a service economy 
E)  the increasing federal budget deficit 
A)  the end of the Cold War 
B)  the rise of international trade 
C)  the Internet 
D)  the rise of a service economy 
E)  the increasing federal budget deficit

Question 14

Approximately what percentage of the federal budget is made up of uncontrollables?

Accepted Answer

A)  25 percent 
B)  35 percent 
C)  42 percent 
D)  60 percent 
E)  90 percent 
A)  25 percent 
B)  35 percent 
C)  42 percent 
D)  60 percent 
E)  90 percent

Question 15

The federal government's role in providing electricity to rural areas is an example of the fact that

Accepted Answer

A)  government often supplies public goods that are too big or risky for private actors to tackle. 
B)  private businesses are always more efficient at providing public goods and services than government actors. 
C)  government never gives up control of an industry once they have started to regulate it. 
D)  state governments are not allowed under the Constitution to engage in any activity related to the provision of public goods. 
E)  the federal government has rarely undertaken projects to produce public goods. 
A)  government often supplies public goods that are too big or risky for private actors to tackle. 
B)  private businesses are always more efficient at providing public goods and services than government actors. 
C)  government never gives up control of an industry once they have started to regulate it. 
D)  state governments are not allowed under the Constitution to engage in any activity related to the provision of public goods. 
E)  the federal government has rarely undertaken projects to produce public goods.

Question 16

Which of the following statements about the Federal Reserve Board (FRB) is false?

Accepted Answer

A)  The FRB is part of the Department of the Treasury. 
B)  The FRB is the main organization for setting monetary policy. 
C)  The members of the FRB are selected by the president and confirmed by the Senate. 
D)  The president cannot remove at will the members of the FRB. 
E)  The FRB sets the federal funds rate. 
A)  The FRB is part of the Department of the Treasury. 
B)  The FRB is the main organization for setting monetary policy. 
C)  The members of the FRB are selected by the president and confirmed by the Senate. 
D)  The president cannot remove at will the members of the FRB. 
E)  The FRB sets the federal funds rate.

Question 17

Supply-side economics is the idea that

Accepted Answer

A)  the best method of producing high levels of economic growth is to engage in high levels of government spending. 
B)  the government should impose heavy tariffs on imported goods in order to protect domestic suppliers. 
C)  the government's role in the economy should be strictly limited to regulating the supply of money. 
D)  increasing the marginal rate of taxation will create a productive economy by providing more revenue to finance government economic programs. 
E)  reducing the marginal rate of taxation will create a productive economy by promoting levels of work and investment that would otherwise be discouraged by higher taxes. 
A)  the best method of producing high levels of economic growth is to engage in high levels of government spending. 
B)  the government should impose heavy tariffs on imported goods in order to protect domestic suppliers. 
C)  the government's role in the economy should be strictly limited to regulating the supply of money. 
D)  increasing the marginal rate of taxation will create a productive economy by providing more revenue to finance government economic programs. 
E)  reducing the marginal rate of taxation will create a productive economy by promoting levels of work and investment that would otherwise be discouraged by higher taxes.

Question 18

What is the reserve requirement?

Accepted Answer

A)  the requirement that the federal government have at least 10 percent of the federal deficit on hand in liquid assets at all times 
B)  the rule that every bank must have a certain amount of cash and negotiable securities on hand at all times 
C)  the demand that there should never be more money circulating in print or computer accounts than there is gold in the U.S. Bank 
D)  the requirement that the Federal Reserve Board limit the deficit to 10 percent of the gross domestic product 
E)  the interest rate on loans between banks that the Federal Reserve Board influences by affecting the supply of money available 
A)  the requirement that the federal government have at least 10 percent of the federal deficit on hand in liquid assets at all times 
B)  the rule that every bank must have a certain amount of cash and negotiable securities on hand at all times 
C)  the demand that there should never be more money circulating in print or computer accounts than there is gold in the U.S. Bank 
D)  the requirement that the Federal Reserve Board limit the deficit to 10 percent of the gross domestic product 
E)  the interest rate on loans between banks that the Federal Reserve Board influences by affecting the supply of money available

Question 19

What year marked the beginning of the Great Depression?

Accepted Answer

A)  1918 
B)  1921 
C)  1929 
D)  1933 
E)  1941 
A)  1918 
B)  1921 
C)  1929 
D)  1933 
E)  1941

Question 20

Which of the following is not a benefit to government provided by contracting?

Accepted Answer

A)  Government can acquire services or products at a cheaper rate than if government were to produce them itself. 
B)  Government can use its contracting power to encourage desirable behavior among those businesses that have contracts with the government. 
C)  Government can use contracting to encourage industries, universities, and other organizations to engage in valuable research. 
D)  Government can use contracting to help build up certain segments of the economy. 
E)  Government officials almost always use contracting to award businesses and corporations that donated substantial amounts of money to their political campaigns. 
A)  Government can acquire services or products at a cheaper rate than if government were to produce them itself. 
B)  Government can use its contracting power to encourage desirable behavior among those businesses that have contracts with the government. 
C)  Government can use contracting to encourage industries, universities, and other organizations to engage in valuable research. 
D)  Government can use contracting to help build up certain segments of the economy. 
E)  Government officials almost always use contracting to award businesses and corporations that donated substantial amounts of money to their political campaigns.

Exam 16: Government and the Economy

According to many analysts, the spurt of economic growth in 2003 illustrates that

The first national regulatory policy was established during the Great Depression.

Before World War II, ______ of federal revenue was generated from individual income taxes.

The tax reform laws of 1981 and 1986 were significant because they

Inflation in the United States has maintained a steady rate of 11 percent for the past two decades.

______ are government grants of cash or other valuable commodities, such as land, used to promote activities desired by the government.

Open-market operations describe the

The Federal Reserve System is the chief institution for the establishment of monetary policy.

The power to raise or lower the tax rate is part of

The goal of the Works Progress Administration (WPA) was to

The theory of laissez-faire argues that economic growth increases when government leaves the marketplace alone.

Historically, Americans have been more concerned with economic liberty than economic equality.

What economic development, according to many critics, has made Keynesian economics less useful?

Approximately what percentage of the federal budget is made up of uncontrollables?

The federal government's role in providing electricity to rural areas is an example of the fact that

Which of the following statements about the Federal Reserve Board (FRB) is false?

Supply-side economics is the idea that

What is the reserve requirement?

What year marked the beginning of the Great Depression?

Which of the following is not a benefit to government provided by contracting?

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