Question 1

Which of the following is the best example of a public good?

Accepted Answer

A)  a computer 
B)  the interstate highway system 
C)  the airline industry 
D)  Wall Street 
E)  Harvard University 
A)  a computer 
B)  the interstate highway system 
C)  the airline industry 
D)  Wall Street 
E)  Harvard University

Question 2

______ policies are designed to eliminate the abuses of powerful ______.

Accepted Answer

A)  Redistributive; tariffs 
B)  Fiscal; loopholes 
C)  Antitrust; monopolies 
D)  Taxation; gross domestic product indexes 
E)  Monetary; interest groups 
A)  Redistributive; tariffs 
B)  Fiscal; loopholes 
C)  Antitrust; monopolies 
D)  Taxation; gross domestic product indexes 
E)  Monetary; interest groups

Question 3

Describe some of the different tools and techniques that the federal government has at its disposal for regulating and effecting economic policy. What are monetary policies? Fiscal policies? What are other ways in which the government can encourage or compel businesses to behave in certain ways?

Accepted Answer

The federal government has a range of to

Question 4

The Kyoto Protocol was designed to

Accepted Answer

A)  set binding targets for greenhouse gas emissions to be met by each country. 
B)  restrict the proliferation of nuclear reactors used to generate both weapons and energy. 
C)  reduce the debt obligations for African nations by over 50 percent. 
D)  establish a global ban on whaling. 
E)  set limits on the amount individuals can drive vehicles per year. 
A)  set binding targets for greenhouse gas emissions to be met by each country. 
B)  restrict the proliferation of nuclear reactors used to generate both weapons and energy. 
C)  reduce the debt obligations for African nations by over 50 percent. 
D)  establish a global ban on whaling. 
E)  set limits on the amount individuals can drive vehicles per year.

Question 5

Tax increases on middle- and lower-class people fight inflation because

Accepted Answer

A)  these groups are the most likely to spend their money in rational ways. 
B)  these groups are the least likely to spend their money in rational ways. 
C)  these groups are the lightest consumers and taxing them places more dollars in consumption. 
D)  these groups are the heaviest consumers and taxing them takes dollars out of consumption. 
E)  these groups are the most likely to benefit from government services. 
A)  these groups are the most likely to spend their money in rational ways. 
B)  these groups are the least likely to spend their money in rational ways. 
C)  these groups are the lightest consumers and taxing them places more dollars in consumption. 
D)  these groups are the heaviest consumers and taxing them takes dollars out of consumption. 
E)  these groups are the most likely to benefit from government services.

Question 6

All tariffs in the United States have been eliminated since the Great Depression.

Accepted Answer

A) True 
 B)False

Question 7

______ are given to states and local governments on the condition that all expenditures are limited to the problem or group specified by law.

Accepted Answer

A)  Tariffs 
B)  Loopholes 
C)  Monopolies 
D)  Categorical grants 
E)  Block grants 
A)  Tariffs 
B)  Loopholes 
C)  Monopolies 
D)  Categorical grants 
E)  Block grants

Question 8

If the Federal Reserve wants to help boost a sagging economy, which one of the following is the most direct way it can do this?

Accepted Answer

A)  Raise interest rates so that banks can earn more money on the loans they provide to individuals and businesses. 
B)  Lower interest rates so that banks can provide more loans at cheaper rates to individuals and businesses. 
C)  Take money out of circulation so that the dollar becomes more valuable. 
D)  Raise the reserve requirement, restricting the amount of cash and negotiable securities banks must have on hand. 
E)  Lower tariffs so that corporations can trade more freely with foreign countries. 
A)  Raise interest rates so that banks can earn more money on the loans they provide to individuals and businesses. 
B)  Lower interest rates so that banks can provide more loans at cheaper rates to individuals and businesses. 
C)  Take money out of circulation so that the dollar becomes more valuable. 
D)  Raise the reserve requirement, restricting the amount of cash and negotiable securities banks must have on hand. 
E)  Lower tariffs so that corporations can trade more freely with foreign countries.

Question 9

Keynesian economics argues that government involvement in economic regulation is an unwarranted restriction on individual liberty.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following best describes the views of Milton Friedman?

Accepted Answer

A)  Government is obligated to increase spending when private businesses are unable to stimulate growth. 
B)  Government should let the growth in the money supply match the rate of economic growth. 
C)  Capitalism promotes inequality that in time will harm the foundations of democratic governance. 
D)  The government should enact high tariffs to make non-American goods too expensive to be competitive with American products. 
E)  The economy has natural cycles of ups and downs, so government should let the market regulate itself. 
A)  Government is obligated to increase spending when private businesses are unable to stimulate growth. 
B)  Government should let the growth in the money supply match the rate of economic growth. 
C)  Capitalism promotes inequality that in time will harm the foundations of democratic governance. 
D)  The government should enact high tariffs to make non-American goods too expensive to be competitive with American products. 
E)  The economy has natural cycles of ups and downs, so government should let the market regulate itself.

Question 11

Federal environmental protection laws were first established in the 1890s.

Accepted Answer

A) True 
 B)False

Question 12

Setting emissions standards for each industry, while allowing companies to trade "carbon credits," is an approach to environmental policy known as

Accepted Answer

A)  cap and trade. 
B)  the green alternative. 
C)  NIMBY. 
D)  the Wall Street cooler. 
E)  the Gore protocol. 
A)  cap and trade. 
B)  the green alternative. 
C)  NIMBY. 
D)  the Wall Street cooler. 
E)  the Gore protocol.

Question 13

What is the most important way the government affects personal and corporate investments?

Accepted Answer

A)  granting tax breaks for stock gains and losses 
B)  promoting investor confidence through policies enforcing stability and regard for the law 
C)  allowing Social Security pensions to be invested in the stock market 
D)  requiring that all stock and bond transfers remain confidential 
E)  bailing out corporations like GM that are considered "too big to fail" 
A)  granting tax breaks for stock gains and losses 
B)  promoting investor confidence through policies enforcing stability and regard for the law 
C)  allowing Social Security pensions to be invested in the stock market 
D)  requiring that all stock and bond transfers remain confidential 
E)  bailing out corporations like GM that are considered "too big to fail"

Question 14

Who among the following advocated for laissez-faire capitalism?

Accepted Answer

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

Question 15

How did the Federal Reserve respond to the terrorist attacks of 9/11?

Accepted Answer

A)  It cut interest rates to promote increased investment and spending. 
B)  To relieve fear, it required that Wall Street be open for business throughout the emergency. 
C)  The Federal Reserve demanded, and received, a seat on the National Security Council. 
D)  All of the above were responses by the Federal Reserve to 9/11. 
E)  It did not do anything; that was the problem. 
A)  It cut interest rates to promote increased investment and spending. 
B)  To relieve fear, it required that Wall Street be open for business throughout the emergency. 
C)  The Federal Reserve demanded, and received, a seat on the National Security Council. 
D)  All of the above were responses by the Federal Reserve to 9/11. 
E)  It did not do anything; that was the problem.

Question 16

When the government's goals are embodied in a law or an order, backed by punishments or rewards, it is best described as

Accepted Answer

A)  public policy. 
B)  regulation. 
C)  administrative rule making. 
D)  legislation. 
E)  implementation. 
A)  public policy. 
B)  regulation. 
C)  administrative rule making. 
D)  legislation. 
E)  implementation.

Question 17

Which of the following is not a possible cause of the increase in economic inequality over the past several decades?

Accepted Answer

A)  the decline of labor unions 
B)  tax policies 
C)  the collapse of the domestic high-tech industry 
D)  globalization 
E)  computerization 
A)  the decline of labor unions 
B)  tax policies 
C)  the collapse of the domestic high-tech industry 
D)  globalization 
E)  computerization

Question 18

______ is the current chair of the Federal Reserve Board, appointed by George W. Bush in 2005.

Accepted Answer

A)  Paul Volcker 
B)  Alan Greenspan 
C)  Ben Bernanke 
D)  Henry Paulson 
E)  Donald Kohn 
A)  Paul Volcker 
B)  Alan Greenspan 
C)  Ben Bernanke 
D)  Henry Paulson 
E)  Donald Kohn

Question 19

When the price level of goods and services increases over several months, it is called

Accepted Answer

A)  monetarism. 
B)  a deficit. 
C)  open-market operations. 
D)  inflation. 
E)  recession. 
A)  monetarism. 
B)  a deficit. 
C)  open-market operations. 
D)  inflation. 
E)  recession.

Question 20

Which of the following are the three basic prerequisites for economic growth?

Accepted Answer

A)  public investment, economic regulation, strong workforce 
B)  domestic investment, foreign investment, government regulation 
C)  foreign investment, strong workforce, economic regulation 
D)  public investment, government investment, financial stability 
E)  public investment, innovation, strong workforce 
A)  public investment, economic regulation, strong workforce 
B)  domestic investment, foreign investment, government regulation 
C)  foreign investment, strong workforce, economic regulation 
D)  public investment, government investment, financial stability 
E)  public investment, innovation, strong workforce

Exam 16: Government and the Economy

Which of the following is the best example of a public good?

______ policies are designed to eliminate the abuses of powerful ______.

Describe some of the different tools and techniques that the federal government has at its disposal for regulating and effecting economic policy. What are monetary policies? Fiscal policies? What are other ways in which the government can encourage or compel businesses to behave in certain ways?

The Kyoto Protocol was designed to

Tax increases on middle- and lower-class people fight inflation because

All tariffs in the United States have been eliminated since the Great Depression.

______ are given to states and local governments on the condition that all expenditures are limited to the problem or group specified by law.

If the Federal Reserve wants to help boost a sagging economy, which one of the following is the most direct way it can do this?

Keynesian economics argues that government involvement in economic regulation is an unwarranted restriction on individual liberty.

Which of the following best describes the views of Milton Friedman?

Federal environmental protection laws were first established in the 1890s.

Setting emissions standards for each industry, while allowing companies to trade "carbon credits," is an approach to environmental policy known as

What is the most important way the government affects personal and corporate investments?

Who among the following advocated for laissez-faire capitalism?

How did the Federal Reserve respond to the terrorist attacks of 9/11?

When the government's goals are embodied in a law or an order, backed by punishments or rewards, it is best described as

Which of the following is not a possible cause of the increase in economic inequality over the past several decades?

______ is the current chair of the Federal Reserve Board, appointed by George W. Bush in 2005.

When the price level of goods and services increases over several months, it is called

Which of the following are the three basic prerequisites for economic growth?

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