Ch. 16 - Economic Policy

In which decade did the government first begin to promote full employment? - 1790s - 1890s - 1930s - 2000s

- 1930s

In which decade did environmental regulations first become a priority of the federal government? Enter 1820 for the 1820s, 1940 for the 1940s, etc. - 1820 - 1940 - 1960 - 1970 - 1980

- 1970

Ben's family income was about $167,000. Based on the figure, what federal tax rate would this correspond to (round up to the nearest percentage)? - 8 - 14 - 21 - 25

- 21

Place these states in order from those with the greatest per capita funding to those with the least per capita funding. - Iowa - Texas - Florida - Alaska

- Alaska - Iowa - Texas - Florida

Why are environmental issues often considered economic issues as well? - Congress has set up the committee system in a way that links the two issues together. - One party is pro-environment, while the other is pro-economic growth. - Attempting to solve environmental issues usually imposes an economic cost. - The same federal department deals with both issues.

- Attempting to solve environmental issues usually imposes an economic cost.

Which of these are ways that the government has promoted business development? - By providing subsidies, loans, and tax breaks - By raising corporate taxes - Imposing tariffs - Investing in infrastructure

- By providing subsidies, loans, and tax breaks - Imposing tariffs - Investing in infrastructure

Which of the following are examples of the government promoting market stability? - The Treasury Department controls the level of investment outside the country. - The court system protects intellectual property rights. - Congress enacts laws that protect people from economic fraud. - The Securities and Exchange Commission provides a transparent and safe capital market.

- Congress enacts laws that protect people from economic fraud. - The court system protects intellectual property rights. - The Securities and Exchange Commission provides a transparent and safe capital market.

Which of the following are sources of political independence for the Federal Reserve Board? - The Fed's power comes from an explicit clause of the Constitution. - Members of the Fed do not need to testify before Congress. - Fed members serve 14-year terms. - The Fed is an independent agency.

- Fed members serve 14-year terms. - The Fed is an independent agency.

Which of the following statements about the budgetary deficit is accurate? - The U.S. ran a budgetary deficit under Clinton in the late 1990s. - The Bush-era tax cuts pushed the U.S. to run a budgetary surplus. - In general, the U.S. government runs a budgetary deficit. - The coronavirus pandemic caused the U.S. for the first time in 20 years to have a budget surplus.

- In general, the U.S. government runs a budgetary deficit.

Which of the following statements about gross domestic product (GDP) are true? - It usually goes up in recessions and down during good economic times. - It is a measure of growth that excludes foreign investments. - An average year of growth would be a 20 percent increase in GDP. - It is a traditional measure of a country's economic growth.

- It is a measure of growth that excludes foreign investments. - It is a traditional measure of a country's economic growth.

Why is inflation a problem? - It undermines the economy because it produces uncertainty in future prices which makes investors cautious. - It creates a hardship especially for the elderly who are on a fixed income. - It always means that wages are increased.

- It undermines the economy because it produces uncertainty in future prices which makes investors cautious. - It creates a hardship especially for the elderly who are on a fixed income.

Which of the following statements is true? - States in the South tended to receive more total funding for infrastructure, while those in the Midwest got the most per capita funding. - There was not much variation in funding for infrastructure across the states. - More populous states tended to get more funding for infrastructure, while smaller states get more per capita funding for infrastructure. - Florida was among the highest in per capita funding for infrastructure.

- More populous states tended to get more funding for infrastructure, while smaller states get more per capita funding for infrastructure.

Which of the following statements is true regarding partisan politics on environmental policy? - Republicans and Democrats joined together to pass the cap-and-trade policy into law. - President Biden was able to pass his Build Back Better plan, which included tax credits for electric vehicles and solar panels and incentives for utility companies to shift to renewable energy supplies, with full support from all Democrats. - Both the Trump and Biden administrations supported the Paris Climate Accord. - Partisan disagreements have produced frequent policy reversals on climate policy at the national level.

- Partisan disagreements have produced frequent policy reversals on climate policy at the national level.

Identify whether these programs are considered discretionary spending. - Social Security - Pell grants to college students - foreign aid - Medicare - bridge upgrade funds

- Pell grants to college students - foreign aid - bridge upgrade funds

Identify whether these programs are considered mandatory spending. - Social Security - Pell grants to college students - foreign aid - Medicare - bridge upgrade funds

- Social Security - Medicare

Identify the correct and incorrect statements about taxation. - State and local tax rates increase as individuals' and families' income increases. - Those in the bottom 20 percent of income earners typically pay a higher rate in state and local taxes compared to federal income taxes. - The middle-income earners (i.e., middle 20%) pay the most in federal taxes. - The federal tax rate is progressive, increasing as individuals' and families' income increases.

- State and local tax rates increase as individuals' and families' income increases. - Those in the bottom 20 percent of income earners typically pay a higher rate in state and local taxes compared to federal income taxes.

Which of the following statements about subsidies are accurate? - Subsidies can be spread widely in response to various demands. - Congress stopped using subsidies in the 1947 Legislative Reorganization Act. - Agricultural subsidies largely benefit small family farmers. - Subsidies are a popular tool among legislators.

- Subsidies can be spread widely in response to various demands. - Subsidies are a popular tool among legislators.

Advocates for tax cuts for high earners and businesses most commonly make which of these two arguments? - Tax cuts for high earners and businesses will provide incentives for those individuals and companies to increase their investments in the economy. - Tax cuts for high earners and businesses will increase federal revenues. - Tax cuts for high earners and businesses will help with wealth redistribution. - Tax cuts for high earners and businesses will promote economic growth.

- Tax cuts for high earners and businesses will provide incentives for those individuals and companies to increase their investments in the economy. - Tax cuts for high earners and businesses will promote economic growth.

which statement is correct? - The average income of the top 1 percent is around $500,000. - Taxes as a share of total income is lowest for the bottom 20 percent of income earners. - The top 1 percent of income earners represent the group with the highest share of total taxes paid. - Taxes paid by those at the bottom income level represent a much larger share of their income compared to any other income group.

- Taxes as a share of total income is lowest for the bottom 20 percent of income earners.

Which statement about the Congressional Budget Office is correct? - The Congressional Budget Office report is the starting point for the annual budget debate. - The Congressional Budget Office was created to provide Congress with information about the costs and impacts of potential policies. - The Congressional Budget Office prepares the president's budget.

- The Congressional Budget Office was created to provide Congress with information about the costs and impacts of potential policies.

Place the following events in the history of American economic policy in chronological order. - Supply-side economics gains popularity. - Franklin Roosevelt starts the New Deal. - The Great Depression begins. - Keynesianism becomes the dominant economic theory in American politics.

- The Great Depression begins. - Franklin Roosevelt starts the New Deal. - Keynesianism becomes the dominant economic theory in American politics. - Supply-side economics gains popularity.

What are the effects of free trade? - The foreign competition it promotes can impose costs on particular economic sectors or societal groups. - It can open new markets for producers. - It can provide consumers with a greater variety of higher-quality products at lower prices. - It nearly always shrinks the country's economy.

- The foreign competition it promotes can impose costs on particular economic sectors or societal groups. - It can open new markets for producers. - It can provide consumers with a greater variety of higher-quality products at lower prices.

Which of the following statements would a Keynesian agree with? - The government can soften the effects of a recession. - Governments should give back to the people through tax cuts when the economy is booming. - Governments should run deficits during recessions. - Tax increases are usually better than increasing spending. - Tax cuts and increased spending during recessions are good ideas.

- The government can soften the effects of a recession. - Tax cuts and increased spending during recessions are good ideas. - Governments should run deficits during recessions.

Which statement about the federal minimum wage is correct? - The value of the nominal federal minimum wage has decreased due to inflation. - The value of the nominal federal minimum wage has kept pace with inflation. - The value of the nominal federal minimum wage has increased more than inflation.

- The value of the nominal federal minimum wage has decreased due to inflation.

Why do supply-side economists believe that tax cuts will lead to more economic growth? - They believe that tax cuts will encourage more immigrants to move to the United States. - They believe that tax cuts will provide more spending money for people to boost demand. - They believe that tax cuts will provide an incentive for people to work more and invest more. = They believe that tax cuts will increase the amount of money in circulation.

- They believe that tax cuts will provide an incentive for people to work more and invest more.

What influence can the National Science Foundation and the National Institutes of Health have on economic growth? - They help give loans to small biotechnology firms. - They promote market stability. - They support business development. - They promote innovation.

- They promote innovation.

Which of the following statements about labor unions are correct? - Twenty-eight states now have "right to work" provisions that guarantee that a worker does not have to belong to a union or pay union dues as a condition of employment. - Right to work laws make it more difficult for unions to collect dues. - Most states have rejected right to work provisions and embrace strong union protections. - Right to work laws strengthen unions in states and help with collective bargaining.

- Twenty-eight states now have "right to work" provisions that guarantee that a worker does not have to belong to a union or pay union dues as a condition of employment. - Right to work laws make it more difficult for unions to collect dues.

Which of the following are examples of public policy? - a federal rule issued by an agency - a presidential order - a law passed by Congress - a book written by a Supreme Court justice - a congressional election - a court ruling - an editorial in the New York Times

- a federal rule issued by an agency - a presidential order - a law passed by Congress - a court ruling

According to Keynesian economic theory, what kinds of actions should government take to achieve full employment? - tax cuts for corporations that would "trickle down" to workers - creation of public works jobs such as those created during the New Deal - reducing business regulations - a tax cut that would put money into the hands of the American public

- a tax cut that would put money into the hands of the American public - creation of public works jobs such as those created during the New Deal

Which interest group is consistently considered the most powerful in lobbying the government about economic issues? - citizens groups - business organizations - labor unions - environmental groups

- business organizations

Order these discretionary spending programs from the largest proportion of discretionary spending to the smallest proportion. - transportation - health - international affairs - defense

- defense - health - transportation - international affairs

What does the government achieve through its use of contracting? - reducing government spending - encouraging desirable corporate behavior - building up sectors of the economy - purchasing goods and services

- encouraging desirable corporate behavior - building up sectors of the economy - purchasing goods and services

Which of the following are tools that the Federal Reserve can use to carry out monetary policy? - creating a new progressive tax - cutting discretionary spending - engaging in open-market operations - changing the federal funds rate

- engaging in open-market operations - changing the federal funds rate

Comparing 1966 to 2022, which of these taxes represent a decreasing proportion of federal revenues? - individual income taxes - social insurance taxes - excise taxes - corporate income taxes

- excise taxes - corporate income taxes

Which of the following taxes are progressive taxes? - sales tax - individual income tax - social security - wealth tax on assets above $50 million

- individual income tax - wealth tax on assets above $50 million

Order these taxes from those that comprised the greatest proportion of federal revenue to those that comprised the smallest proportion of federal revenue for 2020. - social insurance and retirement receipts - excise taxes - corporate income taxes - individual income taxes

- individual income taxes - social insurance and retirement receipts - corporate income taxes - excise taxes

Comparing 1966 to 2022, which of these taxes represent an increasing proportion of federal revenues? - individual income taxes - social insurance taxes - excise taxes - corporate income taxes

- individual income taxes - social insurance taxes

In 1960, the average price of a loaf of bread was 30 cents. By 1990, the average price was $1.30, and today it is around $3.00. This is a description of what concept? - Keynesian economics - progressive taxation - open-market operations - inflation

- inflation

Which are important sources of economic growth? - innovation - public investment in infrastructure - sufficient and productive workforce

- innovation - public investment in infrastructure - sufficient and productive workforce

Which items are examples of public goods? - new sports stadium - national defense - public schools - interstate highway system - Tesla electric car

- interstate highway system - national defense - public schools

What was the dominant economic theory in the U.S. prior to 1929? - laissez-faire capitalism - Keynesian economics - supply-side economics

- laissez-faire capitalism

Put the following budget categories in order from the one that takes up the largest percentage of the federal budget to the one that takes up the smallest percentage of the federal budget. - discretionary spending such as welfare, education, and foreign aid - mandatory spending such as Social Security and Medicare - interest on the national debt

- mandatory spending such as Social Security and Medicare - discretionary spending such as welfare, education, and foreign aid - interest on the national debt

Which of the following methods have been considered by the federal government to deal with climate change? - space exploration for livable planets - mitigation by reducing emissions - promoting alternative technologies - adapting to climate change

- mitigation by reducing emissions - promoting alternative technologies - adapting to climate change

The government passed the CARES Act to address the economic fallout of the COVID-19 pandemic. Which of these provisions were included in the legislation? - one-time payments to individuals and families - student loan relief allowing borrowers to defer payments - expanded unemployment insurance - health insurance reimbursement for those with COVID-19

- one-time payments to individuals and families - student loan relief allowing borrowers to defer payments - expanded unemployment insurance

Which items are examples of public goods? - new sports stadium - public schools - national defense - interstate highway system - Tesla electric car

- public schools - national defense - interstate highway system

John has an annual income of $137,700, and Steven has an annual income of $275,400. Social Security requires a tax of 6.2 percent on the first $137,700 of income for the retirement program. John pays $8,540, and Steven also pays $8,540 on his first $137,700 of income. This amounts to 6.2 percent for John, but 3.1 percent on the first amount of Steven's income. This is an example of - progressive taxes - flat tax - regressive taxes - wealth tax

- regressive taxes

Which of the following taxes are regressive taxes? - sales tax - individual income tax - social security - wealth tax on assets above $50 million

- sales tax - social security

At different times in American history the federal government has relied on certain taxes more than others. Which taxes were more relied upon in the twentieth or twenty-first century? - tariffs - excise taxes - social insurance tax - individual income tax

- social insurance tax - individual income tax

Which of the following are examples of government policies that promote alternative technologies? - subsidies for solar panel manufacturers - building flood walls in areas prone to flooding - providing tax incentives for producing clean energy - raising the gasoline tax - creating a cap-and-trade scheme

- subsidies for solar panel manufacturers - providing tax incentives for producing clean energy

Which of the following are examples of government policies that promote alternative technologies? - subsidies for solar panel manufacturers - raising the gasoline tax - creating a cap-and-trade scheme - building flood walls in areas prone to flooding - providing tax incentives for producing clean energy

- subsidies for solar panel manufacturers - providing tax incentives for producing clean energy

At different times in American history the federal government has relied on certain taxes more than others. Which taxes were more relied upon in the nineteenth century? - tariffs - excise taxes - social insurance tax - individual income tax

- tariffs - excise taxes

Which of the following parts of the federal government played a major role in stabilizing the economy after the 2008 economic crisis? - the Supreme Court - the Treasury Department - the Fed - the president - Congress

- the Treasury Department - the Fed - the president - Congress

What is the goal of a policy of redistribution? - to reduce disparities of wealth between the lowest and highest income brackets - to set the conditions on companies seeking to sell goods or services to government agencies - to grant cash or other valuable commodities to promote activities desired by the government - to consistently increase the general level of prices

- to reduce disparities of wealth between the lowest and highest income brackets

What is the correct definition of gross domestic product (GDP)? - total amount of revenue collected by the government - balance of a country's receipts and its payments in international trade - difference between the total revenue and total spending by the government - total value of goods and services produced within a country

- total value of goods and services produced within a country

The Federal Reserve has a dual mandate (or responsibility) that requires it to focus first and foremost on which two things? - balanced budgets - unemployment - inflation - exchange rates - inequality

- unemployment - inflation

economic goal: protect employees and consumers

Congress calls the head of General Motors to testify over faulty car ignition systems.

economic goal: promote stable markets

Congress enacts a single national regulation for car emissions.

___________________ is the policy of reducing or eliminating regulatory constraints on the conduct of individuals or private institutions. ___________________ administrations engage in this most often.

Deregulation, Republican

(True or False): States on the East Coast were the only states that received the highest levels of per capita infrastructure funding (over $3,000).

False

(True or False): The government drew on the lessons from supply-side economics in its stimulus payments to the public during the COVID-19 crisis.

False

(True or False): There is broad consensus among Americans that climate change is a major threat to the well-being of Americans, with both parties holding similar attitudes.

False

Republican Party

Government spending should be cut.

supply-side economics

Lower taxes lead people to work harder, which increases overall revenue for the government.

______________ can affect the total amount of credit through the interest, known as _________________, that member banks charge one another for loans.

The Fed, the federal funds rate

economic goal: promote economic prosperity

The National Science Foundation awards millions of dollars in research grants.

laissez-faire capitalism

The best thing the government can do for the economy is stay out of it as much as possible.

economic goal: promote business development

The government awards over one billion dollars in funding to microchip consortium Sematech.

Keynesianism

The government can control the business cycle by strategically spending or changing the tax rate.

Democratic Party

The wealthy should pay higher taxes than others. Government should intervene in the economy.

(True or False): Redistribution is largely facilitated by a progressive tax system.

True

(True or False): Regulation is the most common tool government has used for dealing with environmental and climate issues.

True

(True or False): Tariffs, which are taxes imposed on imported goods, promote domestic goods by raising the cost on similar imported goods.

True

A group of Senators have proposed a bill prohibiting any company with more than $20 billion in digital advertising revenue, such as Google, from owning multiple parts of the digital advertising chain. This is an example of - free trade policy - antitrust policy - social regulation - monetary policy

antitrust policy

Actions that the _________________ government(s) took after the publication of Upton Sinclair's The Jungle in 1906 and Ralph Nader's Unsafe at Any Speed in 1965 are examples of the desire to _________________________.

federal, protect employees and consumers

Taxing and spending are related to _____________________ policy, while _____________________ policy is related to regulating the economy through manipulating credit and interest rates.

fiscal, monetary

twentieth century taxes

individual income tax, social insurance tax, corporate income tax, tariffs, excise taxes

Because the federal minimum wage is not indexed to __________________, its value declines if it is not raised periodically.

inflation

Federal Reserve

manipulate the money and credit supply in the country

Several attorneys general in 2020 accused drugmaker Gilead Sciences of abusing the _________________ it had on Remdesivir, the only approved antiviral Covid-19 treatment, claiming they had not established a reasonable price or met health and safety standards.

monopoly

Federal Deposit Insurance

protect bank accounts against bank closures, up to $250,000 per account

Office of Management and Budget

provide independent expertise on budgeting to the executive branch

Congressional Budget Office

provide independent expertise on budgeting to the legislative branch

Which economic theory adopts the idea that cutting the marginal tax rate can actually increase government revenue? - supply-side economics - laissez-faire capitalism - Keynesianism - progressive taxation

supply-side economics

nineteenth century taxes

tariffs, excise taxes