Ch13: Introduction to Public Policy

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.

1) Mandatory Spending 2) Discretionary Spending 3) Interest on the national debt

Imagine that the nation has just entered an unexpected recession. Place the following items in the order in which we would expect them to occur according to the "textbook" approach to monetary policy.

1) The Federal Reserve lowers the target for the federal funds rate. 2) Consumer interest rates decrease. 3) The number of businesses and individuals taking out loans increases. 4) Economic growth recovers. 5) The federal Reserve raises the target for the federal funds rate.

Out of all public K-12 spending, about what percentage comes from the federal government?

10

What year did Social Security's program cost nearly match its tax revenue?

2010

For much of the latter half of the 20th century, - was the main form of federal welfare. It was replaced in the welfare reform process of 1996 with -.

Aid to Families with Dependent Children, Temporary Assistance for Needy Families

Determine whether or not each of the following is an aspect of public policy.

An Aspect of Public Policy -presidential order -bureaucratic rule -court ruling -congressional statute Not an Aspect of Public Policy -public opinion poll -presidential election

How does the government determine eligibility for Temporary Assistance for Needy Families (TANF)?

Based on an applicant's ability to show financial need for assistance

Imagine that the National Security Agency wants to make sure that domestic STEM training remains robust. If it enters into a formal agreement with a number of universities to further this goal, what tool of economic policy is the government using?

Contracting power

Which of the following statements about inflation are correct?

Correct -A common inflation rate is roughly 2-4 percent. -Inflation is best influenced through interest rate shifts. Incorrect -It is impossible to have a negative inflation rate. -Any inflation is bad for the economy.

Which of the following are examples of federal antitrust policy?

Correct -AT&T was forced to break up into seven independent companies in 1982. -Microsoft was forced to include other web browsers with its Windows operating system in 2001. Incorrect -The Occupational Safety and Health Administration requires dental hygienists to wear masks and gloves. -The United States allowed airlines to pick fares and routes in 1978.

How did the Great Depression influence the American approach to social programs?

Correct -Americans began to recognize poverty was inherent in the economy. -It marked the beginning of questioning how generous or restrictive the government would be about the welfare of the poor. Incorrect -The American government was determined to fix poverty at whatever cost was necessary. -It began the era of questioning whether or not the government should do anything about poverty.

Which of the following statements about gross domestic product (GDP) are true?

Correct -It is a measure of growth that excludes foreign investments. -It is the common measure of the country's economic growth. Incorrect -An average year of growth would be a 20 percent increase in GDP. -GDP generally increases during a recession.

Which statements accurately characterize the method of Social Security's redistribution?

Correct -It redistributes wealth from higher-income people to lower-income people. -It redistributes wealth from younger workers to older retirees. Incorrect -It redistributes wealth from lower-income people to higher-income people. -It redistributes wealth from older retirees to younger workers.

What effect does a steel tariff have on the U.S. economy?

Correct -It stimulates domestic steel manufacturing. -It makes steel imports more expensive. Incorrect -It makes it cheaper for domestic firms to produce goods. -It makes steel exports cheaper.

Which of the following programs benefit the working poor?

Correct -Medicaid -the earned income tax credit -SNAP Incorrect -Medicare -mortgage interest tax deduction

Which of the following social spending programs are considered entitlement programs?

Correct -Social Security -Medicaid -Medicare Incorrect -Pell Grants

By 2035, the Social Security system will only be able to pay about 80 percent of its obligations. Which of the following factors explain why the program is stressed?

Correct -Social Security is a pay-as-you-go system rather than a trust. -The baby-boom generation is larger than previous generations of retirees relative to the number of working-age Americans. Incorrect -It will take decades for the program to recover from the COVID-19 pandemic. -The age to qualify for Social Security benefits has been reduced to 55.

Which statements about unemployment insurance are accurate?

Correct -State and federal laws determine who is eligible for insurance. -The federal government has extended benefits for various crises. Incorrect -Unemployment insurance is only funded by the national government. -Anyone without a job can get unemployment insurance.

Which of the following statements about subsidies are accurate?

Correct -Subsidies are a popular tool among legislators. -Subsidies can be used to encourage people to do something they otherwise wouldn't do. Incorrect -Agricultural subsidies largely benefit small family farmers. -Congress stopped using subsidies in the 1947 Legislative Reorganization Act.

Which of the following statements about the Federal Reserve System ("the Fed") are accurate?

Correct -The Fed makes loans to banks. -The Fed seeks to prevent both inflation and deflation. Incorrect -The Fed regulates all commercial and state-chartered banks. -The Fed has been in place since the Bank of the United States was established in 1791.

Which of the following statements about the budgetary deficit are accurate?

Correct -The budgetary deficit is affected by political events. -In general, the U.S. government runs a budgetary deficit. Incorrect -The Bush-era tax cuts pushed the United States to run a budgetary surplus. -The United States ran a budgetary deficit under Clinton in the late 1990s.

Which of the following tax systems are progressive?

Correct -a graduated income tax in which earnings up to $50,000 are taxed at 15 percent and earnings above $100,000 are taxed at 25 percent Incorrect -a property tax in which the value of the property is taxed at 1 percent -a sales tax in which each person is charged 8.5 percent -a payroll tax in which each person is taxed at 6.2 percent.

How does the government promote a market economy?

Correct -by protecting property rights -by creating a system of law and order -by enforcing contracts Incorrect -by upholding monopolies

How has the government helped create a labor force?

Correct -by providing public education -by jailing the unemployed -by offering limited welfare support Incorrect -N/A

Which of the following are tools that the Federal Reserve can use to carry out monetary policy?

Correct -changing the reserve requirement -changing the discount rate -engaging in open-market operations Incorrect -creating a new progressive tax -cutting discretionary spending

Which of the following policy options would a majority of Americans support?

Correct -lifting the ceiling on payroll taxes -raising taxes on high-income earners Incorrect -reducing Social Security benefits

Which of the following are goals of social policy?

Correct -promote equality of opportunity -alleviate poverty -provide social insurance Incorrect -encourage economic growth

Both No Child Left Behind and the Obama administration's education initiatives have shown a strong reliance on which of the following policies?

Correct -tests to determine school accountability -standards-based education Incorrect -increased funding for education -local control over education

Which economic sectors have benefited from government subsidies?

Correct -transportation -security -agriculture -technology Incorrect -N/A

Which of the following items are examples of public goods in a market economy?

Correct -well-maintained public roads -maintenance of law and order -a new town marketplace Incorrect -a new sports stadium -more effective pharmaceutical drugs

Identify each of the following spending programs as either mandatory spending or discretionary spending.

Discretionary -transportation -education -public safety Mandatory -farm price supports -Medicare -Social Security

Identify each of the following policy areas as applying to either elementary education or higher education.

Elementary Education -No Child Left Behind -National Defense Education Act Higher Education -Morrill Act -GI Bill

Average citizens have as much influence over government policy as big business interest groups.

False

For most of American history, the U.S. government has been involved in regulating the relationship between business and labor.

False

Redistribution can be achieved through a regressive tax system.

False

The private market—not the government—can determine official standards about things, like how much one pound weighs.

False

Why are so many social policies delivered via complicated, indirect pathways, such as delivering benefits through the tax code?

Indirect pathways are closer to the idea of limited government.

What was the primary impact of the 1965 Higher Education Act?

It made higher education more affordable through offering financial assistance.

How would combining the currently separated policies of taxing and spending influence the budget?

It would lead to a budgeting process that is more internally consistent.

- is the federal health care program of the elderly, and - is the program that covers health care for the poor.

Medicare, Medicaid

In 2002, a major piece of education legislation, titled - passed with - support.

No Child Left Behind, Bipartisan

Which group sets the president's proposed budget for the year?

Office of Management and Budget

What economic goal does the Securities and Exchange Commission (SEC) most help the government achieve?

Promote market stability

Match the spending area to the party that is more likely to support increasing it.

Republicans -military defense Democrats -unemployment assistance -education -Social Security

What is the name of the government program that provides cash benefits to senior citizens?

Social Security

In the 19th century, the federal government's primary revenue source was the -. Today, the - is the single largest source of federal revenue, making up 49 percent of the revenue in 2020.

Tariff, Individual income tax

Why do banks participate in the Federal Reserve System?

The Fed allows banks to expand their loan operations continually.

What event spurred the national government to enter the field of elementary education?

The Soviet Union's successful launch of a space program

What makes Social Security a contributory program?

The fact that recipients are expected to contribute to the costs of the program

Which of the following statements best captures the relationship between the federal government and the states in the area of education policy?

The federal government has become a bigger player since 2002 in the area of education policy

Which group benefits the least from U.S. social programs?

The poor

Which of the following is the correct definition of gross domestic product (GDP)?

The total value of goods and services produced within a country

Welfare reform, which replaced AFDC with TANF, was in a large part motivated by the public worry about - and it shifted welfare's primary administration to the -.

The underserving poor, state

The year 2020 had both unemployment under 4 percent and over 14 percent.

True

Identify whether each characteristic applies to the budget deficit only, the national debt only, or both.

both -an amount that can be reduced by raising taxes national debt only -the total amount owed by the U.S. government budget deficit only -the gap between revenue and expenditures

In general, it is - to get social policies on the national agenda. Once in place, it is - to adjust them.

difficult, difficult

Programs such as Medicaid and the Supplemental Nutrition Assistance Program (SNAP) are examples of what kind of benefits?

in-kind

Before the Great Depression, Americans tended to think poverty was the result of -. After the Depression, more Americans believed that poverty could be the result of -.

individual irresponsibility, the economic system

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?

inflation

Categorize the following programs as either contributory or noncontributory.

noncontributory -Medicaid -TANF ("welfare") -SNAP ("food stamps") contributory -Social Security -Medicare

Match each economic goal with the example that best demonstrates it.

protect consumers -FDA public warning about a toxic substance (methanol) in some hand sanitizer products. stimulate economic growth -The national government created the Works Progress Administration. promote stable markets -Companies are required to disclose information about the stocks and bonds they sell. promote business development -The government awards over $1 billion in funding to internet precursor ARPANET.

Which of the following policy proposals is most popular?

raising taxes on high income earners

In which decade did the government first begin to promote full employment?

the 1930s

The Chair of the Fed is politically -, and their power is largely - the elected branches of government.

visible, independent from