Economics LUOA
Many assume, though falsely, that rapid increases in the money supply will have no negative consequences upon general prices but, somehow, increase everyone's purchasing power, or enable everyone to buy more goods and services than previously. Why is this not true? (Choose all that apply.)
- An increase in the supply of money does not lead to an increase in the supply of goods and services, or resources, because the law of supply and demand in relationship to the price system directly impacts the availability of goods and services, not the money supply. - Even if such an infusion of money doubled purchasing power, people cannot buy twice as many goods and services unless there are twice as many goods and services available.
2. Why does free international trade make it possible for each country to acquire goods, services, and resources more economically?
- Countries benefiting from various and peculiar natural resources, geographic and climatological circumstances as well as specialization in production techniques as compared to other countries, can produce such products more economically, making their products more attractive to international buyers. - People generally benefit more from international markets when they're allowed to purchase products or services at cheaper costs compared to domestic markets.
Which of the following statements is true relative to voluntary exchanges? (Choose all that apply).
- Economic exploitation, properly understood, is to take advantage of a potential voluntary exchange to economically improve one's circumstances. - What is being exploited in a voluntary transaction is not someone who is a party to the transaction but the transaction itself.
Which of the following is incorrect?
All of these are correct
The Axiological dilemma deals with what life-question in a final way?
Axiology attempts to deal with issues of ultimate value.
James Madison quotes from Sir William Blackstone's Commentaries on the Laws of England and specifically that section which established the origin of property from Genesis 1:28. Which of the following does not model Blackstone's use of this passage?
Blackstone understood Genesis 1:28 as God granting man the authority to do whatever he wanted with creation. Though God created, he left His creation to man to dispose of in whatever manner he saw fit.
Which of the following is not true about the consequences of inflation?
Inflation will benefit all economics groups and, in the long run, increases overall economic growth.
Price Ceilings result in...
Shortages
What is the monetary policy institution of the United States?
The Federal Reserve
Competition exists...
as a consequence of economic scarcity.
5. Direct Spending...
d. is the same as mandatory spending, and consists of entitlement funding.
1. Egalitarianism promotes
f. b and c b. equality of results c. redistribution of wealth.
An ______ is a basic motivating element which spurs us to make decisions and pursue actions—any kind of action—as well as market-related ones.
incentive
Profits actually guide the factors of production such as ______, labor, and capital in accordance with demand.
land
In free economies, ________ always expresses a judgment of the estimation in which something is held because individuals will judge an item to have value if they want it, desire it, or need it.
value
5. If society held to an economic vision of equality of results, how would this goal alter the role of government?
- Governments should attempt to equalize all human attributes to ensure there's no disparity or inequity in the acquisition of property. - Governments should pursue economic measures of social justice to ensure that everyone has the exact same economic success. - Governments should disregard natural human hindrances and propose policies which economically advance some over others in the name of social justice.
What is the general significance of Supreme Court Case of United States v. Butler, 297 U.S. 1 (1936)? (Choose all that apply).
- The Supreme Court determined through the famous Butler Case that the "General Welfare" clause must be construed very generally and was not tied down to the the subsequent list of specified powers. - The Supreme Court used the Butler case to authorize the constitutionality of Social Security in the subsequent Helvering v. Davis of 1937.
How does the rapid printing of money lead to a general rise in prices? (Choose all that apply).
- The supply of goods and services is outpaced by the supply of money, resulting in a greater degree of scarcity and a rise in prices generally. - Prices rise, generally, because people have more money in their pockets and effectively are able to spend more money on goods and services and, hence, bid up prices.
4. Who actually benefits or favors equality of outcome?
- Those who typically favor equality of outcome benefit from it too, such as intellectuals and academics. - Bureaucrats and administrators granted oversight over the management of programs initiated to equalize conditions and results typically favor equality of outcome.
Which of the following represents fundamental reasons as to why all poverty relief programs that create or perpetuate dependence, reward sloth, or level those who work hard along with those who hardly work at all fail? [choose all that apply]
- Typically, such programs focus too much on the power and prestige of the givers and benefactors who have the tendency to dominate and oppress recipients. - Such poverty programs do not actually enable recipients to exercise godly dominion. - This is because such programs strike at the heart of what it means to be human—to bear the image of God.
What exactly is "the division of labor" which Adam Smith and Leonard Read refer to? [choose all that apply]
- a. The division of labor refers to a variety of labor capacities distributed among a multitude of people with differing degrees of skills. - d. The division of labor refers to a division of very complex productive efforts into much simpler tasks which a multitude of individuals perform for purposes of production.
List the three main functions of the price system.
1. Transit information 2. Incentivize 3. Determine Income Distribution
Which of the following best identifies a market monopoly or the consequences of such?
A market monopoly characterizes a firm which uniquely specializes in the creation of a specific good or service which customers are incentivized to purchase and which other firms incentivized to invest in.
What is a price ceiling?
A price ceiling establishes a maximum price that can be charged for a good, service, or resource.
Which of the following defines a price ceiling?
A price ceiling is a government-established maximum price that sellers may charge for a good or resource.
Which of the following defines a price floor?
A price floor is a government-established minimum price that buyers must pay for a good or resource.
Which of the following defines the Law of Supply?
A principle that states there is a direct relationship between the price of a good and the quantity of it producers are willing to supply.
Which of the following defines the Law of demand?
A principle that states there is an inverse relationship between the price of a good and the quantity of it buyers are willing to purchase.
Which of the following correctly defines the term 'Worldview'?
A worldview is a philosophy of life which attempts to address and answer the grand questions of life in such a way that man can actually live, or live according to his design.
According to Madison, what sort of property is considered to be most valuable?
According to Madison, the most sacred form of property is a man's conscience.
1. Which of the following is not a major entitlement program?
All of the above are major U.S. entitlement programs
According to Madison, governments are not just, nor property secure under it when
All of these are correct
In considering a biblical worldview statement on property, which of the following affirms the ownership of property from the Scriptures?
All of these are correct.
Which of the following adequately captures changes in equilibrium?
All of these are correct.
Which of the following does not address the importance of studying the implications of constitutional federalism for economic policy?
All of these are correct.
Which of the following best explains the location or nature of these terms as part of the American constitutional order and system: More Perfect Union, Justice, Domestic Tranquility, Common Defence, General Welfare, and the Blessings of Liberty?
All of these terms are located in the Preamble to the U.S. Constitution.
Which of the following statements is true?
Both are true.
This represents an analysis question. Does a change in the price of sugar and an input for making ice cream affect the supply curve or the demand curve?
By raising the costs of production, it reduces the amount of ice cream that firms produce and sell at any given price, altering the supply curve.
Which of the following is not a characteristic of a reliable form of money?
Compartmental
Which of the following is an incorrect statement?
Competition means central planning, or the direction of the whole economic system according to one unified plan.
Which of the following is not a characteristic of competition?
Competition necessitates legislation which supports the economic needs of infant industries by protecting them from more innovative and seasoned industries dominating the market.
If the interpretation of the congressional authorization to meet the general welfare of the United States as indicated in Article 1, Section 8, clause 1 is separated from the subsequent list of enumerated powers, then Congress has what sort of authority in securing the General Welfare of the United States?
Congress has an unlimited grant of congressional taxing and spending authority in order to achieve the general welfare of the United States, and can use its own discretion to determine what the general welfare is.
Which of the following best identifies the subjective theory of value?
Consumers will weigh the value of any good or service relative to their incentives and the importance of such a good or service relative to their self-interest.
What is covetousness?
Covetousness is the inordinate longing for the wealth of others and its gain through unjust means.
A graph of the relationship between the price of a good and the quantity demanded:
Demand Curve
A table that shows the relationship between the price of a good and the quantity demanded:
Demand Schedule
You have $10,000 in cash and decide to deposit it in your checking account at your local bank. Since the reserve requirement is 10 percent, your bank must keep $1000 or 10 percent of your $10,000 deposit as reserves. But, the other $9000 generates excess reserves for the bank which can be used to extend additional loans. The bank extends a new loan to someone borrowing $9000 in the form of either checkable deposits or cash. No one else has less money, and the person taking out the loan now has an additional $9000. How much money has been added to the money supply?
Due to excess reserves, $9,000 has been added to the money supply.
In the final analysis, why do economic exchanges even occur?
Economic exchanges occur because individuals value a product they exchange another for more because they believe that product will better satisfy their personal needs or wants.
Which of the following best defines or characterizes economic profit in a free market?
Economic profit is understood as total revenue minus total cost.
Which of the following does not express how exchange promotes economic progress?
Economic transactions promote the economic progress of one party at the expense of another due to the principle of exploitation.
What is Leonard Read's main point in "I Pencil"?
Economics cannot be planned, as no one possesses all the necessary knowledge and skills to produce even a simple pencil.
According to COR, what is Economics?
Economics is the study of the principles and methods of allocating scarce resources to achieve optimal production, distribution, and consumption of wealth.
The Epistemological dilemma deals with what life-question in a final way?
Epistemology asserts ultimate answers to the question "How can I know what is true?"
Consider the following comment by Solicitor General Reed in the famous Butler case of 1936 relative to Article 1, Section 8, clause 1. Having laid aside Madison's perspective, what have been the ramifications of the misconstruction of this clause in keeping with Butler for economics and economic policy? Respond with a short answer of no less than 25 words.
Everything would be so confusing. All policies are interwoven together like it says. There is a domino effect. If one changes, all the other policies fall down with it. If you change one you change all.
According to Ewert, the Christian left asserts that free-markets are based upon and encourage an ethic of selfishness. How does Ewert counter this?
Ewert has discerned that though the "free market does allow '"self-directed" actions, it does not require "selfish" economic actions."' The market itself does not require an attitude of selfishness to direct the production and sale of goods and services.
Which of the following is incorrect?
Federalism assumes that all power is lodged within the people generally.
Which of the following is not true relative to the Christian left's moral indictment of the free market?
Free markets actually encourage the formation and maintenance of the most basic human community, such as the family. The right to private property, which free markets require, is vitally connected to the integrity of the family unit.
Which of the following best captures the essence of the Biblical Christian Worldview?
God applies to the whole of life.
Which of the following is not a fundamental biblical proposition relative to economics?
God has determined that man position himself as a servant of the earth and, therefore, to ensure that the environment is perpetually protected.
Which of the following is not a moral criteria of the free market or a necessary part of the ethical foundations of Economics?
Good Intentions
Which of the following is not a characteristic of the free market?
Government Coercion
Which of the following is not a major source or principle of economic progress?
Government regulatory policies that reduce trade encourage and promote economic progress.
Why do we find that the values of different goods are very different in degree and that the value of a good frequently changes?
In a free market, the value of any good is established based upon the satisfaction of our needs and, therefore, differences in importance relative to individual preferences.
________ affect our economic choices, that is, our choices among alternative, incompatible uses of scarce resources.
Incentives
Is the monetary policy of inflation best equated with a mirage or oasis?
Inflation is a mirage, as people confuse money with wealth, as opposed to products and services and, therefore, assume the more dollars they acquire, the wealthier they are.
Which of the following is not a consequence of inflation?
Inflation results in economic stability and predictability.
Where does the right to the ownership of private property originate, and which British common law recognized?
Its origination is recorded in Genesis 1:28: God establishes a general grant of dominion to all mankind and can lawfully do so because He owns all the earth.
Which of the following properly defines the term "jurisdiction"?
Jurisdiction refers to the lawful use of lawful authority.
5. Milton Friedman concludes Read's "I Pencil" and mentions Adam Smith's comments about an "invisible hand," which Read emphasized. Read the following quote by Smith found in his The Theory of Moral Sentiments (1759) and then answer the following question: Every individual... neither intends to promote the public interest, nor knows how much he is promoting it... he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. What does Smith mean by this "invisible hand" which Friedman and Read both highlight?
Labor cooperation and production is possible without government coercion.
GDP and CPI, employment, fiscal policy such as taxation, monetary policy, the money supply, and inflation, which includes a discussion of the Federal Reserve System, as well as international trade are all
Macroeconomic concerns.
Which of the following correctly identifies macroeconomics?
Macroeconomics emphasizes aggregate markets to discern GDP and CPI.
Which of the following represents James Madison's interpretation of the "General Welfare and Common Defence" clause?
Madison explained that the "common defense" and "general welfare" are "general expressions" understood through the "specification of the objects" which follow the clause, as their relationship was indicated by a semi-colon.
1. The federal budget of the United States consists of which of the following prominent categories of spending?
Mandatory and Discretionary
Which of the following defines a Demand Curve?
Many people will predictably reject purchasing a product the more costly it becomes, thus producing a corresponding drop in the demand for that product or service—demand curves slope downward.
Which of the following represents a term used to describe the effects of a change in the current production situation or process?
Marginal
Which of the following represents the change in total value of benefit derived from an action such as consumption of an additional unit of a good or service? It reflects the maximum amount that the individual considering the action would be willing to pay for it.
Marginal Benefit
Which of the following represents the change in total cost resulting from an action such as the production of an additional unit of output?
Marginal Cost
Decisions are made at the ________, as individuals should exchange when marginal benefits exceed marginal costs.
Margins
Which of the following correctly identifies microeconomics?
Microeconomics highlights local, individual economic decisions of producers and consumers within various markets.
Which of the following correctly identifies monetary policy?
Monetary policy is a national policy pursued to ensure money is available for the whole economy.
Money must retain certain characteristics if it's going to make a reliable medium of exchange. One of these characteristics is that money should be assayable. What is meant by this?
Money cannot be readily counterfeited.
What represents the policy plank of the Franklin Delano Roosevelt Administrations?
New Deal
What does Read mean when he uses the term "master mind" when explaining the operation of free markets?
No one person or civil authority is dictating market operations; no "master mind" exits.
Situations and circumstances other than the rapid infusion of money into an economy that can generate an inflationary phenomenon is...
None of these are correct.
A good for which, other things equal, an increase in income leads to an increase in demand:
Normal Good
Which of the following describes a Federal Reserve monetary tool known as Open Market Operations?
OMO consists of the buying and selling of U.S. government securities, like U.S. Treasury bonds and other assets on the open market, to expand or contract the money supply.
Which of the following does not identify a condition necessary for exchanges to occur?
One party to the exchange must have sufficient power to coerce the other party into the transaction.
All worldviews must answer four philosophical dilemmas, each of which addresses a life concern in a final way. What does the Ontological question attempt to address in a final way?
Ontology attempts to provide final answers to questions of origins, or the ground of being and existence.
Consider the following: A firm has just developed a new product which consumers signal they demand through purchases given a particular set price. With this, this firm is also making an economic profit with its new, exceptional (but seemingly unique) product, giving them a virtual monopoly on it. If the market remains free, which of the following will happen over a period of time?
Other firms will be incentivized to enter that market to compete and make a profit via innovation and efficiency.
Which of the following does not represent a fundamental reason as to why all poverty relief programs that create or perpetuate dependence, reward sloth, or level those who work hard along with those who hardly work at all, fail?
Poverty relief programs of this nature do not tend to go far enough in their giving or simply lack the backing of nations with vast budgets.
The ________ to the U.S. Constitution represents a justification clause, or enacting clause, by which is meant that it justifies the creation of the Constitution for the purpose of achieving six great and grand objects for which the various power schemes and checks and balances are intended to serve and achieve.
Preamble
Why are price-coordinated economies superior to command economies in allocating scarce resources and meeting demand?
Price-coordinated economies are able to harness variable uses of scare resources in order to meet consumer demand.
How does the market price system incentivize production to meet consumer demand?
Prices incentivize producers to meet demand by drawing them into various production efforts through the profit motive, thus meeting consumer demand.
The legal protection of the private ownership of private property is necessary for free markets to thrive. Which of the following does not make an adequate case for this principle?
Private property is never taken care of as well as public property owned by the government because people can be coerced into doing what is right for everyone within a public ownership framework.
Free-market competition directs the movement of markets relative to producers' responses to consumers and vice versa. Which of the following does not adequately capture this?
Producers desire the lowest price that the market (consumers) will bear given their propensity to produce goods and services for charitable causes.
Which of the following is not characteristic of the nature of profit in free market economics?
Profits are generally the result of the continual rise of prices.
Which of the following is not characteristic of the nature of profit in free-market economics?
Profits are generally the result of the continual rise of prices.
Which of the following represents a consequence(s) of profits?
Profits will positively alter innovation, resulting in quality products, efficiently distributed goods and services, and an economical use of scare resources.
Which of the following represents a consequence(s) of profits?
Profits will positively alter innovation, resulting in quality products, efficiently-distributed goods and services, and an economical use of scare resources.
Which of the following is incorrect, biblically, in regards to the nature, definition, or characterization of property?
Property, properly speaking, can be isolated to the ownership of external, tangible, and taxable things.
Which of the following identifies the two main categories of external incentives?
Rewards and Punishments
Read the following quote by Nahum Sarna, a noted scholar of Jewish history, taken from his book Understanding Genesis. Determine which option best describes or conveys his point of emphasis. The idea that there is an intimate, in fact, inextricable connection between the socio-moral condition of a people and its ultimate fate is one of the main pillars upon which stands the entire biblical interpretation of history.
Sarna is asserting that a Biblical interpretation of history is linked to an understanding of ideas and their consequences in the moral and social life of any society.
Consider the following quote by Dr. Francis Schaeffer found in his How Should We then Live? and identify which option best explains his main point. A culture or an individual with a weak base can stand only when the pressure on it is not too great. As an illustration, let us think of a Roman bridge. The Romans built little humpbacked bridges over many of the streams of Europe. People and wagons went over these structures safely for centuries, for two millennia. But if people today drove heavily loaded trucks over these bridges, they would break. It is this way with the lives and value systems of individuals and cultures when they have nothing stronger to build on than their own limitedness, their own finiteness. They can stand when pressures are not too great, but when pressures mount, if then they do not have a sufficient base, they crash - just as a Roman bridge would cave in under the weight of a modern six-wheeled truck. Culture and freedoms of people are fragile. Without a sufficient base, when such pressures come only time is needed — and often not a great deal of time ─ before there is a collapse.
Schaeffer utilizes Roman methods of bridge-building to convey the critical role of ideas in supplying lasting answers to life. When these ideas, or worldviews for that matter, are found weak and wanting, they crash like a little Roman humpback bridge because life-pressures are too great.
How does the price system solve the problem of alternative applications of labor and capital to meet thousands of different needs and wants of different urgencies in society?
Since there is no fixed supply of labor and capital, or any resource for that matter, the price system communicates to producers what to make more efficiently and to consumers where to purchase quality items more cheaply.
________________________ develops when individuals are all acting according to individual plans, as just the right amount of goods and services become readily available. This process also requires tremendous ________________________. as no central planner is needed to make certain that items come into existence.
Spontaneous order coordination
Two goods for which an increase in the price of one leads to an increase in the demand for the other:
Substitutes
________ represents a condition in which the amount of a good offered for sale by producers is greater than the amount that buyers will purchase at the existing price. A decline in price will eliminate the surplus.
Surplus
Price Floors result in...
Surpluses
Which of the following is not a monetary tool of the Federal Reserve?
Tax Compliance
The Teleological dilemma deals with what life-question in a final way?
Teleology attempts to provide final answers to questions of purpose and destiny.
What is meant by the phrase "institutional structure and procedure of life"?
The "institutional structure and procedure of life" is the total societal and relational expression of answers to all the basic questions in life.
Ewert points out that the so-called secular left appears to have moderated its opposition to free markets based upon pragmatic as opposed to philosophical reasons. Nevertheless, the "Christian left" is still much less influenced by the demonstrated failure of state-directed economic policies. According to Ewert, why is this the case?
The Christian left appears to prioritize the moral superiority of socialism—they are convinced that capitalism must be judged on its 'moral' merits and, in comparison to socialism, it is far more immoral.
James Madison's interpretation of the General Welfare clause is represented by which of the following?
The Congressional authority to achieve the General Welfare of the United States is limited, and defined by the subsequent list of specified congressional powers.
Which of the following best identifies the significance of the Federalist Papers (1787-1788)?
The Federalist Papers represent the best commentary on the problems of the Articles of Confederation and the nature of the U.S. Constitution (1787).
What is the purpose of the Preamble to the U.S. Constitution?
The Preamble limits and defines the general scope of the national government's authority and the powers the Constitution delegates to the various branches are intended to meet these great objects!
Explain how the price system functions in the free market. In order to answer this question correctly, you must incorporate the three functions of the price system and the following terms: signals or signaling, scarcity, scarce resources, supply and demand, efficiency, consumers, and producers. Your response, of course, need not be isolated to only these terms.
The Price System is a way of organizing activity going on in the economy. It coordinates decisions made by consumers, owners of companies, valuable resources and producers. These people usually have no way of contacting other people who work in the economic industry except through the Price System. The Price System leads them through process after process to ultimately get them to their goal of distributing what someone needs and getting something they need themselves. First information is exchanged notifying people what someone else needs and if they can provide they do in return for something they need. Before they trade, they need to incentivize. For example if Susan can give Rachel 7 loaves of bread, Rachel has to give Susan 7 bottles of diet soda. It has to be an equal trade, and that's where incentivizing comes in to play. Lastly, they determine what they earn from distributing their products for trade. Now Rachel can sell her loaves of bread and if each loaf is $10, she ultimately gains $70, and if Susan sells her bottles for the same price, then she would gain $70. (it's never that simple I just made up an example to help understand) Then after both parties figure their income, they can decide if the trade is worth it or not.
Which of the following is incorrect regarding product innovation in a free-market economy?
The approval of central planners, a legislative majority, or business rivals are necessary for an entrepreneur to try out a new idea.
Which of the following defines a Market Supply Curve?
The market supply curve is the sum of the individual supply curves of the firms.
According to Madison, what is the primary purpose of civil-government?
The primary purpose of government is the protection of man's property in both its external and internal forms, a man's rights relative to his property and the property a man has in his rights.
Which of the following best identifies the economic term alternative uses?
This term means that available resources have innumerable uses.
________ promotes economic progress because individuals exchange products, or trade, resulting in vast quantities of goods and services due to specialization and mass production.
Trade
Choose one price system function from your list and elaborate on its characteristics as a price-system signal, or as part of the price system.
Transferring information is when the price system send out needed/important information to consumers and producers about the best way to sell and distribute products. It is a very important function and it is very much apart of the price system.
The Price System Utilizes Alternative Applications of Labor and Capital to Meet Market Demands.
True
Does voluntary exchange permit individuals to realize gains derived from cooperative effort?
Yes. Cooperation assumes interdependence among individuals with diverse gifts and talents and, therefore, individuals exchange what they create for what they need.
Which of the following represents a market clearing price?
a condition in which supply meets demand and stabilizes prices
According to Reverend Sirico, we must make some rather "crucial distinctions" which will assist us in understanding the connection between morality and economic liberty more adequately. A series of such distinctions are presented below. Which one of the following will assist us in this endeavor?
a distinction between rights and privileges
Inflation is best defined as
a general rise in prices across an entire economy.
A Republic is best defined as
a government of laws via representation as opposed to simply a government of men.
Inflation is...
a monetary phenomenon and expressed in the general rise in prices across an entire economy.
According to Reverend Sirico, "To ensure that free markets are preserved as much as possible by our public policies, . . . we must provide __________
a robust explanation of their moral value."
Which of the following represents the philosophical nature of the U.S. Constitution (1787)?
a system of limited civil-government for purposes of ensuring ordered liberty
1. Rent control is...
a. A government-mandated price ceiling that will result in shortages in the rental housing market.
5. Do landlords benefit from rent controls?
a. Absolutely not. They are forced to subsidize the rents paid by their tenants which result in net losses.
3. Just who exactly are the beneficiaries of pro-inflationary policies?
a. Debtors benefit the most and never creditors or savers!
3. Free International trade allows domestic producers and consumers to benefit from economies of scale. What is meant by this? Please read the options carefully.
a. Economy of scale relates to the cost advantages of enterprises in relation to the amount of goods and services they're able to produce relative to the size of their operations. Larger firms are able to reduce costs per unit given increased production and operational efficiencies and require large markets, often supplied through international trade.
2. Entitlement programs have what sort of impact upon work incentives?
a. If transfer payments and benefits generally exceed the income of those taking advantage of such programs and find that their disposable income increases if they do not raise their income levels through work, they are not incentivized to increase their work efforts.
4. Do minimum-wage laws really help the poor and those who are young and considered unskilled workers?
a. No. While increasing the minimum wage will increase the wages of low-skilled workers, their on-the-job training opportunities will decline.
1. Why do nations adopt such strict import laws, and raise barriers to trade?"
a. Protectionism; that is, to protect domestic industries from foreign competitors.
1. Why do public works projects mean taxes?
a. Public works projects for purposes of employment are, consequently, not funded through the free-market.
5. A huge personal income tax increase was adopted in 1932 in the midst of the Great Depression as the top marginal rate was increased from 25 percent to 63 percent. Other tax rates were increased by a similar proportion. Which of the following presents the predicable and real outcome of such high marginal rates during the Depression?
a. The results were disastrous as national output dropped and unemployment rose.
3. The essence of the New Deal agenda was...
a. a social policy approach of recovery, relief, and social reform legislation.
1. Deflation results from...
a. a swift contraction of the money supply.
3. The United States Federal Government takes in revenue through...
a. the IRS Tax Code, Title 26 U.S.C.
It was necessary to broach the topic of Article 1, Section 8, clause 1 and the reinterpretation of the General Welfare clause because...
all of the above
Which of the following is incorrect biblically?
all of the above
GDP cannot measure which of the following?
all of these are correct
Which of the following can lead to shifts in the supply curve?
all of these are correct
Competition...
allows people to gravitate towards what they do best as the goal of any free market is productivity and productive employment.
4. What is the best cure for inflation?
b. A steady reduction in the rate of monetary growth is the only means by which inflation can be remedied.
3. What is the proper role of government relative to equality of opportunity?
b. Governments should protect the private use of private property and avoid hindering expressions of individuality in the market
4. Which of the following is not a true statement from a biblical perspective?
b. Human individuality is actually illusory. Man's value is best equated with group identity and equality of sameness.
2. Which of the following is not a predicable consequence of high marginal tax rates?
b. Second, high marginal tax rates will encourage people to work more, harder, and with greater efficiency.
4. Which of the following defines subsidy?
b. a government payment or tax credit provided to either the producers or consumers of certain goods
1. A minimum-wage law is...
b. a government-mandated price floor that will result in surpluses in the labor market.
2. What sort of economic fallacy does protectionism rest upon?
b. the fallacy of looking only at one side of the policy or of noticing what is immediately seen, while neglecting the results that are not seen
2. Equality of outcome is now the passionately pursued goal of numerous organizations and the purpose of federal legislation. Which of the following identifies this?
c. Everyone ought to reach the economic finish line at the same time.
2. Which of the following is not true about Minimum-Wage laws?
c. The individuals intended to be benefitted from minimum-wage laws actually are and shortages in labor now occur, meaning many more low-skilled workers can expect to be hired.
2. Which of the following is not a consequence of Rent Controls?
c. The quality of housing will improve.
5. What is the fallacy of the welfare state?
c. The very fallacy of the welfare state is the spending categories required for its existence—waste and the misappropriation of funds is inevitable, while force is required to collect the money.
5. Which of the following is incorrect relative to either the nature of a trade barrier or its consequences?
c. Trade barriers lower the cost of doing business with those protected industries.
2. FDR's "Brain Trust" consisted primarily of
c. close advisers drawn from the academies who shifted from the belief in individual responsibility, laissez-faire, and a decentralized and limited government to the belief in social responsibility and a centralized and powerful government.
1. Thomas Sowell has proposed a thesis which attempts to explain differences in policy outlooks ultimately located in contrasting worldviews. Which of the following identifies this thesis?
c. conflicting visions of a constrained and unconstrained nature
3. In 19th century early America, private charity and philanthropy were possible because those who accumulated fortunes were able to donate freely. Which of the following allows these sorts of moral obligations of serving one's neighbor?
c. equality of opportunity and personal liberty which allows one to fulfill their moral obligations under God
Competition is the absence of ________, and the presence of an environment of freedom which maximizes one's volitional capacity to choose.
coercion
Fill in the appropriate blanks: The principle of property, linked to individuality, issued forth in an equality of civil protection for liberty of ________________________ and the necessary freedoms to pursue ________________________ and religious duties owed to God and neighbor. Such duties include charity and private philanthropy.
conscience moral
Competition enhances ________ through constant interaction and exchange. Consumers compete against consumers, producers against producers.
cooperation
Spontaneous order develops when individuals are all acting according to individual plans, as just the right amount of goods and services become readily available. This process also requires tremendous ______________, as no central planner is needed to make certain that items come into existence.
coordination
Profits are calculated by relating ______ to prices by communicating which goods to produce and how to most efficiently produce them.
costs
2. How does the fallacy of failing to see what is not seen operational in the demand for public works projects?
d. Any tax money devoted to funding the bridge, relative to employment and materials, means that amount of money was transferred from, or diverted from, private use and no longer available to finance projects people need.
4. Which of the following spending categories did most New Deal programs fall into, which most social welfare programs still require?
d. Category IV: You spend another person's money on someone else.
4. Which of the following is not a consequence of free international trade? Please read each option carefully.
d. Free international trade results in the dumping of products in international markets, thus intentionally undercutting domestic labor forces, driving up costs, and therefore producing antagonisms between nations. The only peaceful option is to promote tariffs, which are a natural consequence of free international trade.
5. Friedman identifies five general truths relative to inflation. Which of the following is not part of that analysis?
d. Inflation always benefits creditors, and especially banks, and, therefore, an unfavorable monetary policy to implement.
3. Which of the following is not a predictable consequence of minimum-wage laws?
d. It may encourage students to stay in school despite the need for more labor given labor shortages.
2. Which of the following is incorrect biblically?
d. The Bible asserts an egalitarian approach to life, whereby all individuals should relinquish any rights to the private ownership of property for the public good.
3. Which of the following is not true about Rent controls?
d. The individuals intended to be benefited from rent control actually are, and surpluses in rentals can now be expected.
5. When considering the fallacy of what is seen and what is not seen, what typically fails people's notice relative to protectionist policies? In other words, what is not immediately seen, but nevertheless, very real?
d. The new industry would be visible, but given the shift in the concentration of capital, other industries would be prevented from coming into existence—this is what is not immediately seen: all the losses!
3. Which of the following does not adequately explain why an inequality of external property exists?
d. There exists an obvious inequality of ownership and, in large part, because those who are wealthy take advantage of those who are poor and thus accumulate wealth through the systematic theft of their property; social injustices represent the main reason for such disparities in property ownership.
1. Why do taxes generally discourage production?
d. all of the above
2. What is meant by, or implied by, equality of opportunity as an economic principle?
d. all of the above
2. Why do governments increase the quantity of money too rapidly?
d. government demand for growth in spending, or government expenditures
3. Those who tend to benefit the least from public works projects are...
d. taxpayers.
The policy imperative of the Franklin Delano Roosevelt Administrations was...
d. the New Deal
Social Security, unemployment benefits, corporate subsidies, farm subsidies, public housing, and countless other manifestations of the welfare state are all coerced transfers which impose an affirmative ________ to rescue upon us. (Many of the beneficiaries, of course, are not in peril or even the least bit needy but have learned to play the political game well enough to collect large amounts from the government.)
duty
3. In the history of the United States at Common Law relative to private Torts (which relates to private wrongs), there was no legal duty to act as a Good Samaritan. What does this mean?
e. all of the above
3. Trade barriers negatively impact economic progress because
e. all of the above
4. Why does rent control worsen the longer it continues?
e. all of the above
5. Equality of outcome requires what sort of government policy?
e. all of the above
1. An American founding principle of equality was equality before God. What is meant, or implied by this?
e. b and d - that all individuals bear a personal equality before God Who shows no respect of persons - that all men are unequal in respect to abilities and characteristics
4. Which of the following will not promote a country's economic prosperity?
e. high marginal tax rates
Profits will quickly solve a shortage and provoke greater levels of economic ______, especially a more efficient use of property and scarce resources.
efficiency
________ represents a state in which the conflicting forces of supply and demand are in balance.
equilibrium
5. Which of the following represents the most productive method of assisting the poor or those who are in need?
f. a and d - Private charity and philanthropy are the best methods. - The best method of assisting the poor is to allow people to exercise moral duties through conviction of conscience.
A price ________ establishes a minimum price that can legally be charged. When a price floor is imposed above the current market equilibrium, it will alter the operation of markets.
floor
Banks in the United States assist in the creation of money through the...
fractional reserve system.
Which economic system rewards people according to the intelligence, creativity, and diligence of their work?
free-market system
What is the Biblical perspective on economics?
freedom of enterprise and righteous stewardship of private property
There is no more persistent and influential faith in the world today than the faith in ________ spending. Everywhere government spending is presented as a panacea for all our economic ills.
government
Not all goods are normal goods. If the demand for a good rises when income falls, the good is called an ________ ________. An example of this kind of good might be bus rides. As your income falls, you are less likely to buy a car or take a cab and more likely to ride a bus.
inferior good
A price index measures the cost of purchasing a market basket of goods at a point in time relative to the cost of purchasing the identical market basket during an earlier reference period. A base year is chosen and assigned a value of 100. As prices increase and the cost of purchasing the reference bundle of goods rises relative to the base year, the price index increases proportionally. A price index of 110 indicates that the general level of prices
is 10 percent higher than during the base period.
Which of the following does not capture the essence or consequence of free-market competition?
lower quality of production and higher prices of products and services
Underlying the Christian view of economics is:
man made in God's image
Regardless of the country, inflation is always and everywhere a ________ phenomenon! Inflation is a printing press issue, and that means it's a government issue, as governments are in charge of a nation's printing presses!
monetary
The objective of the Federal Reserve is
monetary equilibrium, by providing liquidity through lending to member banks.
The free market is moral because it's based on merit. Individuals are rewarded when they produce goods and provide services that people want. The free market requires that you think about others and their needs and attempt to please them. This is also referred to as the ________________.
morality of the market
The free market is moral because it's based on merit. Individuals are rewarded when they produce goods and provide services that people want. The free market requires that you think about others and their needs and attempt to please them. This is also referred to as the ________________. (Insert one complete phrase)
morality of the market
If the amount of goods and services for purchase increased in tandem with the supply of money, prices would be
more or less stable.
3. Fill in the Blank Progressives and modern critics of equality of opportunity have launched two significant criticisms against the Founders' view. First, that equality of opportunity is impossible to achieve. Second, to the extent that equality of opportunity has been tried, it has resulted in a gigantic inequality of outcomes. Equality of __________, in the Progressive view, is desirable and can only be achieved by massive government intervention.
outcomes
The ________ ________ coordinates the interaction between supply and demand.
price system
In short, economic analysis indicates that high tax rates will reduce ________ activity, retard capital formation, and promote wasteful use of resources. Predictably, the income of a country that imposes high marginal tax rates will fall below its potential.
productive
The bottom line is that incentives do matter, and ______ direct productive efforts and activities to gain advantages and benefits.
profits
A key source of economic progress is free trade relations between nations, and such trade views ________via tariffs as detrimental and destructive to economies.
protectionism
Which of the following represents the amount of a good that sellers are willing and able to sell?
quantity supplied
Government intention for minimum-wage laws is to...
raise the wages of the low-skilled workers.
5. Fill in the Blank As Beisner notes in his article "Biblical Justice vs. Social Justice," the Bible does not demand wealth ________ or equalization.
redistribution
What is meant by Enumerated Powers found within the U.S. Constitution?
relates specifically to a particular delegation or accounting, crediting of power, or vestment
4. Discretionary Spending...
relates to spending on programs funded through annual appropriations acts or appropriations legislation and consists of spending fixed for a specified amount of time.
CPI represents an economic index which
represents the general level of prices related to the cost of purchasing a basket of goods compared to the purchase of that same market basket at a previous period.
A ________ can occur in a situation in which quantity demanded is greater than quantity supplied.
shortage
The consequence of fixing a maximum price for a particular commodity would result in a ________ for that commodity.
shortage
The availability of ________—goods that perform similar functions—underlies the law of demand. No single good is absolutely essential; everything can be replaced with something else.
substitutes
Competition encourages firms to
supply goods and services consumers value highly relative to cost.
It would be comforting to believe that the government can simply decree higher pay for low-wage workers, without having to worry about unfortunate repercussions, but the validity of that belief is open to doubts that cannot be dispelled by the kind of research that would lead to the conclusion that Russian roulette is harmless. The preponderance of evidence indicates that labor is not exempt from the basic economic principle that artificially high prices cause ________. In the case of surplus human beings, that can be a special tragedy when they are already from low-income, unskilled, or minority backgrounds and urgently need to get on the job ladder if they are ever to move up the ladder by acquiring skills and experience.
surpluses
All government expenditures must eventually be paid out of the proceeds of ________; that inflation itself is merely a form, and a particularly vicious form of taxation.
taxation
Which of the following represents a core economic fallacy from which other economic fallacies are derived?
the fallacy of examining only the short-term consequences of any given economic policy
Which of the following represents a topic or issue which arises under macroeconomics?
the gross domestic product, or GDP of a nation
The division of labor results in an increase in the amount of work done. Which of the following is not a circumstance which promotes such productivity?
the intervention of civil-government to coordinate production efforts
Real GDP is defined as
the market value of final goods and services produced within a country during a specific time period, usually a year, but adjusted for inflation.
One reason prices are "inflated" is because...
the money supply grows too quickly—the supply is much greater than the demand for it, leading to a general rise in prices.
According to Sowell, which of the follow best summarizes the study of economics?
the use of scarce resources which have alternative uses
The money supply in the United States is mainly measured...
through two units: M1 and M2.
Market transactions only occur if both parties or all parties benefit from the exchange. This ________ ________ would not occur if one party was being exploited at the expense of the other party—both parties benefit and are wealthier because of the exchange.
voluntary exchange
2. Annual Budgets were first legislatively authorized in the United States...
with the Budget and Accounting Act of 1921.