Unit 6: Government and the Economy

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16.4 What is one service the Fed performs for the Treasury Department? a. It processes payments, such as Social Security checks. b. It auctions government bills. c. It collects federal taxes. d. It selects the Secretary of the Treasury.

a. It processes payments, such as Social Security checks.

14.2 Which of the following would be a progressive tax? a. People earning $35,000 pay 10 percent tax, while people earning $100,000 pay 30 percent tax. b. People pay 10 percent on property whether it is worth $50,000 or $500,000. c. All people pay a 15 percent income tax. d. Everyone pays a 5 percent sales tax.

a. People earning $35,000 pay 10 percent tax, while people earning $100,000 pay 30 percent tax.

14.9 One feature common to states is a. a balanced budget requirement. b. an income tax. c. a sales tax. d. the same percentage of spending on Medicaid.

a. a balanced budget requirement

16.8 What is the Fed's most important monetary policy tool? a. creating money b. changing the federal funds rate c. changing reserve requirements d. borrowing money

a. creating money

15.7 A supply-side economist would be in favor of a. cutting taxes b. raising taxes c. increasing government spending. d. regulating markets.

a. cutting taxes

15.4 Classical economics states that a. markets should be allowed to regulate themselves. b. government should spend in a recession. c. government should cut taxes in a recession. d. government should raise taxes in a recession.

a. markets should be allowed to regulate themselves.

16.5 The federal funds rate is a. the rate banks charge when lending money to one another. b. the amount that a bank has to subtract for its reserve. c. a special rate that member banks of the Federal Reserve get for their financial operations. d. the rate customers of savings banks get for borrowing money.

a. the rate banks charge when lending money to one another.

14.7 An example of federal discretionary spending is a. transportation b. Social Security c. Medicare d. food stamps

a. transportation

16.9 What is the main idea of monetarism? a. All money should be issued by the federal government. b. The money supply is the most important factor in economic performance. c. Interest rates are the most important factor in economic performance. d. Money should be minted in gold or silver.

b. The money supply is the most important factor in economic performance.

15.3 Which of the following might be part of an expansionary policy? a. increased taxes b. a tax cut c. lower government spending d. mandatory spending

b. a tax cut

14.5 What is withholding? a. a statement to employees telling them how much taxes they owe. b. a way of collecting taxes from the salaries of employees. c. a pension paid to retired people. d. a kind of insurance for employees who lose their jobs.

b. a way of collecting taxes from the salaries of employees.

15.6 The main idea of the multiplier effect is that a. government should create new money to put an end to inflation. b. every dollar the government spends creates a greater than one dollar change in economic output. c. taxes multiply each year and create a greater deficit. d. as the economy grows, more jobs are created.

b. every dollar the government spends creates a greater than one dollar change in economic output.

15.2 The federal budget process begins with a. appropriations bills. b. federal agency estimates. c. Congress. d. the Congressional Budget Office.

b. federal agency estimates

16.3 Who owns the Federal Reserve System? a. the federal government b. member banks c. all banks in the country d. all commercial banks in the country

b. member banks

15.5 John Maynard Keynes believed that to end the Great Depression, government should a. allow the markets to regulate themselves. b. spend and buy more goods and services. c. lower taxes. d. raise taxes.

b. spend and buy more goods and services.

14.1 The income, property, goods, or services on which people pay tax is called a tax a. tax rate. b. tax base. c. sales tax. d. revenue.

b. tax base

16.7 What is the required reserve ratio? a. the amount of money that the Fed does not let banks borrow b. the reserves that the Fed requires banks to keep from the money deposited c. the interest rate banks charge each other d. the money kept by the federal government

b. the reserves that the Fed requires banks to keep from the money deposited

15.10 What was the budget situation of the federal government at the end of the twentieth century? a. There was no longer a national debt. b. The budget deficit was larger than ever. c. There was a budget surplus. d. The budget was balanced.

c. There was a budget surplus.

14.4 What is a person's taxable income? a. the gross income received from salaries, wages, tips, and commissions b. all the income that was withheld by an employer and sent to the federal government c. a person's gross income after subtracting exemptions and deductions d. all the personal exemptions and deductions a person has

c. a person's gross income after subtracting exemptions and deductions

16.1 What is monetary policy? a. the amount of money the federal government spends b. the amount of money that the Federal Reserve banks print up and distribute c. actions the Federal Reserve System takes to influence the rate of inflation and real GDP d. the decision to have federal or state banks

c. actions the Federal Reserve System takes to influence the rate of inflation and real GDP

14.10 The main source of revenue for local governments is a. a sales tax b. license fees c. property taxes d. income taxes

c. property taxes

15.9 The national debt is a. all the money individuals owe on their credit cards. b. the interest the government pays on bonds. c. the total amount of money the federal government owes. d. the same as a budget deficit.

c. the total amount of money the federal government owes.

15.8 When government revenues and expenditures are equal, there is a. a budget surplus. b. a budget deficit. c. hyperinflaion. d. a balanced budget.

d. a balanced budget

14.8 Which of the following would be paid for with a state's capital budget? a. lawmakers' salaries b. education c. salaries of state troopers d. a new bridge

d. a new bridge

16.6 How do banks create money? a. by getting permission to print money from the Federal Reserve b. by paying interest to their customers c. by selling off bank property d. by loaning out money that borrowers place in their checking accounts

d. by loaning out money that borrowers place in their checking accounts

14.6 Most federal mandatory spending is spent on a. defense b. interest on the national debt. c. salaries for people in the federal government d. entitlements

d. entitlements

14.3 What provides the largest portion of federal revenue? a. corporate taxes b. tariffs c. FICA taxes d. individual income taxes

d. individual income taxes

16.10 Which of the following actions would the Fed take to fight inflation? a. increase government spending b. raise taxes c. increase the money supply d. reduce the money supply

d. reduce the money supply

15.1 What is the main goal of government's fiscal policy? a. to have a budget surplus b. to have a budget deficit c. to produce a balanced budget d. to maintain a stable economy

d. to maintain a stable economy

16.2 How many Federal Reserve Districts are there? a. one b. one for each state c. three d. twelve

d. twelve


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