Macroeconomics: Policy and its Effects

According to the theories of Friedrich August von Hayek, the economy may be too complicated to think in terms of ______. Hayek believed that ______ was dangerous and could lead to severe inflation. Milton Friedman supported changes to ______ policy to influence economic growth.

-aggregates -expansionary policy -monetary

Keynes was an avid believer in _________ intervention to help solve economic issues. Keynes believed that _________ aggregate demand could help solve economic problems during a recession. Keynes recommended that the government _________ taxes during economic contraction. During the Great Depression, Keynes promoted _________ actions to encourage economic recovery.

-government -increasing -lower -expansionary

Which of these outcomes are possible negative externalities? Check all that apply.

-increased traffic in the neighborhood surrounding the factory -pollution from trucks making deliveries to the factory

Read this sample food label. Which regulatory goals are met by the label? Check all that apply.

-informing consumers about products -helping consumers make educated choices -ensuring that producers are responsible for product contents

Which of these are goals of financial regulation? Check all that apply.

-preventing monopolies -ensuring that businesses accurately report their earnings -keeping prices fair

Hayek is best known for his contribution to the understanding of _________. Hayek disagreed with Keynes about expansionary policy because it could cause _________ and _________ influence consumer decisions. Unlike Keynes, Hayek believed that consumer actions _________ be accurately displayed on a supply and demand curve.

-price changes -inflation, negatively -could not

According to the information presented about Country Y, the classical economic concept of _________ can be seen. The economic events of Country Y demonstrate the idea of laissez faire because the government _________ intervene in economic events.

-the invisible hand -did not

According to the president's speech, what were some effects of the financial crisis? Check all that apply.

-the loss of savings for many workers -the loss of credit in the economy -growing economic challenges for many

What are the main purposes of regulatory policies? Check all that apply.

-to protect constitutional rights, safety, and fairness -to ensure that property rights are protected -to create regulation in a mixed-market economy only when needed

In which situation would government regulation most likely be necessary?

A factory requires employees to work in unsafe conditions.

According to the chart, which regulatory agency provides the greatest monetary benefit to the public?

EPA

Why is there a need for government regulation, and what limits need to be placed on these regulations? Give your answer in the form of a short paragraph.

Government regulations are necessary because they protect public safety and market fairness. For example, food safety regulations help protect consumers from pathogens that could cause widespread illness. By creating regulations, the government can make food-borne illness less likely. However, even though these regulations are necessary, they must still meet constitutional requirements. Producers and consumers have the right to own and use property, among other constitutional rights.

Which statement best describes the idea of monetarism?

Monetary policy is the best way to influence economic growth.

A regulatory agency that protects workers is

OSHA.

According to the chart, which regulatory agency had the fewest regulations studied?

USDA

Classical economics played an important role in helping the United States establish

free enterprise

A government might enact expansionary spending when it is trying to

increase aggregate demand for goods.

The most efficient way to ensure that producers are responsible for products is through

labeling.

Milton Friedman led a new economic school of thought called

monetarism.

The Food and Drug Administration sets standards for

product labeling.

A regulatory agency that makes sure banks follow federal laws is

the FDIC.

Which regulatory agencies provide general oversight for the banking industry?

the Fed and the FDIC

A mixed-market economy is best defined as an economy

with some government intervention.