Chapter 15

National fiscal policy in the United States is controlled primarily by the

Congress and the president.

Relative to other advanced industrialized democracies, the percentage of government spending in the United States that is done by subnational (state and local governments) is

High

Relative to other countries, the U.S. national debt as a percentage of GDP is

Moderate

Which of the following statements is NOT true of the federal budget?

The budget is a binding document that determines how much money is appropriated to each program.

Which of the following statements is true about the national deficit and the national debt?

The national debt refers to the total amount owed to those who have loaned money to the government. The national deficit is the difference in a given year between revenue and expenditure.

When government policies are designed to regulate commerce, what does this mean?

The policies provide the rules for the conduct of business.

Suppose that a politician said that the U.S. economy adhered to strict laissez-faire capitalism. Which of the following facts makes this statement inaccurate?

There are publicly owned companies, such as Amtrak and the Tennessee Valley Authority.

When individuals enroll in college, they do so to obtain an education that primarily serves to provide them with private benefits, such as the prospect of higher income, a better career choice, or knowledge about subjects of interest. However, each additional college graduate in a state also provides the public benefit of showing potential employers that a state has a well-educated workforce, thus increasing the chance that jobs will move to the state. This public benefit is an example of

an externality.

The role of the federal government in the economy has expanded at various times in history. Which of the following programs that expanded economic policy took place during the New Deal?

creation of the Social Security program

Monetary policy in the United States is controlled primarily by the

federal reserve Board

What is the term used to describe taxing and spending decisions by governments?

fiscal policy

If a good is nonrival,

if one person is enjoying it, it does not preclude someone else from enjoying it.

Which economic philosophy advocates that the government take a noninterventionist approach to the economy, leaving market forces alone to determine the economic behavior of people and business firms?

laissez-faire

The Social Security program pays a base salary to retirees over the age of 67, which is financed by Federal Insurance Contributions Act (FICA) taxes collected from those who are currently employed. What is the most likely primary purpose behind this program today?

redistributing benefits

In the United States there is a cap on social security taxes, so wealthy individuals contribute a lower percentage of their incomes than do individuals who do not earn as much money. Therefore, Social Security taxes are

regressive

In 1994, then-chair of the Federal Reserve Board Alan Greenspan raised interest rates, stating that doing so would reduce the risk of inflation. What policy purpose was he trying to fulfill?

stabilizing the economy

A progressive tax is a tax

that places a greater financial burden on the wealthy than on the poor and the middle class.

What is the gross domestic product (GDP)?

the value of all of the goods and services produced by an economy within its borders

When does inflation occur?

when the supply of money in the economy grows faster than the supply of goods and services produced and consumed