Economics Chapter 14,15,16
Higher-than-normal interest rates caused by heavy government borrowing hurts private borrowers through
"Crowding out"
is a term that refers to paper money.
Currency
In the Keynesian model, GDP = C + I + G + (X - M), "G" stands for
Government
Which agency manufactures U.S. paper money?
US Print and Engrave
"Those who benefit from government goods and services should pay in proportion to the amount of benefits they receive."
Benefit Principle
The Fed is led by a seven-member _ who are appointed by the president and approved by the Senate.
Board of Governers
policies based on demand-side economics
Keynesian Economics
Why is the Federal Open Market Committee considered the Fed's primary monetary policy-making body?
It has the power to raise and lower interest rates.
How does new money enter into circulation in the United States?
It is distributed by banks, which get it from the Fed.
Supply-side policies aim to _____.
Limit government
What do state governments spend the most on?
Local government
President Reagan tried to reduce government spending by _____.
Lowering Taxes
A commercial bank that owns stock in the Fed is called a(n) _ bank.
Member
change in overall spending caused by a change in investment spending
Multiplier
the total amount borrowed from investors to finance the government's deficit spending
National debt
Which of the following could be considered a synonym for FICA
Payroll tax
Per person basis; total divided by population
Per Capita
Which of these interest rates is set by individual banks?
Prime Rate
that part of the economy made up of private individuals and businesses
Private Sector
Which of these ensures that the U.S. government does not own the Fed?
Private national banks are required to purchase shares in the Fed.
Which of the following groups does supply-side policy target through stimulation? Selected:
Producers
In discussing taxes, which is the opposite of regressive?
Progressive
After intergovernmental revenue, the largest source of revenue for local governments is
Property Tax
An effective tax is one that exhibits one or more of the following characteristics.
a. Equity b. Simplicity c. Efficiency d. All of the Above
change in investment spending caused by a change in overall spending
accelerator
government spending and revenue collection to manage the economy
fiscal policy
Which is the primary source of revenue for the federal government?
Taxes
t/f The fractional reserve system is unique to the United States.
False
Approximately what percent of all U.S. banks are members of the Fed?
40%
Metallic forms of money, called _, are produced by the Bureau of the Mint.
Coins
The progressive income tax is an example of _____.
An Automatic Stabilizer
Annual budget in which expenditures equal revenues
Balanced Budget
Which type of tax is levied on the sale of an asset held for 12 months or longer?
Capital Gains Tax
Which is an example of a natural monopoly
City-water system
Which is a major revenue category for state governments?
Contribution to Retirement Funds
States receive most of their intergovernmental revenue funds from
Federal Government
In Keynes's view, a short-term budget deficit due to government spending or tax cuts is _____.
Economically impossible
benefit to eligible individuals
Entitlement
program or benefit that uses established eligibility requirements to provide health, nutritional, or income supplements to individuals
Entitlement
Which type of tax is levied on specific items or services, including gasoline and telephone services?
Excise Tax
t/f Strategies for achieving economic goals of economic growth, full employment, and price stability have remained the same over time.
F
t/f The discount rate is the interest rate charged by the Fed for loans to individuals.
F
t/f "Easy money policy" is a method of tightening credit and discouraging investment.
F
t/f State governments have primary responsibility for elementary and secondary education.
F
t/f Supply-side policies have proven that smaller government makes the economy more efficient.
F
t/f The federal government receives the majority of intergovernmental funds from states.
F
t/f The largest category of state spending is education
F
t/f Only five states—Alaska, Delaware, Montana, New Hampshire, and Oregon—have a general sales tax.
F
t/f Supply-side policies aim to grow the size of the federal government.
F
According to Keynesian economics, which sector of the economy could offset a decline in business spending?
Government
The( ) is the branch of the U.S. Treasury Department that collects taxes.
IRS
( ) of a tax is the term for the final burden of the tax.
Incidence
The tax levied on the wages, salaries, and other income of individuals is known as the ( ) tax.
Individual Income
A general state or city tax levied on a product at the time of sale is called a ( )
Sales Tax
Which of the following is an example of federal mandatory spending?
Social Security
Policies that make production more efficient are favored by ______.
Supply and Demand Sides
t/f Monetary policy concerns itself with the cost and availability of credit.
T
t/f All but seven states—Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming—rely on the individual income tax for revenue.
T
t/f Open market operations involve the sale of government securities in financial markets.
T
t/f Supply-side and demand-side economic policies have the same goals.
T
t/f The hallmark of President Ronald Reagan's administration was supply-side economic policies.
T
Exceptions or oversights in the tax law that allow taxpayers to avoid taxes are called ( )
Tax Loopholes
Fiscal policy may involve ____.
Taxing corporations
Which of the following describes the idea of the Laffer Curve as it is expressed mathematically?
The ratios show the relationship between federal income tax rates and revenue.
What are the Fed's three main tools for conducting monetary policy?
The reserve requirement, open market operations, and the discount rate
What do Fed member banks do with customer deposits?
They keep a portion as legal reserves and loan out a portion at interest.
Which of these best describes the effectiveness of wage-price controls on inflation?
They're unsuccessful
The terms proportional, progressive, and regressive
Types of Taxes
Which of these describes a general connection between the money supply and interest rates?
A contraction of the money supply is associated with higher interest rates.
