Macroeconomics: Policy and its Effects

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.

Regulatory agencies such as the OCC and the FDIC add _______ to the banking system.

safety

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

Friedrich Hayek believed that

the economy is too complicated to apply aggregates.

A mixed-market economy is best defined as an economy

with some government intervention.

A notable action taken by the Fed during the financial crisis of 2008 was carrying out open market operations, which was intended to lower the ______. The actions taken by the Fed ______ have immediate positive results, despite the fact that the Federal Funds Rate reached nearly ______.

-Federal Funds Rate -did not -0%

Why was the Food Safety Modernization Act passed? Check all that apply.

-Many citizens are in danger of contracting a food-borne illness. -More people are living with chronic illnesses. -Pathogens are becoming stronger and harder to defeat

According to the Fed, what were the major problems during the financial crisis of 2008? Check all that apply.

-The money supply became less liquid. -Lending and credit stopped. -It was difficult for banks to receive the loans needed to have cash required to function.

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

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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 did Friedrich Hayek call expansionary spending dangerous?

He felt it could lead to inflation and poor decisions by consumers.

Which economist most likely would have agreed with the US government's intervention during an economic crisis in 2008?

John Maynard Keynes

A regulatory agency that protects workers is

OSHA.

According to President Obama, what are the reasons for the financial crisis?

President Obama indicates that there are several reasons for the financial crisis. According to the president, one reason is irresponsible practices by financial institutions. The amount of risk involved in newly created investments was high, and few investors or consumers understood this. These types of investments were made possible due to a lack of regulation within the system.

The graph shows how individuals affect economic growth. Which best describes how individuals help the economy grow?

They work to influence the money supply.

A purpose of government regulation in a mixed-market economy is to protect

corporate rights.

Identify the actions taken by the Fed to assist banks during the financial crisis of 2008. Check all that apply.

-The Fed bought securities to increase the money supply. -The Fed lowered interest rates, hoping to increase available credit. -The Fed carried out open market operations to stimulate growth.

How did Adam Smith's economic ideas help the United States establish a free enterprise system? Check all that apply.

-They led to freedom of choice for consumers and producers. -They led to open competition for consumers. -They led to individual ownership of property.

According to the video, which food safety regulations have been created by the passage of the Food Safety Modernization Act? Check all that apply.

-a requirement for farmers to prevent hazards when growing or harvesting foods -a requirement for facilities that produce food to monitor cooking temperatures to prevent hazards -a set of rules for importers to make sure that food is inspected before it is shipped

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

Which are results of regulation in a mixed-market economy? Check all that apply.

-compliance with laws -control of externalities

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 occurred during the Great Depression? Check all that apply.

-new forms of money -increasing prices -plummeting growth

Which of these are duties of the SEC? Check all that apply.

-overseeing the actions of brokers and financial advisers -ensuring the security and fairness of mutual funds and exchanges -bringing suits against businesses that are not following securities laws

According to the video, what are the purposes of the Dodd-Frank Act? Check all that apply.

-to improve accountability for banks -to end bailouts -to protect consumers from abusive financial practices

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

According to the video, how was the Banking Act of 1933 a reaction to the Great Depression?

The Banking Act of 1933 was a reaction to the Great Depression because it worked to protect deposits from risky investments by banks. These investments caused many citizens to lose their money during the Great Depression. Protections occurred through the creation of regulations and new agencies to oversee financial institutions.

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.

_________ was an economist who led a new school of classical economics. The concept of laissez faire refers to _______ government intervention in the economy. The theory that governments should assist in economic crises through fiscal and monetary policy can be credited to ________

-Smith -little -Keynes

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 best summarizes the philosophical difference between economists John Maynard Keynes and Adam Smith?

Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach.

Which statement best describes the idea of monetarism?

Monetary policy is the best way to influence economic growth.

Based on the video, which economic theories were most clearly applied by the Federal Reserve in response to the economic crisis? Describe the connections between the Fed's actions and the theories of Smith, Keynes, Hayek, or Friedman.

The Federal Reserve pursued policies that most closely followed the theories of Keynes and Friedman. Both economists argued that aggregate demand could be influenced through policies. They believed that this could help the economy recover or grow. The Fed seemed to follow Keynes's theories by taking action to intervene. It also seemed to follow Friedman's thinking by focusing on increasing the money supply through monetary policy.

According to the video, did the Federal Reserve pursue an expansionary or a contractionary monetary policy? Give at least two examples of actions that support your answer.

The Federal Reserve took an expansionary approach during the crisis. This was done by expanding the money supply and boosting liquidity. This can be seen in the Fed's actions of lending to banks, purchasing securities, and lowering the federal funds rate in order to lower overall interest rates. The Fed's goal was to increase consumer spending and overall liquidity within the system, and they pursued this by expanding the supply of liquid money.

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

USDA