Deck 8: Power and the Economy

Question 1

Globalization of economic power required reductions in tariffs and trade barriers around the world.

Answer 1

True

Question 2

The American economic system is a market or free enterprise system. As such, it is largely

A) unplanned.
B) planned.
C) free lance.
D) out of control.

Answer 2

A

Question 3

The "comparative advantage" argument claims that countries benefit when they focus on producing as many goods as possible.

Answer 3

False

Question 4

Profits occur when selling prices are higher than the costs of production.

Question 5

Social Security and Medicare are the two largest federal entitlement programs.

Question 6

The labor market largely determines where people will work and how much they will be paid.

Question 7

Inside directors of corporations, who are also full-time presidents or vice presidents of the corporations, tend to dominate the board proceedings.

Question 8

A market is any place or arrangement that enables people to exchange money for goods, services, or labor.

Question 9

The Reagan administration of 1981 was successful in reducing income taxes and decreasing unemployment.

Question 10

On the whole, the private enterprise economy organizes itself with a minimum of centralized planning or direction. The American system relies chiefly on private individuals, in search of

A) cheap goods to keep the economy moving.
B) better jobs to keep America economically sound.
C) wages and profits to get the job done.
D) the American dream to get the job done.

Question 11

Adam Smith's theories are called both laissez-faire economics and classical economics.

Question 12

Consumer demand, product supply, and competition determine prices.

Question 13

Markets implement decisions through involuntary exchange.

Question 14

Most federal revenues come from the taxes that businesses pay.

Question 15

Trade slows down the flow of ideas and technology, preventing nations from learning from each other.

Question 16

The World Trade Organization has the power to adjudicate trade disputes between countries.

Question 17

Economics is the study of the production and distribution of scarce goods and services.

Question 18

Inflation refers to a rising price level for consumer goods and services, which results in increased purchasing power of money.

Question 19

Keynesian economic theory advocates using fiscal policy, the combination of tax policy and spending policy to ensure a healthy economy.

Question 20

The economic system consists of the institutions and processes by which a society imports and consumes plentiful resources.

Question 21

The national debt is the total of all annual federal deficits. The current debt is about $57,000 for every

A) corporation in America.
B) person serving in the U.S. armed forces.
C) person under 65 in America.
D) man, woman, and child in America.

Question 22

The annual negative imbalance between revenues and expenditures of the U.S. government, or when the government spends more than it collects in any given year, is called

A) a federal deficit.
B) the national debt.
C) national income accounting.
D) the trade deficit.

Question 23

Monetarism is a Keynesian economic theory that advocates that the government's proper role in promoting a healthy economy is using its power to regulate the

A) money supply to ensure that the rate of inflation remains high.
B) tax base so that inflation remains steady.
C) corporate earnings to ensure that goods are available.
D) money supply to ensure that the rate of inflation remains low.

Question 24

To compute the Gross Domestic Product (GDP), economists sum up all the expenditures on goods and services, plus government purchases. Care is taken to count

A) only the final product sold to consumers.
B) stocks in the production company.
C) raw materials that go into the product.
D) all of these.

Question 25

The free-enterprise system is subject to major modifications by the activities of government. Which of the following is not a reason that the government intervenes in the free market?

A) To protect public property
B) To provide a stable money supply
C) To regulate industries with strong public interest
D) To set minimum standards for wages and working conditions

Question 26

Ideal conditions for a market operation include all of the following EXCEPT

A) competition among many buyers and sellers.
B) the ability of buyer to exclude others from benefits of purchase.
C) deregulation.
D) mobility of resources and labor.

Question 27

President George W. Bush sought to increase investments by doing which of the following?

A) Reducing the top capital gains tax rate
B) Increasing the top capital gains tax rate
C) Increasing the dividend income tax rate
D) Decreasing the per child tax credit

Question 28

Consumers decide what should be produced by expressing their preferences in terms of the amount of money they spend on various goods and services, thus creating

A) consumer demand.
B) price.
C) profit.
D) inflation.

Question 29

The capital market refers to money made available by banks and other lenders as loans, primarily to business firms but to consumers as well. The interest rate charged by lenders is really

A) the price of the money.
B) based on the stock market.
C) a form of collective decision making.
D) fair for businesses but unfair to consumers.

Question 30

The GDP divided by the population is a measure of

A) economic well-being.
B) how one nation compares to others.
C) the stock market performance.
D) inflation.

Question 31

Keynesian economics recommends that during a recession the national government should increase its spending and decrease taxes, and that during a boom, it should

A) decrease taxes and raise wages.
B) take a laissez-faire stance.
C) cut government spending and increase taxes.
D) increase government spending, taxes, and wages.

Question 32

Federal revenues come primarily from

A) federal personal income tax.
B) federal excise tax.
C) corporate income tax.
D) customs' duties on imports.

Question 33

Decisions of employers and employees to offer and accept jobs at specified wages is the definition of

A) the capital market.
B) the labor market.
C) fiscal policy.
D) monetary policy.

Question 34

Using government policies to increase the supply of goods and services through incentives to work, save, and produce is a feature of

A) monetarism.
B) laissez-faire economics.
C) Keynesianism.
D) supply-side economics.

Question 35

Today, almost one-quarter of the world's total economic output is sold in a country other than the country in which it was produced. The U.S. currently exports about _________ percent of the value of its GDP and imports about _________ percent.

A) 5, 10
B) 13, 16
C) 1, 2
D) 3, 6

Question 36

Monetarists believe that the national government must use its monetary policy to maintain a healthy economy. Monetarists target an inflation rate of

A) 1-6 percent.
B) 2-4 percent.
C) 4-6 percent.
D) 1-3 percent.

Question 37

Most U. S. government spending goes into entitlement programs. Sixty percent of federal spending is used to provide all classes of people with legally enforceable rights to government benefits. Which of these is not a form of entitlement?

A) Food stamps
B) Social security
C) Medicaid
D) School vouchers

Question 38

The federal debt requires the U.S. Treasury Department to borrow large amounts of money. This money is diverted from the private sector where it would otherwise be available as loans for all but which of the following?

A) New and expanding businesses
B) Credit items for consumers
C) Modernizing industrial plants
D) Helping less developed nations modernize industrial plants

Question 39

Some economic activities escape measurement in the GDP. This underground economy involves activities that are unreported to the government and are therefore not counted in the GDP. Which of the following is not an example of this underground economy?

A) Illegal drug transactions
B) Illegal gun transactions
C) Unreported income tax
D) A waiter's correctly reported tips

Question 40

The rate at which money is exchanged for goods and services is called

A) the market.
B) profit.
C) price.
D) inflation.

Question 41

The international organization that adjudicates trade disputes among countries and monitors and enforces trade agreements is the __________.

Question 42

A __________ system is a method of making economic decisions that allows individuals and firms to decide who gets what and how using a voluntary exchange.

Question 43

U.S. firms that dominated the domestic market in the 1950s and 1960s-steel, automobiles, aircraft, computers, electronics, agriculture, etc.-began to look abroad to expand their own sales. American corporations became

A) multidisciplinary.
B) multifaceted.
C) multinational.
D) multi-million dollar corporations.

Question 44

Briefly describe the two ways in which economic decisions are made.

Question 45

What is the GDP and what are the limitations associated with it?

Question 46

Explain the two challenges to the imperial position of corporate management that began in the 1980s.

Question 47

Which of the following is not true of trade with other nations?

A) Competition abroad cuts costs and improves quality of goods produced in the United States.
B) Trade quickens the flow of ideas and technology.
C) Trade expands the menu of goods and services available to trading countries.
D) Trade is directly responsible for job loss and unemployment.

Question 48

Explain the importance of the General Agreement on Tariffs and Trade (GATT).

Question 49

What is the role of markets in the United States in determining basic economic outcomes: What is to be produced, how it is produced, and for whom will it be produced? How does global trading influence these same economic outcomes?

Question 50

The __________ controls the supply of money and credit and interest rates (sets monetary policy).

Question 51

Created in 1993, the _________ has been given power to adjudicate trade disputes among countries and monitor and enforce trade agreements.

A) WTO
B) GATT
C) NAFTA
D) OMB

Question 52

In 1993, the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA). Objections by U.S. labor unions were drowned out by

A) protesting hippies.
B) support by the American corporate community, Congress, President Bill Clinton, and former President George H.W. Bush.
C) support from foreign corporations and the Mexican president.
D) support from the European corporations who traded with Canada.

Question 53

Explain the difference between current dollars and constant dollars.

Question 54

Describe the ideal conditions for a market operation.

Question 55

Describe the intent and impact of NAFTA.

Question 56

The _________ consists of the decisions of employers and employees to offer and accept jobs at specified wages (prices).

Question 57

A __________ involves the purchase of enough stock in publically held corporations to force the ouster and replacement of existing corporate management.

Question 58

NAFTA envisioned __________ on products from Mexico, the United States, and Canada.

A) an increase in taxes
B) the removal of tariffs
C) more revenues
D) higher prices

Question 59

Explain why America's corporate and financial institutions would support tariffs.

Question 60

The principle of comparative advantage suggests that if nations devote more of their resources to the production of those goods that they produce most efficiently, then all trading nations

A) must pay tariffs.
B) benefit.
C) lose profits.
D) none of these

Question 61

Compare and contrast Keynesian and supply-side economics. What are the underlining principles of these economic theories? What tools does each theory advocate the government use for "fixing" various economic situations?

Question 62

Explain the similarities and differences in the economic strategies used by President George H.W. Bush and President Bill Clinton. How did the outcomes vary?

Question 63

Describe the role of deficit spending and national debt in the disagreement between President Obama and conservative Republican members of Congress.

Question 64

Compare the corporate raiders' claims that corporate takeovers are good for America to the opponents' argument against the takeovers.

Question 65

Explain the relationship between the end of the farming-dominated economy and the end of the general laissez-faire stance of the national government.

Question 66

Write an essay that explains the benefits of increased global trade for the United States as well as the case for protectionism of the U.S. economy.

Question 67

Why does the government intervene in the economy? Write an