Deck 18: Economic Policy

Question 1

When voting behavior and economic conditions correlate at the national but not at the individual level,it can be said that the voters are

A)heliocentric,or earth conscious.
B)sociopathic,or self-absorbed.
C)homeopathic,or group related.
D)socialistic,or ideology driven.
E)sociotropic,or other-regarding.

Answer 1

E

Question 2

The amount the government spends in excess of what it takes in each year is called the .

A)debt
B)unbalanced fund
C)appropriation
D)deficit
E)redline

Answer 2

D

Question 3

The huge new demands for Social Security benefits and medical payments under Medicare is largely due to

A)the population getting older.
B)increases in benefits in those programs.
C)the increasing numbers of young workers in the American economy.
D)recent changes to make the programs less generous.
E)None of these choices is true.

Answer 3

A

Question 4

A twentieth-century example of government use of money to influence elections was

A)increasing the size of the military in election years.
B)increasing foreign aid in election years.
C)increasing Social Security benefits in election years.
D)reducing subsidies for mortgage insurance in election years.
E)mobilizing troops in election years.

Question 5

Keynes would insist that there is no need for the government to

A)create public works programs.
B)cut federal expenditures.
C)increase taxes.
D)pump money into the economy.
E)balance the budget on a year-to-year basis.

Question 6

Americans generally cutting spending on federal programs.

A)support
B)oppose
C)are divided by party on
D)prefer raising taxes to
E)Want to pair tax increases with

Question 7

The pocketbook issue tends to preoccupy politicians most

A)early in a presidential term.
B)toward the end of a session of Congress.
C)when presidential popularity is at its peak.
D)when the economy is doing poorly.
E)just before elections.

Question 8

In 2012,the national debt rose to over $ trillion.

A)3
B)5
C)16
D)45
E)112

Question 9

Government's ability to improve the economy,especially near elections,are made difficult because

A)governments lack the ability to affect the economy.
B)many improvements to the economy are mutually exclusive.
C)it is illegal to use government policy to affect elections.
D)changes to economic policy are frequently reversed after elections.
E)presidents prefer to ignore the economy in favor of foreign affairs in election years.

Question 10

Milton Friedman believed that inflation occurs

A)when the government does not stimulate the economy.
B)when the private sector spends too little.
C)when too much money chases too few goods.
D)when spending is higher than revenue from taxes.
E)when Republicans control the White House.

Question 11

In normal economic times,this economic theory argues that the proper thing for government to do is to have a steady,predictable increase in the money supply at a rate about equal to growth in the economy's productivity.

A)Keynesian economics.
B)Monetarist economics.
C)Economic planning.
D)Supply-side economics.
E)Credit-based economics.

Question 12

When there is an economic downturn,this economic theory argues that the proper thing for government to do is increase demand through pumping more money into the economy by spending more than it takes in in taxes and by creating public-works programs.

A)Keynesian economics
B)Monetarist economics
C)Economic planning
D)Supply-side economics
E)Credit-based economics

Question 13

The total value of all a nation's goods and services produced each year is called

A)adjusted production value.
B)consumer price index.
C)gross domestic product.
D)goods measure.
E)international trade product.

Question 14

Elected officials are strongly tempted to take

A)a long-run view of the economy.
B)a short-run view of the economy.
C)a position in support of policies that will best satisfy the self-regarding voter.
D)positions with no regard to unemployment.
E)Both a short-run view of the economy and a position in support of satisfying the self-regarding voter are true.

Question 15

According to the monetarist theory,inflation occurs when

A)government holds down interest rates.
B)there is too little money,and interest rates are low.
C)demand exceeds supply.
D)the budget deficit exceeds the gross national product GNP).
E)the government prints too much money.

Question 16

In 2008,71% of those who said they had become worse off economically voted for ,while over half of those who felt they had become better off voted for John McCain.

A)George W.Bush
B)Jimmy Carter
C)Barrack Obama
D)George W.H.Bush
E)Bill Clinton

Question 17

In 2012,Barack Obama became the first president since to be reelected despite an unemployment rate on election day that was higher than the unemployment rate on the day of his first inaugural.

A)Herbert Hoover
B)Harry Truman
C)Jimmy Carter
D)Ronald Reagan
E)Franklin Roosevelt

Question 18

In 2011,Standard & Poor's,a credit ratings agency,issued

A)a warning about the U.S.housing market.
B)an opinion in support of the U.S.Congress and its efforts to lower the federal debt.
C)a first­ever warning about America's national debt.
D)a call to focus on a measure other than GDP growth.
E)a call for the U.S.federal government to spend more.

Question 19

The health of the American economy creates politics.

A)majoritarian
B)interest group
C)client
D)entrepreneurial
E)egalitarian

Question 20

When voting on economic issues,most voters

A)consider only their own pocketbook.
B)vote exclusively for Democrats.
C)vote exclusively for Republicans
D)consider the overall economic well-being of the entire nation.
E)tend to be extremely anti-incumbent.

Question 21

Since 1974,the purpose of congressional budget resolutions passed annually in May has been to

A)add up all the agreed-on expenditures.
B)set a ceiling on total spending.
C)get final authorization for all expenditures.
D)compromise over the spending measures of the two houses.
E)settle issues related to discrepancies in math.

Question 22

The first unified presidential budget did not appear until the .

A)1820s
B)1860s
C)1880s
D)1920s
E)1930s

Question 23

This federal organization is primarily responsible for monetary policy.

A)Council of Economic Advisers.
B)Treasury Department.
C)Office of Management and Budget.
D)Federal Reserve Board Fed).
E)National Security Agency.

Question 24

The president's adviser who provides estimates of government revenues and who recommends tax changes is the

A)chairperson of the CEA.
B)secretary of the Treasury.
C)director of the OMB.
D)chairperson of the Fed.
E)deputy director of the OMB.

Question 25

The hypothesized cause of income inequality are

A)declining high wage service jobs.
B)declining premium for higher education achievement.
C)more powerful labor unions.
D)taxing and spending policies affecting the poor differently than the well-off.
E)None of these choices is true.

Question 26

In this important decision,the Supreme Court ruled that the president does not have the authority to seize private steel mills even during wartime.

A)Lochner v.New York
B)Muller v.Oregon
C)West Coast Hotel Co.v.Parrish
D)Youngstown Sheet & Tube Co.v.Sawyer
E)Gibbons v.Ogden

Question 27

Republicans tend to support free trade,but George W.Bush imposed sharp increases in the taxes that must be paid on imported steel because

A)Congress pressured him to do so.
B)the CEA recommended that he do so.
C)other nations had done the same thing.
D)he wanted political support in states such as Ohio and Pennsylvania.
E)of a bargain with Democratic senators.

Question 28

The fiscal year goes from

A)June 3 to November 15.
B)March 16 to September 29.
C)October 1 to September 30.
D)January 1 to November 30.
E)January 15 to November 15.

Question 29

When the Troubled Asset Relief Program TARP)program began investing in ,some Americans argued that there was potential wisdom in the planning approach.

A)the airline industry
B)banks
C)coal
D)steel
E)rubber

Question 30

The chairman of the Council of Economic Advisors,director of the Office of Management and Budget,and the secretary of the treasury are collectively called gural.

A)the professionals.
B)the three musketeers.
C)the troika.
D)the Council of Economic Advisors.
E)Executive Office of the President's Economic Council.

Question 31

An economist proposes that the government should spend more on public-works programs to help increase demand for goods and services in order to improve the overall economy.Which approach would fit best with this economic theory?

A)Keynesian economics
B)Monetarist economics
C)Economic planning
D)Supply-side economics
E)Credit-based economics

Question 32

The number of separate parts of government that take part in economic policy is

A)fewer than five.
B)fewer than ten.
C)approximately thirty.
D)close to thirty.
E)dozens,possibly hundreds.

Question 33

According to this economic theory,cutting taxes will increase people's incentive to work,save,and invest.

A)Keynesian economics
B)Monetarist economics
C)Economic planning
D)Supply-side economics
E)Credit-based economics

Question 34

Reagan's strategy in the budget battle of 1981 was to

A)focus on specific controversial programs and leave remaining programs at current spending levels.
B)pass a May budget resolution that called for further cuts in most programs.
C)form a consensus of liberals and conservatives.
D)get Congress to vote for a total package of cuts before it voted for particular cuts.
E)reduce party leaders to a subordinate role in the process by insisting on particular cuts on the front end of the process.

Question 35

The Gramm-Rudman Act was passed by Congress to

A)fine-tune the existing budget procedures.
B)give more authority to the OMB.
C)eliminate deficit spending.
D)eliminate the balance-of-trade deficit.
E)eliminate tax cuts.

Question 36

Typically,the economic adviser with the closest link to the financial community is the

A)chairperson of the CEA.
B)secretary of the Treasury.
C)director of the OMB.
D)chairperson of the Fed.
E)deputy director of the OMB.

Question 37

In theory,the Fed is

A)the only national entity responsible for economic policy.
B)central planning body for the economy.
C)independent of both the president and Congress.
D)the main fiscal policy body in the federal government.
E)None of these choices is true.

Question 38

If only the economic health of the nation mattered,then politics would dominate.

A)majoritarian
B)interest group
C)client
D)entrepreneurial
E)organizational

Question 39

The executive agency in charge of economic forecasting and preparing the president's annual economic report to Congress is the

A)Council of Economic Advisers.
B)Treasury Department.
C)Office of Management and Budget.
D)Federal Reserve Board Fed).
E)National Security Agency.

Question 40

Entitlements,including Social Security,Medicare,and veterans' benefits,are the majority of

A)discretionary spending.
B)mandatory spending.
C)welfare benefits.
D)debt payments.
E)Treasury bonds.

Question 41

Contributing to the success of loophole politics prior to passage of the 1986 tax bill was the

A)strong support of policy entrepreneurs such as Ralph Nader.
B)existence of low marginal rates to offset revenues lost through deductions.
C)decentralized structure of Congress.
D)existence of tariff revenues to offset revenues lost through deductions.
E)strong support of the conservative coalition and Ralph Nader.

Question 42

High marginal tax rates have been offset by .

A)deductions
B)exemptions
C)exclusions
D)shelters
E)All of these choices are true.

Question 43

All of the following gave significant tax benefits to most taxpayers EXCEPT

A)mortgage interest deductions.
B)Schedule C deductions.
C)state tax payments.
D)interest on consumer loans.
E)local tax payments.

Question 44

President was notable for saying,"Read my lips.No new taxes."

A)Bill Clinton
B)Gerald Ford
C)Ronald Reagan
D)George H.W.Bush
E)John F.Kennedy

Question 45

Before the creation of the federal income tax,most of the money that the government needed came from __________.

A)loans
B)state contributions
C)private wealth
D)tariffs
E)public charity

Question 46

The Budget Enforcement Act of 1990 required that all increases in nonentitlement spending be followed by

A)abolition of frivolous agencies.
B)matching funds from the states.
C)spending cuts in discretionary programs.
D)tax increases.
E)decrease in spending on other discretionary programs or increase in taxes.

Question 47

The main beneficiaries of the deductions left after the 1986 tax reform act were

A)individuals.
B)universities.
C)insurance companies.
D)automakers.
E)All of these choices are true.

Question 48

The political compromise reached on taxation in the first half of the twentieth century included

A)high marginal tax rates and numerous loopholes.
B)low marginal tax rates and numerous loopholes.
C)high marginal tax rates and few loopholes.
D)low marginal tax rates and few loopholes.
E)None of these choices is true.

Question 49

Which statement best describes the tax burden in the United States?

A)It is lower than it is in most other democratic nations.
B)It is about the same as it is in most other democratic nations.
C)It is slightly higher than it is in most other democratic nations.
D)It is much higher than it is in most other democratic nations.
E)It has fluctuated considerably,but just about always remained higher than in most other democratic nations.

Question 50

Democrats agreed to support loopholes that favored the rich in return for high marginal rates,because they feared that a combination of no loopholes and high marginal rates would

A)hurt the middle class more than it would hurt the wealthy by denying them Schedule C deductions.
B)discourage foreign investment and raise the cost of raw materials.
C)encourage foreign investment in U.S.industry,thereby hurting the economy indirectly.
D)seriously affect productivity by raising the cost of raw materials and labor.
E)hurt the economy by discouraging people and businesses from saving and investing.

Question 51

The Budget Enforcement Act of 1990 focused on limiting

A)travel expenses.
B)payment on the national debt.
C)existing contracts.
D)entitlements.
E)discretionary spending.

Question 52

Keeping both the tax burden and tax evasion low would be an example of politics.

A)client
B)entrepreneurial
C)interest group
D)majoritarian
E)reciprocal

Question 53

The 1993 tax reforms marked the first time since 1945

A)that taxes were cut.
B)that taxes were increased.
C)that a major bill was passed without any support from the minority party.
D)that a tax bill passed with unanimous support.
E)Both that taxes were increased,and that it was unanimous are correct.

Question 54

In 1993,President Clinton raised the top income tax rate to over

A)15 percent.
B)20 percent.
C)31 percent.
D)39 percent.
E)53 percent.

Question 55

When Congress first created a peacetime income tax in 1895),

A)it distributed the money evenly among the states.
B)the president vetoed the legislation.
C)several states threatened to secede from the Union.
D)the deficit disappeared instantly.
E)the Supreme Court declared it unconstitutional.

Question 56

Loophole politics is an example of politics.

A)majoritarian
B)interest group
C)entrepreneurial
D)client
E)reciprocal

Question 57

From the inauguration of income tax up to the 1950s,tax rates tended to rise and fall with

A)the cycles of public opinion.
B)good and bad economic times.
C)war and peace.
D)Democratic and Republican administrations.
E)critical or realigning elections.

Question 58

The average citizen paid very little in income taxes until

A)the Great Depression.
B)the New Deal.
C)the election of Herbert Hoover.
D)the Korean War.
E)World War II.

Question 59

The term sequester refers to

A)those budget items,such as Social Security,that are largely uncontrollable.
B)the process of protecting certain items from budgetary review.
C)freezing budget items at previous levels.
D)a limit set on the percentage of uncontrollable expenses that the budget can contain.
E)automatic,across-the-board percentage cuts in the budget.

Question 60

If a tax is progressive,

A)the wealthiest individuals pay the lowest marginal rate.
B)the wealthiest individuals pay the highest marginal rate.
C)every taxpayer pays the same rate.
D)rates are lower at the lowest and highest income brackets.
E)rates are the highest for the middle class.

Question 61

Liberals generally believe the debt should be addressed by lowering taxes.

Question 62

When a recession and an older population occur together,our national debt tends to increase significantly.

Question 63

Cutting inflation and lowering interest rates on loans can easily be done at the same time.

Question 64

Discuss the difference between deficit and debt.

Question 65

American voters vote only their own economic interest.

Question 66

The amount the government spends in excess of what it takes in each year is called the debt.

Question 67

Keynesianism argues that lower taxes will provide incentives for people to work,save,and invest.

Question 68

Keynes was skeptical of the notion that the market would automatically operate at a full-employment,low-inflation level.

Question 69

A monetarist believes that inflation is caused by too little money chasing too many goods.

Question 70

A progressive tax is one that requires those who are better off to pay more as a percentage of their income.

Question 71

Voters frequently endorse three inconsistent policies-lower taxes,less debt,and new programs.

Question 72

The Tax Reform Act of 1986 called for lower tax rates but smaller and fewer deductions.

Question 73

The most important part of the economic policymaking machinery is Congress.

Question 74

Sociotropic voting would involve decision making based on personal experiences rather than on perceptions of the economic health of the nation as a whole.

Question 75

The executive office in charge of forecasting economic trends is the Council of Economic Advisers.

Question 76

The economic approach known as planning has never been popular in America.

Question 77

The president's troika of economic advisers includes the Federal Reserve Board,the Council of Economic Advisers,
and the secretary of the Treasury.

Question 78

People who tell pollsters that their families' finances have gotten worse are more likely than other people to vote
against the incumbent president.

Question 79

By 2015,the federal debt rose to reach over 18 trillion.

Question 80

The federal government traditionally makes out its budget without regard for the amount of money it has to spend.