Deck 15: Economic and Environmental Policy: Contributing to Prosperity

Question 1

Supply-side economics,as implemented by President George W.Bush's administration,involved

A)the supply component of the supply-demand equation.
B)stressing the importance of tax cuts for businesses.
C)stressing the importance of tax cuts for the wealthy.
D)an increase in the size of the national debt.
E)All these answers are correct.

Answer 1

E

Question 2

Economic efficiency requires

A)that the free market not be regulated by government.
B)that the output of goods and services is the highest possible given the amount of input used to produce them.
C)the economy to be organized around large firms.
D)economic transactions to be fair to each party.
E)economic transactions to be equal to each party.

Answer 2

B

Question 3

A ruling by the Food and Drug Administration that a drug is dangerous to use and therefore cannot be marketed is an example of regulation for the purpose of

A)supply-side safety.
B)demand-side safety.
C)equity.
D)efficiency.
E)profit.

Answer 3

C

Question 4

A fiscal policy solution to inflation would be to

A)increase government spending.
B)lower tariffs and other barriers to trade.
C)increase the tax rate.
D)raise the discount rate.
E)decrease the tax rate.

Question 5

Government support for agriculture in the form of price supports and income subsidies is designed primarily to

A)increase farm production in order to meet the nation's food needs.
B)stabilize farm income,which would otherwise fluctuate greatly due to market and weather conditions.
C)promote farm conservation so as to preserve the productive capacity of U.S.agriculture.
D)encourage rural development.
E)encourage urban development.

Question 6

Monetary policy differs from fiscal policy in that

A)it has to be exercised by the legislature.
B)the policy goals are very different.
C)it is a slower process than fiscal policy.
D)it can be implemented more quickly than fiscal policy.
E)None of these answers is correct.

Question 7

Members of the Federal Reserve Board

A)serve for variable terms and are exposed to high levels of political pressure.
B)have no power to refuse congressional requests for information.
C)are appointed by the president and can be removed by the Senate.
D)are appointed by Congress and can be removed by Congress.
E)are appointed by the president and are not subject to removal.

Question 8

In John Maynard Keynes's demand-side economic theory,an economic recession can be shortened through

A)government spending programs.
B)the natural workings of the free-market system.
C)a lowering of tariffs in the global economy.
D)a determination on the part of government not to spend any more than it receives in taxes.
E)tax cuts for the wealthy.

Question 9

The term externalities refers to

A)regulations imposed on a firm by government.
B)a nation that is a trading partner of another nation.
C)unpaid costs of production that are incurred by society.
D)tariffs imposed on American goods exported to other countries.
E)None of these answers is correct.

Question 10

Government benefits for business include all of the following EXCEPT

A)low-interest loans and government-guaranteed loans.
B)corporate tax breaks.
C)a national transportation system.
D)minimum-wage laws.
E)a national education system.

Question 11

The era of "new social regulation",which addressed issues such as the environment and worker safety,differed from the previous two eras of regulatory reform in that

A)the Republican Party took the lead in placing additional regulations on business.
B)the aim was to regulate activities of firms of many types,not just those in a particular industry.
C)the regulatory agencies were established in a way that prevented the president from having a role in their operations.
D)the guiding principle was self-regulation-business was given wide leeway in deciding how it would comply with the new requirement.
E)the guiding principle was overregulation-business would be allowed almost no leeway in deciding how it would comply with new regulations.

Question 12

When the Fed was created in 1913,

A)it had no role in the management of the nation's economy.
B)it was restricted to providing emergency loans to financial institutions.
C)it adhered to a strictly supply-side policy focus.
D)its primary economic management tool was to reduce inflation by restricting the money supply.
E)it was far more likely to increase the money supply by lowering interest rates than to restrict it by raising them.

Question 13

,Adam Smith made all of the following arguments for laissez-faire capitalism,EXCEPT which of the following?

A)The desire for profit is the invisible hand that guides a capitalist system.
B)The government should not be allowed any role whatsoever in the economy.
C)Private firms should be left alone to make their production and distribution decisions.
D)Firms will try to use as few resources as possible in order to keep their prices low.
E)Certain areas of the economy were better run by government agencies.

Question 14

What did Congress do in 1995 to reduce overregulation?

A)It cut funding for regulatory agencies like the EPA and Securities and Exchange Commission.
B)It passed the Airlines Deregulation Act,which eliminated government-set airfares and the requirement that airlines provide service to smaller-sized cities.
C)It restricted the president's ability to directly request administrative regulations from agency heads.
D)It cut the budget of the Food and Drug Administration.
E)It enacted legislation that prohibits administrators in some instances from issuing a regulation unless they can show that its benefits outweigh its costs.

Question 15

The Progressive Era of government regulation focused on

A)strengthening consumer protection by preventing credit agencies from gouging individuals with high levels of debt.
B)bolstering worker safety by increasing the power of unions and forcing better safety practices on businesses.
C)increasing environmental protection and strengthening the EPA.
D)regulating troubled economic sectors,such as banking.
E)stopping the unfair business practices of the new monopolies,such as the railroads.

Question 16

Monetary policy includes all the following assumptions EXCEPT that

A)the money supply is the key to sustaining a healthy economy.
B)too little money in circulation contributes to inflation.
C)too little money in circulation contributes to a slowdown in consumer buying.
D)too little money in circulation contributes to a slowdown in production.
E)too much money in circulation contributes to inflation.

Question 17

Fiscal policy is a mechanism the government employs to influence the economy.Fiscal policy is based on

A)the idea that a balanced budget is the key to a healthy economy.
B)the money supply.
C)the government's taxing and spending decisions.
D)the importance of maintaining a 12-month (fiscal year)economic cycle.
E)the projections of the Federal Reserve Board.

Question 18

Judged in the context of the full range of public policies,the government in the United States has been

A)equally hostile to the interests of business and labor.
B)equally supportive of the interests of business and labor.
C)substantially more supportive of business than labor.
D)substantially more supportive of labor than business.
E)substantially more supportive of left-wing radicals than conservatives.

Question 19

Which of the following statements best describes the relationship today between government and the economy in the United States?

A)The economy is largely self-regulating.
B)The government subsidizes economic interests but otherwise leaves them to operate as they please.
C)The government is the driving force in the U.S.economy; business has a secondary role.
D)The government has an important role in regulating and maintaining the U.S.economy.
E)The government owns most of the means of production in the United States.

Question 20

The Federal Reserve controls the money supply through all of the following actions EXCEPT

A)raising the cash reserve that member banks are required to deposit with the Federal Reserve.
B)raising the interest rate that member banks are charged when they borrow from the Federal Reserve.
C)lowering the cash reserve that member banks are required to deposit with the Federal Reserve.
D)lowering the interest rate that member banks are charged when they borrow from the Federal Reserve.
E)lowering the tax rate on individuals.

Question 21

The ________ established minimum wages and constraints on the use of child labor.

A)Securities and Exchange Act of 1934
B)Banking Act of 1934
C)Airlines Deregulation Act of 1977
D)Fair Labor Standards Act of 1938
E)Homestead Act of 1862

Question 22

The highest rate of inflation (13 percent)since World War II occurred in ________.

A)1955
B)1963
C)1979
D)1991
E)2002

Question 23

Which of the following statements is true?

A)The national debt was eliminated in 1998.
B)The chair of the Fed creates the president's budget on an annual basis.
C)Keynes advocated government spending to counteract an economic downturn.
D)The highest budget deficit in U.S.history was $59 billion.
E)The Congressional Budget Office creates the president's budget on an annual basis.

Question 24

The Federal Reserve System

A)was created in 1933.
B)is run by a congressional committee.
C)regulates only national banks.
D)was created specifically to conduct fiscal policy.
E)None of these answers is correct.

Question 25

Supply-side economics is based primarily on

A)stimulation of the business (supply)component.
B)government stimulation of consumer demands.
C)a repudiation of trickle-down theory.
D)increases in taxation.
E)increases in government regulation.

Question 26

Which is true regarding the nation's environmental policy?

A)The first major steps by the national government to clean up the environment began in the early 1900s.
B)A majority of the public is sympathetic to environmentalism.
C)The modern environmental movement gained impetus with the publication of Armageddon in 1949.
D)In the 1960s,the government began a policy of land conservation through the creation of national parks.
E)A majority of the public is not sympathetic to environmentalism.

Question 27

Over the past forty years,the burden of federal taxation has

A)shifted from big business to small business.
B)shifted from individuals to corporations.
C)shifted from corporations to individuals.
D)evened out between individuals and corporations.
E)None of these answers is correct.

Question 28

Advocates of deregulation are primarily concerned with

A)efficiency.
B)equity.
C)externalities.
D)public safety.
E)political expediency.

Question 29

Which president's use of government policy as economic stimulus ushered in the modern era of U.S.government fiscal policy?

A)Thomas Jefferson
B)Franklin Roosevelt
C)Lyndon Johnson
D)Woodrow Wilson
E)William Clinton

Question 30

The Federal Reserve plays a large part in establishing ________ policy.

A)monetary
B)military
C)fiscal
D)budgetary
E)security

Question 31

________ wrote The Silent Spring in 1962.

A)Al Gore
B)George W.Bush
C)Greenpeace
D)Rachel Carson
E)The Sierra Club

Question 32

A major point of debate surrounding the Federal Reserve's role in economic policy is

A)the Fed's political accountability.
B)whether the president should be able to veto the Fed's decisions.
C)the issue of competence.
D)whether Congress should be able to reject the Fed's decisions.
E)None of these answers is correct.

Question 33

Which of the following is correct about environmental policy?

A)The national parks are subject to a dual use policy of preservation,recreation,and exploitation of the rich natural resources.
B)The Environmental Protection Agency was elevated to cabinet status in 1998 by President Clinton and the Republican Congress.
C)Environmental regulation has done little to improve air and water quality.
D)Policymakers always give more consideration to environmental protection than to economic development when the two conflict.
E)None of these answers is correct.

Question 34

Earth Day was the brainchild of Senator

A)Ted Kennedy.
B)Robert Byrd.
C)Mike Mansfield.
D)Ted Stevens.
E)Gaylord Nelson.

Question 35

Democrats in Washington have usually responded to high levels of unemployment with

A)reduced government spending.
B)increased government spending.
C)increased government taxes.
D)decreased government taxes.
E)decreased government regulation.

Question 36

Keynesian economics emphasizes ________ as a means of curtailing economic downturns.

A)reduced taxes
B)increased government spending
C)decreased regulation
D)decreased inflation
E)increased taxes

Question 37

If the economic problem is low productivity and high unemployment,the fiscal policy action on the demand side would be to

A)increase taxes.
B)cut business taxes.
C)increase spending.
D)decrease spending.
E)None of these answers is correct.

Question 38

The Superfund program is designed to

A)bail out financial institutions that are considered too large to collapse.
B)provide domestic farmers with subsidies in order to remain competitive with international farming.
C)provide funds for cleaning up badly contaminated and polluted sites.
D)provide the president with emergency funds to deal with major natural disasters.
E)None of these answers is correct.

Question 39

Regarding the Kyoto agreement and greenhouse gas emissions,which of the following is true?

A)The United States is the largest single producer of greenhouse emissions in the world,on a per-capita basis.
B)President George W.Bush rejected the agreement.
C)It was a multinational effort to reduce carbon emissions.
D)The burden of addressing the global warming problem will fall unevenly on nations.
E)All these answers are correct.

Question 40

What has been the preferred strategy of U.S.lawmakers for combating the problem of global warming?

A)reducing regulation on businesses to allow more private-sector solutions to develop creatively
B)raising interest rates to slow down the economy
C)business-tradable carbon tax credits
D)reduction of carbon emissions
E)alternative energy sources and energy conservation

Question 41

The first national park was created at ________ in 1872.

A)Acadia
B)Yellowstone
C)Yosemite
D)Mammoth Cave
E)the Grand Canyon

Question 42

Describe Adam Smith's laissez-faire model of economics.

Question 43

The tax cuts pushed by President George W.Bush while in office were premised largely on

A)demand-side economics.
B)supply-side economics.
C)fiscal policy.
D)monetary policy.
E)Keynesian economics.

Question 44

About what percentage of the annual federal budget is accounted for by the interest paid on the national debt?

A)50%
B)5%
C)25%
D)15%
E)2%

Question 45

The Tennessee Valley Authority is

A)an electricity industry owned by the United States.
B)a private industry regulated by the United States.
C)a private electricity industry exempt from government regulation.
D)a private environmental organization that receives federal funding.
E)a private environmental organization with power to regulate industry.

Question 46

The creation of the Food and Drug Administration and the passage of the Securities and Exchange Act were intended to

A)promote equity in the economy.
B)eliminate the problem of externalities in the economy.
C)destroy the legal foundation of the business trust.
D)promote efficiency in the economy.
E)None of these answers is correct.

Question 47

Which of the following government agencies regulates business competition?

A)Federal Trade Commission
B)Interstate Commerce Commission
C)Antitrust Division of the Justice Department
D)all of these: the Federal Trade Commission; the Interstate Commerce Commission; and the Antitrust Division of the Justice Department
E)None of these answers is correct.

Question 48

The federal government has assumed a permanent,strong role in the economy,contributing to its stability and efficiency,since

A)the 1930s.
B)the 1860s.
C)the 1960s.
D)the 1980s.
E)None of these is correct; federal spending has reached high levels only sporadically.

Question 49

Define the term fiscal policy and explain how fiscal policy can be used in response to economic conditions.
D.Roosevelt in the 1930s.When there is an economic downturn,government can increase its spending or cut individual taxes as a means of stimulating consumer (demand-side)spending.When the economy is inflationary,the opposite actions can be taken as a way of dampening consumer demand.Fiscal policy can also take a supply-side form,as it did in part during the Reagan years.Supply-side emphasizes business production and investment.The economy can be stimulated through a reduction in taxes on firms and high-income individuals.

Question 50

What was a major change brought about by the National Labor Relations Act of 1935?

A)It established the national minimum wage.
B)It broke up business monopolies in order to give workers more choice in employer.
C)Workers were given the right to bargain collectively.
D)It eliminated the ability of companies to bargain directly with unions.
E)It reduced the ability of workers to go on strike indefinitely.

Question 51

Farm subsidies have traditionally had strong support in Congress,particularly from

A)representatives whose districts are rural.
B)rural-state senators and representatives.
C)senators whose states are rural.
D)the Speaker of the House and Senate president pro tempore.
E)Democratic senators and representatives.

Question 52

Explain the difference between economic efficiency and economic equity as principles that justify government regulation of the economy.

Question 53

Define the term monetary policy,and describe two ways the Fed implements monetary policy.

Question 54

Regulatory activity relating to the environment has actually meant that the environment today is

A)no better than it was during the 1960s.
B)actually worse than it was during the 1960s.
C)vastly more clean than it was during the 1960s.
D)so free from pollution that further regulatory activity in the future seems pointless.
E)None of these answers is correct.