Deck 15: Economic and Environmental Policy: Contributing to Prosperity

Question 1

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.

Answer 1

A

Question 2

One focus of the Progressive Era of government regulation was

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 corrupt business practices such as the sale of unsafe food and drugs.

Answer 2

E

Question 3

In The Wealth of Nations (1776),Adam Smith made all of the following arguments for laissez-faire capitalism,EXCEPT

A)that the desire for profit is the invisible hand that guides a capitalist system.
B)that the government should not be allowed any role whatsoever in the economy.
C)that private firms should be left alone to make their production and distribution decisions.
D)that the government should regulate banking,currency,and contracts.
E)that certain areas of the economy were better run by government agencies.

Answer 3

B

Question 4

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 5

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 6

The ________ established minimum wages.

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 7

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 participates in the economy though the regulation of privately owned businesses.
E)The government owns most of the means of production in the United States.

Question 8

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 9

What happened after Lehman Brothers went out of business in September of 2008?

A)The stock market rose dramatically.
B)The stock market rose slightly.
C)The stock market was essentially unchanged.
D)The stock market dropped slightly.
E)The stock market dropped dramatically.

Question 10

The primary purpose of the Troubled Asset Relief Program was to

A)quickly provide jobs to the unemployed.
B)shore up shaky financial institutions.
C)lower the rate of inflation.
D)demonstrate that only the Fed controlled economic policy.
E)help out the European economy and boost demand for American exports.

Question 11

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.

Question 12

Which of the following is correct about environmental policy?

A)The national forests are protected from the exploitive "dual use policy."
B)The Environmental Protection Agency was elevated to cabinet status in 1998 by President Clinton and the Republican Congress.
C)Environmental regulation has led to dramatic improvements in 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 13

Passed in 2010,the Dodd-Frank Wall Street Reform and Consumer Act

A)loosens restrictions on large financial institutions considered "too big to fail."
B)allowed low interest rates and small down payments for first-time home buyers and small business entrepreneurs.
C)empowers government to more closely oversee financial activities.
D)sought to promote environmental protection,consumer protection,and worker safety.
E)required warning labels on all "hazardous" consumer goods,such as cigarettes.

Question 14

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)the 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 15

Which of the following government agencies regulates business competition?

A)Federal Trade Commission
B)Interstate Commerce Commission
C)Securities and Exchange Commission
D)all of these: the Federal Trade Commission; the Interstate Commerce Commission; and the Securities and Exchange Commission
E)None of these answers is correct.

Question 16

On the whole,American politicians have been LEAST willing to ________ in order to combat global warming.

A)reduce carbon emissions
B)encourage clean energy
C)encourage energy conservation
D)consider alternative energy sources
E)raise fuel standards for vehicles

Question 17

Advocates of deregulation are primarily concerned with

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

Question 18

________ wrote Silent Spring (1962).

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

Question 19

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.

Question 20

The Great Recession,which began in 2008,was precipitated primarily because the federal government was too lax in regulating

A)computer technology.
B)the buying and selling of stocks.
C)interest rates charged to banks.
D)subprime mortgages.
E)the buying and selling of junk bonds.

Question 21

Supply-side economics,as implemented by the Reagan and Bush administrations,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 of these answers are correct.

Question 22

The $787 billion stimulus bill passed by Congress in 2009

A)illustrated classic supply-side principles.
B)focused primarily on lowering tax rates for businesses.
C)was passed with strong bipartisan support.
D)had almost no Republican support.
E)was not necessary,according to most Democratic-leaning economists.

Question 23

Farm subsidies account for approximately ________ of net agricultural income,making America's farmers among the most heavily subsidized in the world.

A)ten percent
B)one-fifth
C)a third
D)one-seventh
E)two-thirds

Question 24

A fiscal policy solution to inflation would be to

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

Question 25

High levels of government spending or deep cuts in taxes result in a(n)________ in which the federal government spends more in a year than it receives in tax and other revenues.

A)trade deficit
B)budget deficit
C)national debt
D)credit imbalance
E)income disparity

Question 26

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 27

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 28

Which country has the HIGHEST annual emissions of carbon dioxide?

A)United States
B)China
C)Japan
D)India
E)Great Britain

Question 29

The tax cuts pushed by the Reagan and Bush administrations were premised largely on

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

Question 30

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 31

If the economy is sluggish,with 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 government spending.
D)decrease government spending.
E)None of these answers is correct.

Question 32

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 33

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 34

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 35

According to 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)raising 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 36

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 37

Which president's use of government policy to stimulated the economy 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 38

Of the following countries,which has done the LEAST to reduce greenhouse gas emissions?

A)Germany
B)France
C)Great Britain
D)United States
E)These countries have been about equal in their efforts to reduce greenhouse gas emissions.

Question 39

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 40

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 employers.
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 41

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 42

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 43

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

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

Question 44

Who was appointed Fed chair in 2014?

A)Ben Bernanke
B)Milton Friedman
C)Alan Greenspan
D)Elizabeth Warren
E)Janet Yellen

Question 45

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

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

Question 46

Monetary policy includes all of 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 47

During what has become known as the Great Recession,the Fed began to purchase the assets of member banks.This new monetary control mechanism used by the Fed was known as

A)subprime borrowing.
B)the Greenspan Plan.
C)quantitative easing.
D)hyper inflation.
E)too big to fail.

Question 48

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

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

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 and George W.Bush 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

The Fed chair

A)is appointed by the president,with no approval from the Senate.
B)serves a four-year term.
C)rarely cares about monetary policy.
D)has absolute authority over the Fed.
E)All of these answers are correct.

Question 51

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

A)1930s.
B)1860s.
C)1960s.
D)1980s.
E)2000s.

Question 52

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

Question 53

The total cumulative amount the federal government owes to its creditors is known as

A)a trade deficit.
B)a budget deficit.
C)the national debt.
D)a credit imbalance.
E)income disparity.

Question 54

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

Question 55

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 56

The Fed is directed by a board of governors whose seven members

A)serve for 14 years.
B)hold office during good behavior,in essence a lifetime appointment.
C)serve for 4 years.
D)retain their seat as long as the president who nominated them is in office.
E)serve for no more than three consecutive 6-year terms.

Question 57

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 58

When was the last time the U.S.government had a balanced budget?

A)1970s
B)1980s
C)1990s
D)2000s
E)None of these answers is correct.

Question 59

If the Fed wanted to act to increase borrowing by firms and consumers and thus hopefully reduce unemployment,it would

A)sell securities.
B)raise the reserve rate.
C)decrease the interest rate on loans to member banks.
D)increase the interest rate on loans to member banks.
E)encourage people to save more and spend less.

Question 60

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