Deck 30: To the New Millennium and Beyond

Question 1

The Economic Stabilization Act of 1970 gave private industry the right to establish wage and price controls,but President Nixon vetoed this power.

Answer 1

False

Question 2

In the period 1960-95,

A) the relations between capital and labor (owners and workers) continued to be as hostile and violent as they were in the 1930s and earlier.
B) the relations between capital and labor (owners and workers) continued to be cooperative and peaceful, as they had been throughout U.S. history.
C) an accord was struck which involved more cooperative relations between capital and labor and encouraged high rates of productivity in industry.
D) the federal government intervened with a strong hand to ensure that labor and capital worked together cooperatively.

Answer 2

an accord was struck which involved more cooperative relations between capital and labor and encouraged high rates of productivity in industry.

Question 3

Prices rose strongly during the Vietnam War (1964-1974),and only the adroit monetary and fiscal policy management of the Carter administration (1976-1980)managed to get inflation under control.

Answer 3

False

Question 4

The hope of "Reaganomics"-that ending inflation will stimulate economic growth-is supported by the experience of 1945-49.

Question 5

In the period 1960-95,the cycles of upturns and downturns in the economy (booms and recessions)

A) were eliminated as knowledge of how the economy operated grew.
B) continued to occur, although not nearly as severely as prior to World War II.
C) grew even worse than prior to World War II.
D) were equally as bad as the period prior to World War II.

Question 6

Political and social desires to increase the "quality of life" in the U.S.led to an increase in the federal funding of public libraries,television and radio as well as increases and broadened uses of federal lands,waters and parks.

Question 7

Like Franklin D.Roosevelt (1933-45),William J.Clinton's (1993-2001)deficit-reducing tax hikes pushed the economy into a recession.

Question 8

In the long run,holding all else constant,inflation requires a decrease in the money supply relative ?to the output of goods and services-not enough money chasing too many goods.

Question 9

William J.Clinton (1993-2001)was the first U.S.president since the Great Depression to increase taxes to try to reduce the federal budget deficit.

Question 10

The Cold War was of overriding importance during the period after World War II for all of the following reasons except

A) It was an automatic "pump primer" which helped keep spending levels high in the overall economy.
B) It helped fuel growth of key sectors of the economy, such as aircraft manufacturing and computers.
C) It fostered economic growth and urbanization in many parts of the nation where military bases and defense factories were built.
D) It put people to work who would otherwise have been unemployed because without high levels of defense spending, the economy almost certainly would have lapsed back into a depression like the one of the 1930s.

Question 11

In the period 1960-95,the federal government

A) played, in general, a much larger role in the economy during this period than prior to World War II.
B) played a small role in the economy, similar to the 1920s.
C) eliminated most of the major programs for the federal government that were established by the New Deal in the 1930s, while state and local governments began to play a larger role in the economy.
D) played a large role in defense spending but followed basically a laissez-faire policy toward the rest of the economy.

Question 12

The expansion of governmental direct controls over the economy which characterized the "New Frontier" and "Great Society" programs of the Kennedy-Johnson years was continued and expanded by the Nixon Administration.

Question 13

Which of the following did not occur during the period 1960-95?

A) The problem of inflation
B) The growth of federal budget and trade deficits
C) Rising unemployment rates
D) All of the above occurred during this period.

Question 14

Economic history shows that stock market averages are useful predictors of the future.

Question 15

Monetarists maintain that the increase in the money supply can explain the inflation of the 1970s ?and 1980s when one considers the bonds purchased by the Fed to finance the federal deficits of the period.

Question 16

In the 1970s,the relationship between stock-market prices and the consumer price index was roughly equal to that of the 1920s,rising in roughly equal amounts.

Question 17

After the inflation of the Johnson-Nixon-Ford years (1963-1976),the Carter Administration,while still inflationary,managed to slow down the rate of advancing prices.

Question 18

The techniques of government regulation in the U.S.are intended to increase the degree of competitiveness in the domestic and international marketplaces.

Question 19

Unlike the 1930s,the Federal Reserve System followed an easy money policy in the first decade?of the 2000s and,consequently,was able to prevent a severe recession from following a period of notably high economic activity.

Question 20

The years after 1960 witnessed some social and economic changes of extraordinary magnitude,including all of the following except

A) The core of U.S. growth shifted away from its historic base in heavy industry.
B) A huge influx of women into the labor force occurred.
C) Legislation provided for greater safety on the job and cleaner air and water.
D) The Cold War ended in the early 1970s, following the end of the Vietnam War, and defense spending declined significantly from the Cold War years of the 1950s.

Question 21

What does the idea of a trade-off between inflation and unemployment mean?

A) That lower inflation could be established but only at the cost of higher unemployment
B) That lower unemployment could be achieved but only at the cost of more government spending
C) That lower inflation could be established but only at the cost of lower unemployment
D) That lower unemployment could be achieved but only at the cost of lower inflation rates

Question 22

The persistent problem of inflation,beginning in the late 1960s,had its causes in all of the following except

A) The full-scale entrance of the United States into the Vietnam War in 1965
B) "Oil shocks" in the 1970s
C) Rising production costs in almost every sector in the economy due to rising energy costs
D) Rising corporate taxes which raised the cost of doing business

Question 23

The 1990s and 1920s have which of the following in common?

A) Growth in real output, real output per person, employment and productivity
B) Changes in the levels of nominal output, money supply and participation in the ?stock market
C) Similar expansions in the stock markets at the end of each period
D) All of the above

Question 24

Inflation leads to bracket creep,which forces taxpayers to pay a larger percentage of their income in taxes,when

A) Changes in the real purchasing power of their income do not keep pace with inflation.
B) Changes in the real purchasing power of their income keep pace with inflation.
C) Income tax codes change quickly as inflation emerges, impacting real purchasing power.
D) Income tax codes increase without taxpayer knowledge, forcing them to pay higher taxes ?than anticipated.

Question 25

The term "stagflation" refers to an economy with the simultaneous problems of

A) rising inflation rates and falling unemployment rates.
B) rising deflation and unemployment rates.
C) rising inflation and unemployment rates.
D) falling deflation and unemployment rates.

Question 26

The U.S.economy remains subject to frequent boom and bust cycles.Throughout U.S.history,policymakers after the Great Depression often

A) raise or lower taxes and spending to adjust aggregate demand and thereby smooth the ?business cycle.
B) take a hands-off approach to the business cycle.
C) consult with world organizations on how to address cyclic fluctuations.
D) close economies to international trade.

Question 27

All of the following were important structural changes in American capitalism during the period 1960-95 except

A) New technology in the form of automated (machine-guided) production processes
B) A capital-labor accord which allowed workers to share in productivity gains through wage increases, particularly during the 1950s and 1960s
C) An increase in self-sufficiency as the nation reduced its economic interdependence with other nations
D) A large and central role for government in directing the post-war economy

Question 28

How much does it cost to tax a dollar of revenue away from the private sector and transfer it to the government in order to bail out a specific industry?

A) One dollar
B) Less than one dollar because the administration of and compliance with the tax ?laws creates jobs for people
C) Less than a dollar because of the excess burden resulting from the elimination of ?productive exchanges by the taxes
D) More than a dollar because collection of the taxes requires resources that would otherwise ?be available for private sector production

Question 29

The techniques of regulation used in the U.S.are

A) meant to solve basic problems, but they create others.
B) meant to re-enforce the "decisions of the marketplace."
C) meant to manage problems rather than solve them.
D) designed to make the economy more efficient than is possible with only the free market mechanism.

Question 30

Bracket creep forces taxpayers to pay a larger percentage of their income in taxes when which of the following occurs?

A) The emergence of high unemployment
B) Inflation
C) Deflation
D) The growth of trade deficit(s)

Question 31

Government controls over industry

A) limit overall net industrial growth.
B) help all industries.
C) lower consumer costs in the industries assisted by government.
D) encourage the destruction of inefficient and lagging industries.

Question 32

What was/were the most enduring legacy/legacies of the 1960s according to Hughes and ?Cain (2011)?

A) Medicare and the War on Poverty
B) The violent antiwar movement
C) The environmental, consumer and women's movements
D) The black power movement

Question 33

The government played a central role in directing the post-World War II economy,causing all of the following to occur except

A) The reduction of entitlements, such as Social Security and unemployment benefits.
B) Massive spending by the federal government, justified by the Cold War.
C) Enormously expanded government infrastructure spending on things like highways, airports, education and research and development.
D) There is no "except"; all of the above occurred.

Question 34

Hughes and Cain (2011)suggest that between 1960 and 1995,the nation witnessed "social and economic changes of extraordinary magnitude," and that the "American republic headed into policies that changed the economy beyond recognition." This sounds remarkable.What were these changes?

Question 35

The Kennedy Tax Cut,enacted in 1964 after his death,was the first supply-side tax cut used in ?U.S.history.Its intent was to stimulate the economy by reducing tax rates in order to do what?

A) Reduce supply
B) Increase production, employment and disposable income
C) Increase government spending
D) Increase the money supply

Question 36

The federal government incentive to support special-interest groups (steel,auto,drug,environment)at the expense of unorganized,widely dispersed groups (for example,taxpayers or consumers)occurs

A) only when the benefits that accrue to the special-interest group exceed the costs ?imposed on others.
B) when nonspecial-interest voters are unconcerned or uninformed about the issue, and ?campaign funds are readily available from the special-interest group.
C) only if the government action is efficient.
D) only if the government action will reduce the monopoly power of business or labor, ?and thereby lead to an improvement in the general welfare.

Question 37

Which of the following provides a tool by which you can measure overall price changes paid by representative individuals living in urban households?

A) The GDP Deflator (NGDP/RGDP*100, expressed as a percentage)
B) The Producer Price Index
C) The Consumer Price Index
D) The Housing Price Index

Question 38

The famous "Kennedy Tax Cut" of 1964 was

A) meant to stimulate private spending.
B) meant to reduce private investment.
C) meant to restrain consumption.
D) designed to increase the federal deficit.

Question 39

When output is held constant,inflation does which of the following?

A) Increases real GDP
B) Increases real income
C) Increases government spending
D) Reduces the purchasing power of individuals ?living on fixed incomes.

Question 40

The trade deficit and federal budget deficit plagued which U.S.presidential administration with ?high inflation and low levels of production and employment?

A) Franklin D. Roosevelt (1933-45)
B) Dwight D. Eisenhower (1953-61)
C) John F. Kennedy (1961-63)
D) Ronald W. Reagan (1981-89)

Question 41

What events prevented the high inflation of the 1970s from permanently crippling the U.S.economy?

Question 42

Compare the Kennedy,Reagan,G.H.Bush and G.W.Bush tax cuts.Identify what they have in common and explain how they differ.

Question 43

What is the Consumer Price Index (CPI)? Interpret Table 30.1.Explain how increases in the CPI affect (i)individuals living on fixed incomes,(ii)savers with deposits paying interest rates not indexed to inflation rates and (iii)net U.S.exports.When does inflation not affect real output and ?the purchasing power of income?

Question 44

Describe the economic history behind the transportation sector in the U.S.What key changes took place and what fuelled these changes?

Question 45

Discuss the "new breed" of federal non-market controls that emerged after 1962.Identify exactly what distinguishes this modern set of federal interventionist agencies and policies from those of ?the past.

Question 46

Discuss how the basic steel and automobile industries have been challenged by foreign competition and have been forced to change to remain competitive.Identify the costs associated with the changes.Explain why these industry challenges,by contrast,have benefited consumers of steel ?and autos.

Question 47

Discuss the events leading up to the demise of the Glass-Steagall Act in 1999.

Question 48

Describe the deregulation efforts of the Reagan Administration.On what economic grounds did the Reagan Administration succeed and fail?

Question 49

Describe the U.S.economy between 1961 and 1980.Identify those factors hindering economic growth during this period.

Question 50

Discuss the government's role in exacerbating inflation in the U.S.To curtail inflation,describe those contractionary fiscal actions the government could have taken.

Question 51

When did the Bretton Woods System collapse? Describe the events leading to its collapse.

Question 52

With special attention paid to the role of economic forces,explain the rise in the number of ?two-income families in the U.S.

Question 53

Discuss how desires to improve the "quality of life" in the U.S.stimulated changes in government intervention in market activities and federal regulation.

Question 54

Describe the U.S.economy between 1980 and 2001.Identify those factors contributing to the economic growth of this period.

Question 55

Explain why the inflation of the 1970s increased the opportunity costs of one woman staying at home.

Question 56

During the 1920s and 1990s,the U.S.economy experienced remarkable growth in the overall economy and several key sectors.Identify what these periods have in common and provide two reasons why the expansive growth of the 1990s was not trailed by a severe depression like the ?Great Depression following the 1920s.

Question 57

Explain the Kennedy Tax Cut of 1964.Why was it controversial among economists,and why did ?the tax need to be perceived as long-term and permanent if it was going to be effective?

Question 58

Some economists argue for increased government regulation.Why do other economists disagree?

Question 59

Explain how the energy crisis of the 1970s provided economic incentive to explore other energy alternatives.