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A capitalist economic system is one in which

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individuals and corporations own the principal means of production, through which they seek to earn profits

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A mixed political economy is one in which

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the government, while not commanding the economy, is still deeply involved in economic decisions

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Capitalism is

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an economic system in which individuals and corporations own the principal means of production.

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Conservatives complain about

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A) the size of the public sector. B) excessive regulation of the private sector. C) the oppressive scope of government

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The consumer price index measures

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the change in the cost of buying a fixed basket of good and services.

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Hundreds, if not thousands, of studies by political scientists have concluded that voters

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vote for the candidate who will benefit the voterʹs financial condition the most

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Which of the following statements is TRUE about Americaʹs political parties and relatively high inflation?

answer

The Democrats are more willing to accept relatively high inflation than the Republicans.

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Union members, minority group members, and the poor are more likely to vote ________ than higher income people are.

answer

Democratic (due to greater concern about unemployment)

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Business owners, managers, and professional people are more likely to vote ________ than lower income people are.

answer

Republican (due to greater concern about inflation)

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The Republican party is more concerned than the Democrats about

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inflation than unemployment

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The nationʹs unemployment rate is determined by

answer

a monthly random survey of the population.

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The ________ conducts a huge statistical survey of the population monthly to measure the nationʹs unemployment rate.

answer

Bureau of Labor Statistics

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The official unemployment rate underestimates unemployment because it leaves out

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discouraged workers.

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In the 2004 presidential election, people who thought their families were doing better off voted

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4 to 1 for George W. Bush.

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Inflation was generally highest during the

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1970s

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The principle that the government should not meddle with the economy is known as

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laissez faire.

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When the stock market crash of 1929 sent unemployment soaring, President Herbert Hoover

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clung to the laissez-faire economic theory.

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Laissez faire is the

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principle that government should not meddle with the economy.

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Who is the current chair of the Federal Reserve Board?

answer

Ben Bernanke

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________ is the manipulation of the supply of money and credit in private hands to promote the nationʹs economic health.

answer

Monetary policy

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An economic theory called monetarism holds that

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the supply of money is the key to the nationʹs health, and having too much cash and credit in circulation stimulates inflation.

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Monetarists want to

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hold the growth in money supply to equal the rise in the gross national product after inflation.

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Monetary policy is directly regulated by

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the Federal Reserve System.

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The Federal Reserve System is governed by

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a seven-member Board of Governors appointed by the President and confirmed by the Senate.

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A supporter of laissez-faire policy would oppose

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governmental intervention in the economy

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Since the New Deal,

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policymakers have made it part of their regular business to seek to control the economy.

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The economic theory that considers the supply of money as the key to the nationʹs economic health is

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monetarism.

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Monetarists emphasize that economic conditions are related to

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the supply of money

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The main agency for making monetary policy is the

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Federal Reserve Board

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The Federal Reserve Board is intended to be

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independent of partisan politics.

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The Federal Reserve Board regulates

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the supply of money and credit in the economy.

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An example of the use of monetary policy is

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requiring banks to keep more money on reserve.

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According to monetarists, making too much money available to borrow may lead to

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inflation

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Members of the Federal Reserve Systemʹs Board of Governors

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are given 14-year terms designed to insulate them from political pressures.

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The Federal Reserve Systemʹs Board of Governors sets discount rates at a higher level

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to decrease the amount of money in circulation

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Which of the following is NOT one of the measures used by the Fed to control the money supply?

answer

It dictates the minimum prime lending rate by commercial banks.

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Which of the following is NOT influenced in a major way by the actions of the Fed?

answer

the minimum wage

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Fiscal policy is

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taxing, spending, and borrowing decisions shaped mostly by Congress and the president.

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Taxing, spending, and borrowing decisions by Congress and the president are known collectively as

answer

fiscal policy.

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The most important political action in setting monetary policy is

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the Federal Reserve.

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An important tool in fiscal policy is the

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level of government spending as indicated in the budget.

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Taxing, spending, and borrowing policies of the federal government are called

answer

fiscal policy.

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Keynesian economic theory argues for

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stimulating the economy through government spending programs.

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________ encourages government to create jobs for people during times of severe unemployment in order to get money into the hands of consumers and stimulate the entire economy.

answer

Keynesian economic theory

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The Keynesian economic theory argues that governmentʹs role in an economic depression should be to

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increase demand.

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A believer in Keynesian economic theory would stress that

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government should stabilize the economy through its spending policies.

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The economic theory that would argue that government can spend its way out of a depression by stimulating the economy through spending is

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Keynesianism.

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Jumping into the business of consumer protection in the 1960s and 1970s, the ________ made new rules about product labeling, exaggerated product claims, and the use of celebrities in advertising.

answer

Federal Trade Commission

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________, supported by President Reagan, was encouraged by the economist Arthur Laffer.

answer

Supply-side economics

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According to proponents of supply-side economics,

answer

cutting taxes leads to more incentive to save, work harder, and create more jobs.

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President Reaganʹs economic policies emphasized

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supply-side economics in which tax cuts and deregulation are designed to free funds for savings and investment.

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George W. Bushʹs tax cuts in 2001 were based on

answer

supply-side economics.

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Major corporate corruption scandals in the 1990s

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followed an era of corporate concentration.

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Since the 1980s big business was particularly characterized by

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an increase in corporate mergers.

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The Sherman Act of 1890 was passed as ________ measure.

answer

an antitrust

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The purpose of antitrust legislation is to

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ensure competition and prevent monopolies

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A famous and recent antitrust case pursued by the Clinton administration involved

answer

Microsoft

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Which of the following is NOT true about the Food and Drug Administration?

answer

It has the regulatory power to cap the retail prices of food and drugs and prevent profiteering by food and drug companies.

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The first major consumer protection policy was the

answer

Food and Drug Act.

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Prior to the New Deal era of the 1930s, the national government

answer

usually allied itself with business elites to squelch labor unions.

question

The right of American workers to collective bargaining was first guaranteed by the National Labor Relations Act, also known as the ________ Act.

answer

Wagner

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Which of the following is NOT true of the Wagner Act?

answer

It gave states the power to adopt right-to-work laws.

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An example of the kind of consumer policy that was first adopted in the 1960s and 1970s was

answer

creation of a Product Safety Commission to regulate the safety of items sold to consumers.

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The agency responsible for protecting the public against false and misleading advertising is the

answer

Federal Trade Commission.

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Truth in lending is enforced by the

answer

Federal Trade Commission.

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The right of workers to collective bargaining is guaranteed by the

answer

National Labor Relations Act.

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An employer is forbidden to fire or discriminate against a worker who advocates the possibility of unionizing under a provision of the

answer

Wagner Act.

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The Taft-Hartley Act was aimed at

answer

limiting certain practices by organized labor.

question

Right-to-work laws were permitted by the

answer

Taft-Hartley Act

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Right-to-work laws are supported by

answer

business management.

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States were given the right to pass right-to-work laws by the

answer

Taft-Hartley Act.

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Right-to-work laws prohibit

answer

requirements that workers join a union to hold their jobs.

question

Government regulation affects businesses like Wal-Mart by

answer

none of the above

Chapter 17 Economic Policymaking Test Questions – Flashcards

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