Chapter 17 Economic Policymaking Test Questions – Flashcards

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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?
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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.
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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.
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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
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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.
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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?
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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.
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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?
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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?
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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
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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
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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.
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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.
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Federal Trade Commission
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________, supported by President Reagan, was encouraged by the economist Arthur Laffer.
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Supply-side economics
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According to proponents of supply-side economics,
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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
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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.
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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
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Microsoft
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Which of the following is NOT true about the Food and Drug Administration?
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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
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Food and Drug Act.
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Prior to the New Deal era of the 1930s, the national government
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usually allied itself with business elites to squelch labor unions.
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The right of American workers to collective bargaining was first guaranteed by the National Labor Relations Act, also known as the ________ Act.
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Wagner
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Which of the following is NOT true of the Wagner Act?
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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
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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
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Federal Trade Commission.
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Truth in lending is enforced by the
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Federal Trade Commission.
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The right of workers to collective bargaining is guaranteed by the
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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
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Wagner Act.
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The Taft-Hartley Act was aimed at
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limiting certain practices by organized labor.
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Right-to-work laws were permitted by the
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Taft-Hartley Act
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Right-to-work laws are supported by
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business management.
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States were given the right to pass right-to-work laws by the
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Taft-Hartley Act.
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Right-to-work laws prohibit
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requirements that workers join a union to hold their jobs.
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Government regulation affects businesses like Wal-Mart by
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none of the above
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