Chapter 10: Political Economy

Test Bank

Multiple Choice

1. Which of the following best describes the field of political economy?

a. the study of production and trade and the relationship with government and the distribution of wealth and income

b. the study of systems of governance, and the analysis of political activities, thoughts, and behavior

c. the study of interconnectedness of politics, economics, and law on a global level

d. the study of the domestic politics, institutions, economies, and conflicts of different countries

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Knowledge

Answer Location: Introduction

Difficulty Level: Easy

2. Which of the following economists developed the model for a government-economic relationship based on deficit spending?

a. Friedrich Hayek

b. John Maynard Keynes

c. Paul Krugman

d. Joseph Stiglitz

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: What Does Politics Have to Do with the Economy?

Difficulty Level: Easy

3. Taxes that are placed on imported or traded goods are known as ______.

a. sin taxes

b. tax expenditures

c. tariffs

d. progressive taxes

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: What Does Politics Have to Do with the Economy?

Difficulty Level: Easy

4. The resource curse refers to the situation in which ______.

a. there are people who will not pay to participate in achieving public goods or resources

b. an economic system is unable to produce or distribute needed goods, resources, or services

c. a country has vast natural resources but less economic growth, less democracy, or worse levels of development compared to countries without those resources

d. people overuse resources or goods available to all, thereby depleting it for all

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: What Does Politics Have to Do with the Economy?

Difficulty Level: Medium

5. A system of exchange in which firms produce goods and consumers buy and use those goods is ______.

a. corporatism

b. an economy

c. fiscal policy

d. monetary policy

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Types of Economic Systems

Difficulty Level: Easy

6. The economist who is recognized as one of the first to define and discuss the concept of capitalism is ______.

a. Rahel Jaeggi

b. John Maynard Keynes

c. Adam Smith

d. Joseph Stiglitz

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Capitalism

Difficulty Level: Easy

7. Which of the following economic systems depends on supply and demand to regulate the availability and price of goods and labor?

a. capitalism

b. communism

c. socialism

d. social democracy

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Capitalism

Difficulty Level: Easy

8. Jaeggi’s functional critique of capitalism argues that it is ______.

a. intrinsically dysfunctional and necessarily crisis-prone

b. exploitative and is either based on an unjust social structure or it produces one

c. the facilitator of a life that is impoverished, without meaning, or empty, and destroys essential components of that which belongs to a fulfilled, happy, and free life

d. prone to stagnation due to internal contradictions

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Comprehension

Answer Location: Capitalism

Difficulty Level: Hard

9. Jaeggi’s ethical critique of capitalism argues that it is ______.

a. intrinsically dysfunctional and necessarily crisis-prone

b. exploitative and is either based on an unjust social structure or it produces one

c. the facilitator of a life that is impoverished, without meaning, or empty, and destroys essential components of that which belongs to a fulfilled, happy, and free life

d. prone to stagnation due to internal contradictions

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Comprehension

Answer Location: Capitalism

Difficulty Level: Hard

10. A scenario in which an economic system is unable to produce or distribute needed or wanted goods and services—especially public or nonexcludable goods—coincides with ______.

a. the free rider problem

b. market failure

c. the resource curse

d. the tragedy of the commons

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Capitalism

Difficulty Level: Medium

11. Which of the following best describes communism?

a. an economic system in which there is a free market wherein supply and demand regulates the availability and price of goods and labor

b. an economic system in which private property is abolished with a system of common ownership

c. an economic system that envisions a greater role for the state in controlling the negative aspects of free markets and providing significant welfare benefits

d. an economic system that utilizes government intervention to balance out the excesses of a free market system

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: The Communist Critique

Difficulty Level: Easy

12. Which of the following economic systems envisions no private property, money or wealth, and a system of common ownership of goods and labor?

a. capitalism

b. communism

c. socialism

d. social democracy

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: The Communist Critique

Difficulty Level: Easy

13. Command economies are economic systems in which ______.

a. states control all aspects of an economy

b. private property is abolished with a system of common ownership

c. there is a greater role for the state in controlling the negative aspects of free markets and providing significant welfare benefits

d. government intervention is used to balance out the excesses of a free market system

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Other Economic Systems

Difficulty Level: Easy

14. Which of the following economic systems envisions a greater role for the state in controlling the negative aspects of free markets and providing significant welfare benefits?

a. capitalism

b. communism

c. socialism

d. social democracy

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Other Economic Systems

Difficulty Level: Medium

15. Which of the following best describes social democracy?

a. an economic system in which there is a free market wherein supply and demand regulates the availability and price of goods and labor

b. an economic system in which private property is abolished with a system of common ownership

c. an economic system that envisions a greater role for the state in controlling the negative aspects of free markets and providing significant welfare benefits

d. an economic system that utilizes government intervention to balance out the excesses of a free market system

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Other Economic Systems

Difficulty Level: Medium

16. Which of the following economic systems tries to “balance capitalist markets and private property with a greater degree of state intervention in the economy … in an effort to ameliorate the economic inequalities that the free market tends to create”?

a. capitalism

b. communism

c. socialism

d. social democracy

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Other Economic Systems

Difficulty Level: Medium

17. Which of the following best describes the idea of corporatism?

a. a formal system of cooperation between business and government

b. a system of exchange between producers and consumers of goods

c. a mix of taxing and spending policies enacted by states

d. a determination of the value and amount of money in the system

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Other Economic Systems

Difficulty Level: Medium

18. Which of the following best describes fiscal policy?

a. a formal system of cooperation between business and government

b. a system of exchange between producers and consumers of goods

c. a mix of taxing and spending policies enacted by states

d. a determination of the value and amount of money in the system

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Fiscal Policy

Difficulty Level: Easy

19. Which of the following are an example of an applied progressive taxation scheme in the United States?

a. estate tax

b. import tax

c. income tax

d. sales tax

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Application

Answer Location: Fiscal Policy

Difficulty Level: Medium

20. Progressive taxes are those ______.

a. placed on goods and services to discourage people from buying them

b. placed on imported goods

c. foregone by governments due to payers’ claims for reductions to their overall tax bills

d. that increase as income level rises

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Fiscal Policy

Difficulty Level: Easy

21. Sin taxes are those______.

a. placed on goods and services to discourage people from buying them

b. placed on imported goods

c. foregone by governments due to payers’ claims for reductions to their overall tax bills d. that increase as income level rises

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Fiscal Policy

Difficulty Level: Easy

22. Taxes placed on things like alcohol, marijuana, cigarettes, and profits from gambling are also commonly referred to as ______.

a. sin taxes

b. tax expenditures

c. tariffs

d. progressive taxes

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Comprehension

Answer Location: Fiscal Policy

Difficulty Level: Easy

23. Tax expenditures are taxes ______.

a. placed on goods and services to discourage people from buying them

b. placed on imported goods

c. foregone by governments due to payers’ claims for reductions to their overall tax bills

d. that increase as income level rises

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Fiscal Policy

Difficulty Level: Easy

24. Tax breaks or things like home mortgage interest deductions on income taxes are examples of ______.

a. sin taxes

b. tax expenditures

c. tariffs

d. progressive taxes

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Application

Answer Location: Fiscal Policy

Difficulty Level: Easy

25. The determination of how much money is available in a country, along with its value, is ______.

a. corporatism

b. an economy

c. fiscal policy

d. monetary policy

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Monetary Policy

Difficulty Level: Easy

26. Which of the following best describes monetary policy?

a. a formal system of cooperation between business and government

b. a system of exchange between producers and consumers of goods

c. a mix of taxing and spending policies enacted by states

d. a determination of the value and amount of money in the system

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Monetary Policy

Difficulty Level: Easy

27. Inflation refers to the ______.

a. amount lenders can charge for the use of borrowed assets

b. increase in prices of goods due to the devaluation of a currency

c. sum of all economic activity in a state

d. value or price of one currency vis-à-vis another

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Monetary Policy

Difficulty Level: Easy

28. In monetary policy, interest rates refer to the ______.

a. amount lenders can charge for the use of borrowed assets

b. increase in prices of goods due to the devaluation of a currency

c. sum of all economic activity in a state

d. value or price of one currency vis-à-vis another

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Monetary Policy

Difficulty Level: Medium

29. The total sum of all economic activity is a country is known as ______.

a. interest

b. inflation

c. gross domestic product

d. exchange rates

Learning Objective: 10.3: Examine measures of economic performance.

Cognitive Domain: Knowledge

Answer Location: Gross Domestic Product

Difficulty Level: Easy

30. The provision of special subsidies and assistance for the poor (typically through tax revenue from wealthier taxpayers) is known as ______.

a. fiscal policy

b. redistribution policy

c. monetary policy

d. tax expenditure

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Knowledge

Answer Location: Inequality

Difficulty Level: Medium

31. Which of the following best describes the field of international political economy?

a. the study of production and trade and the relationship with government and the distribution of wealth and income

b. the study the relationship between global politics and the global economy

c. the study and method used to examine the relationship between politics and economics across a range of states

d. the study of different countries’ factor endowments or technological endowments that allow for the ability to produce particular goods at lower opportunity costs

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Knowledge

Answer Location: International Political Economy

Difficulty Level: Medium

32. Research on the theory of comparative advantage involves which of the following?

a. the study of production and trade and the relationship with government and the distribution of wealth and income

b. the study the relationship between global politics and the global economy

c. the study and method used to examine the relationship between politics and economics across a range of states

d. the study of different countries’ factor endowments or technological endowments that allow for the ability to produce particular goods at lower opportunity costs

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Comprehension

Answer Location: Comparative Advantage

Difficulty Level: Medium

33. Fair trade refers to the adoption of ______.

a. lower trade barriers and little government involvement in trade and the economy

b. policies of retaliation against states perceived as ‘cheating’ by using trade and non-tariff barriers to stimulate their economies

c. various types of trade barriers to protect domestic goods and services from outside competition and comparative advantages

d. policies that advocate replacing foreign imports with domestic production

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Knowledge

Answer Location: Free and Fair Trade

Difficulty Level: Medium

34. Which of the following best describes the field of comparative political economy?

a. the study of production and trade and the relationship with government and the distribution of wealth and income

b. the study the relationship between global politics and the global economy

c. the study and method used to examine the relationship between politics and economics across a range of states

d. the study of different countries’ factor endowments or technological endowments that allow for the ability to produce particular goods at lower opportunity costs

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Knowledge

Answer Location: Comparative Political Economy

Difficulty Level: Medium

35. Programs that provide small loans to people in impoverished situations—in many cases women—to allow them to purchase provisions as well as overhead to start small businesses are called ______.

a. payday advances

b. microlending

c. small scale subsidization

d. community development programs

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Knowledge

Answer Location: Women and the Economy

Difficulty Level: Hard

True/False

1. Political science research has shown that economic concerns are a primary issue for voters.

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Comprehension

Answer Location: Introduction

Difficulty Level: Easy

2. The resource curse is a paradox in political economy.

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Comprehension

Answer Location: What Does Politics Have to Do with the Economy?

Difficulty Level: Hard

3. Adam Smith recognized that the purpose of studying political economy is to provide everyone with plentiful revenue.

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Knowledge

Answer Location: Capitalism

Difficulty Level: Hard

4. Communism, in its ideal form, has been attempted several times in the last century.

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Comprehension

Answer Location: The Communist Critique

Difficulty Level: Easy

5. The origins of socialism are rooted in disagreements about how the working class would take control of the state.

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Comprehension

Answer Location: Other Economic Systems

Difficulty Level: Medium

6. The tax imposed by the 2010 Affordable Care Act on individuals who did not have health insurance was an example of a tax expenditure.

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Application

Answer Location: Fiscal Policy

Difficulty Level: Easy

7. Managing unemployment is a central feature of fiscal policy.

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Comprehension

Answer Location: Fiscal Policy | Monetary Policy

Difficulty Level: Medium

8. Inflation is often kept in check by the implementation of targeted interest rates.

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Comprehension

Answer Location: Monetary Policy

Difficulty Level: Medium

9. Countries with capitalist economies are unable to smooth out the highs and lows of boom and bust cycles.

Learning Objective: 10.1: Describe the relationship between governments and the economy.

Cognitive Domain: Comprehension

Answer Location: Gross Domestic Product

Difficulty Level: Medium

10. In comparative political economy, states form the context in which political and economic actors interact.

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Comprehension

Answer Location: Comparative Political Economy

Difficulty Level: Medium

Essay

1. What are some of the similarities and differences between the various economic systems that have been adopted and are in use around the world? What are the social and political implications?

Learning Objective: 10.2: Describe different types of economic systems, including capitalism, socialism, and command economies.

Cognitive Domain: Analysis

Answer Location: Types of Economic Systems

Difficulty Level: Medium

2. In what ways can states (governments) affect their economies? Why might they pursue those options, and what are the consequences of those actions?

Learning Objective: 10.2: Describe the relationships between governments and the economy

Cognitive Domain: Comprehension

Answer Location: Government Involvement and Economic Performance

Difficulty Level: Medium

3. Consider the impact of economic inequality for politics and society. What are some of the methods used to assess inequality? Prescribe a policy or set of policies that you think could be the most effective at ameliorating inequality, and why.

Learning Objective: 10.3: Examine measures of economic performance.

Cognitive Domain: Analysis

Answer Location: Inequality

Difficulty Level: Hard

4. Is democracy a good or bad thing for economic growth and development? Why?

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Analysis

Answer Location: Democracy and the Economy

Difficulty Level: Medium

5. Does economic development encourage democratization (a growth in democracy)? How and why—or how and why not? Consider the different policies that states can adopt to affect the economy, the impact of regime types, and real world examples to support your argument.

Learning Objective: 10.4: Identify the fields of comparative and international political economy including their major areas of research.

Cognitive Domain: Analysis

Answer Location: Democracy and the Economy

Difficulty Level: Hard