Test Bank Chapter 15 Economic and Environmental Policy

We The People, 13e (Patterson)

Chapter 15 Economic and Environmental Policy: Contributing to Prosperity

1) 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.

2) The main 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.

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

A) the desire for profit is the invisible hand that guides a capitalist system.

B) the government should not be allowed any role whatsoever in the economy.

C) private firms should be left alone to make their production and distribution decisions.

D) firms will produce a good when there is a demand for it.

E) certain areas of the economy were better run by government agencies.

4) 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.

5) 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 has an important role in regulating and maintaining the U.S. economy.

E) The government owns most of the means of production in the United States.

6) 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.

7) Which of the following government agencies regulates various aspects of business operations?

A) Federal Trade Commission

B) Interstate Commerce Commission

C) Consumer Financial Protection Bureau

D) all of these: the Federal Trade Commission; the Interstate Commerce Commission; and the Antitrust Division of the Justice Department

E) None of these answers is correct.

8) 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.

9) Advocates of deregulation are primarily concerned with

A) efficiency.

B) equity.

C) externalities.

D) public safety.

E) political expediency.

10) 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.

11) 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.

12) 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.

13) 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.

14) 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

15) The Progressive Era of government regulation focused on

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 selling of unsafe food and drugs.

16) 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.

17) ________ wrote Silent Spring in 1962.

A) Al Gore

B) George W. Bush

C) Greenpeace

D) Rachel Carson

E) The Sierra Club

18) Which of the following is correct about environmental policy?

A) Environmental regulation has not markedly improved the air and water conditions since its initial establishment and growth.

B) The Environmental Protection Agency was proposed by a Republican president and enacted by a Democratic Congress.

C) Conservation and deforestation is the highest-profile environmental issue today in the United States.

D) The EPA has the authority to levy fines and sanctions on businesses.

E) None of these answers is correct.

19) Which of the following is true of the climate change issue?

A) Scientists theorize that the use of carbon-based fuels is most responsible for temperature rises.

B) Most scientists doubt the evidence behind the theory that humans are helping to cause temperature increases. 

C) U.S. policymakers are relatively uniform in their desire to avoid costly measures to reduce carbon emissions.

D) Most Western countries have not taken major steps to reduce carbon emissions.

E) U.S. participation in the Paris accord is the only major initiative it currently undertakes to deal with climate change.

20) Which of the following has been a major impediment to any U.S. action to reduce its carbon emissions as a means of reducing climate change?

A) the continual slowing down of the U.S. economy

B) the lack of power in the presidency to affect policy change on the issue

C) the lack of any regulatory agencies that might be able to enforce carbon reduction measures

D) the overwhelming disinterest of the American people

E) the fragmented nature of the U.S. political system

21) 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) All of these countries have been about equal in their efforts to reduce greenhouse gas emissions.

22) Which country has the highest annual emissions of carbon dioxide?

A) United States

B) China

C) Japan

D) France

E) Great Britain

23) Government benefits for business include all of the following EXCEPT

A) loan guarantees and direct loans.

B) corporate tax breaks.

C) a national transportation system.

D) minimum-wage laws.

E) a national education system.

24) 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.

25) 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.

26)   Government subsidies to small and large farmers are designed in large part to

A) increase tax revenue levied on farm production and exports.

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.

27) Which president's use of government policy as economic stimulus 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

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

A) 10 percent

B) one-fifth

C) a third

D) one-seventh

E) two-thirds

29) 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.

30) In 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.

31) A fiscal policy solution to inflation would be to

A) increase government spending.

B) lower tariffs and other barriers to trade.

C) decreasing government spending.

D) raise the discount rate.

E) decrease the tax rate.

32) If the economic problem is 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 spending.

D) decrease spending.

E) None of these answers is correct.

33) Which of the following statements is true?

A) The national debt was eliminated in 1998.

B) Demand-side policy cannot be used to slow down an economy.

C) Demand-side stimulation typically provides more immediate help to low-income citizens more than does supply-side stimulation.

D) The highest budget deficit in U.S. history was $59 billion.

E) Demand-side policy suggests that government spending should increase more during and economic recession than an economic depression.

34) 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

35) 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.

36) 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.

37) 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.

38) The tax cuts pushed by President George W. Bush while in office were premised largely on

A) demand-side economics.

B) supply-side economics.

C) helping the lowest-income Americans.

D) monetary policy.

E) Keynesian economics.

39) Supply-side economics, as implemented by President George W. Bush's administration, 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 budget deficit.

E) All of these answers are correct.

40) The total amount of money the federal government spends each year in excess of its yearly revenues is the

A) trade deficit.

B) budget deficit.

C) national debt.

D) credit imbalance.

E) income disparity.

41) About how much of annual federal spending goes to pay interest on the national debt?

A) $30 million

B) $300 million

C) $30 billion

D) $300 billion

E) $900 billion

42) 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.

43) 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.

44) 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 rising unemployment.

E) too much money in circulation contributes to inflation.

45) 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.

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

A) monetary

B) military

C) fiscal

D) budgetary

E) security

47) 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.

48) 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.

49) The Federal Reserve controls the money supply through all of the following actions EXCEPT

A) raising the percentage of funds members banks are required to hold in reserve.

B) raising the interest rate that member banks are charged when they borrow from the Federal Reserve.

C) lowering the percentage of funds members banks are required to hold in 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.

50) If the Fed wanted to act to reduce unemployment, it would

A) sell securities.

B) raise the reserve rate.

C) decrease the interest rate on loans to member banks.

D) discourage businesses from expanding.

E) encourage people to save more and spend less.

51) 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.

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

A) 1955

B) 1963

C) 1979

D) 1991

E) 2002

53) Who was appointed Fed chair in 2018?

A) Ben Bernanke

B) Milton Friedman

C) Alan Greenspan

D) Janet Yellen

E) Jerome Powell

54) 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.

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.

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

A) the 1930s.

B) the 1860s.

C) the 1960s.

D) the 1980s.

E) the 2000s.

57) Define the term fiscal policy and explain how fiscal policy can be used in response to economic conditions.

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

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

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