Economics Exam

Test 4

The following questions concern economics. They are multiple choice questions; please select the most appropriate answer.

America’s economic system can best be described as one of:
Socialism
Communism
Keynesianism
Capitalism

Hallmarks of America’s economy include which of the following combinations?
Free markets, property rights, little governmental oversight
Restricted trade, strong governmental regulation of all facets of the economy, and little respect for property rights.
A centralized economy with top down management.
An economy that lives by the principle: from each according to his ability, to each according to his needs.

A deficit occurs when:
The government spends more than it receives in tax revenues.
There is equilibrium between taxes and spending.

Entitlements are spending items when the government:
Guarantees a benefit to all citizens upon their qualification within a certain class of citizens. Such as social security.
Guarantees a project to a city as part of its latest budget. For example, a water system for West Liberty.

What particular type of budget expenditures constitutes the largest amount of spending by the federal government?
Infrastructure such as roads and interstates.
Military spending such as for the war.
Spending on foreign aid.
Entitlement spending.

Which of the following terms best describes the modern America form of government?
Welfare State.
Opportunity State.
Communistic state.
Pure Free Market State.

Fiscal policy is set, at least primarily, by whom:
Congress and the President
The President alone.
The Supreme Court
The Federal Reserve

Monetary policy is set, at least primarily, by whom:
Congress and the President
The President alone.
The Supreme Court
The Federal Reserve

Supply side economics holds that:
Tax cuts, even if they lead to a deficit, are of principle importance because they allow the citizens to spend and grow the economy.
Deficits are of principle importance. Cutting them should be the most important focus of government.
In times of recessions or depressions, it’s a good idea for the federal government to borrow and spend more money than it takes in from taxes. This spending by the government will result in a stronger economy eventually.
All the above.

Keynesian economics holds that:
Tax cuts, even if they lead to a deficit, are of principle importance because they allow the citizens to spend and grow the economy.
Deficits are of principle importance. Cutting them should be the most important focus of government.
In times of recessions or depressions, it’s a good idea for the federal government to borrow and spend more money than it takes in from taxes. This spending by the government will result in a stronger economy eventually.

The federal government regulates the economy to do which of the following:
Ensure safety of consumers
Promote moral outcomes
Protect parties likely to be disadvantaged
All the above.

Generally speaking, America regulates the economy ______ than most developed countries.
in fewer ways
in more ways

The federal government is concerned about the pace of the economy and the risk of inflation. What policy is most likely to be pursued?
Congress would cut taxes
The Federal Reserve would raise taxes
The Federal Reserve would raise interest rates
The Congress would cut interest rates

The federal government is concerned that the economy is slowing and heading towards a recession. Which set of policies are the most likely ones Congress would consider? Keep in mind that the two parties will likely approach the issue differently.
Tax cuts or spending increases
Tax increases and spending increases
Tax neutral policies and spending cuts
None of the above.

Interest rate increases would most likely?
Shrink the economy by reducing the supply of money.
Increase the economy by increasing the supply of money.

Interest rate cuts would most likely?
Shrink the economy by reducing the supply of money.
Increase the economy by increasing the supply of money.

Free trade….
Is always a bad thing because it hurts American workers
Is always a good thing because it allows American consumers to buy products at cheaper prices.
Both A and B have some truth to them.
None of the above.

Globalization refers to what?
The increasing need for governments across the globe to work better with one another.
The failure of states to cooperate with one another across the globe.
The ability of goods, services, weapons and peoples to travel across countries’ boundaries with ease.

A policy where deficit and national debt reduction is stressed would potentially help the economy in what way?
It will free up more money for private spending and economic growth.
By reducing the national debt, interest rates will go down.
Both A and B
None of the above

Interest rate cuts will most likely make the economy:
Grow
Shrink