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54 9 Chapter 18: Economic Policy Reading Comprehension Quiz Multiple Choice Questions 1) The U.S. economic system is a A) pure capitalist system. B) mixed free-enterprise system. C) pure laissez-faire system. D) mixed Marxist and socialist system. E) pure centralized economic system. Answer: B Reference: LO 18.1, pgs. 570-577 Skill: Understanding 2) The Great Depression began in A) 1887. B) 1909. C) 1917. D) 1929. E) 1943. Answer: D Reference: LO 18.1, pgs. 570-577 Skill: Understanding 3) During the 1960s and 1970s, most regulatory programs enacted by the national government fell into the category of ________ regulation. A) due process B) paper tiger C) environmental protection Copyright © 2011, 2009, 2007 Pearson Education, Inc. All rights reserved.

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Chapter 18: Economic Policy

Reading Comprehension Quiz

Multiple Choice Questions

1) The U.S. economic system is a A) pure capitalist system. B) mixed free-enterprise system. C) pure laissez-faire system. D) mixed Marxist and socialist system. E) pure centralized economic system. Answer: BReference: LO 18.1, pgs. 570-577Skill: Understanding

2) The Great Depression began in A) 1887. B) 1909. C) 1917. D) 1929. E) 1943. Answer: DReference: LO 18.1, pgs. 570-577Skill: Understanding

3) During the 1960s and 1970s, most regulatory programs enacted by the national gov-ernment fell into the category of ________ regulation. A) due process B) paper tiger C) environmental protectionD) social E) moral Answer: DReference: LO 18.1, pgs. 570-577Skill: Understanding

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4) Which president signed legislation that deregulated commercial airlines, railroads, motor carriers, and financial institutions? A) Richard M. Nixon B) Gerald R. Ford C) Jimmy Carter D) Ronald Reagan E) Bill Clinton Answer: CReference: LO 18.1, pgs. 570-577Skill: Understanding

5) The deliberate use of taxing and spending policies to improve the country's economic prospects is called A) budgetary policy. B) fiscal policy. C) socioeconomic policy. D) discretionary policy. E) monetary policy. Answer: BReference: LO 18.2, pgs. 577-583Skill: Understanding

6) The _________________ allowed the federal government to impose an income tax on American citizens.A) Second AmendmentB) Fair Tax ActC) Sixteenth AmendmentD) Smoot-Hawley TariffE) Articles of ConfederationAnswer: CReference: LO 18.2, pgs. 577-583Skill: Understanding

7) Which of the following countries owns the greatest percentage of American debt?A) RussiaB) Great BritainC) CanadaD) ChinaE) JapanAnswer: DReference: LO 18.3, pgs. 583-586Skill: Understanding

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8) ________________ handles much of the day-to-day management of monetary policy.A) CongressB) The Federal Reserve SystemC) The Internal Revenue ServiceD) The Council of Economic AdvisorsE) The White HouseAnswer: BReference: LO 18.3, pgs. 583-586Skill: Understanding

9) Studying rankings provided by the __________________ is one way to evaluate how hospitable a country is to business.A) Better Business BureauB) Federal Reserve SystemC) AFL-CIOD)World Economy Fact BookE) Economic Freedom of the World IndexAnswer: EReference: LO 18.3, pgs. 583-586Skill: Understanding

10) Social Security was created in the A) 1790s. B) 1860s. C) 1930s. D) 1960s. E) 1970s. Answer: CReference: LO 18.4, pgs. 586-593Skill: Understanding

11) The earned income tax credit program does all of the following EXCEPT A) increase employment among low-income Americans. B) refund part or all of the Social Security wages paid by the poor. C) provide an incentive to work. D) help the unemployed. E) increase consumer spending. Answer: DReference: LO 18.4, pgs. 586-593Skill: Understanding

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12) How are supplemental nutrition benefits distributed to citizens?A) Food delivery servicesB) An electronic debit programC) Paper couponsD) Food banksE) The government eliminated the program entirely.Answer: BReference: LO 18.4, pgs. 586-593Skill: Understanding

13) The modified version of the George W. Bush administration’s initial bailout plan passed by Congress in 2008 was called the ______________________.A) Emergency Economic Stability ActB) Troubled Asset Relief ProgramC) Works Progress AdministrationD) American Recovery and Reinvestment ActE) Lilly Ledbetter Fair Pay ActAnswer: AReference: LO 18.5, pgs. 593-599Skill: Understanding

14) Which of the following describes the purpose of www.recovery.gov?A) A site designed by charities to help citizens apply for disaster relief fundsB) A site set up by banks to improve their image after the financial crisisC) A site established by the government to offer resources to Americans with substance abuse problemsD) A site planned by the government to educate citizens on where and how their stimulus funds are being spentE)A site designed to describe new state-level education reforms Answer: DReference: LO 18.5, pgs. 593-599Skill: Understanding

15) Education spending received approximately ________percent of the total Recovery Act funds.A) 5B) 10C) 15D) 20E) 35Answer: BReference: LO 18.5, pgs. 593-599Skill: Understanding

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True/False Questions

1) The U.S. economy is characterized by private ownership of property, private enter-prise, and marketplace competition. Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Understanding

2) The first major effort to regulate business was caused by growing concern over the power of the railroads.Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Understanding

3) President Franklin D. Roosevelt’s New Deal decreased government intervention in many economic policy areas, such as labor and industry.Answer: FALSEReference: LO 18.1, pgs. 570-577Skill: Understanding

4) After accounting for inflation, workers are currently earning their highest minimum wage. Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

5) China holds the greatest percentage of American debt.Answer: TRUEReference: LO 18.2, pgs. 577-583Skill: Understanding

6) The Federal Reserve Board consists of seven members who serve 14-year terms, are appointed by the president, and are confirmed by the Senate.Answer: TRUEReference: LO 18.3, pgs. 583-586Skill: Understanding

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7) The Federal Reserve has recently begun take a big-picture financial system approach to regulation as opposed to focusing on individual banks.Answer: TRUEReference: LO 18.3, pgs. 583-586Skill: Understanding

8) Both the New Deal and the Great Society lessened government involvement in Ameri-cans’ everyday lives.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Understanding

9) The supplemental nutrition program was originally intended to increase the variety of international foods Americans were eating.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Understanding

10) The majority of Recovery Act funds were allotted to improving health care.Answer: FALSEReference: LO 18.5, pgs. 593-599Skill: Understanding

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Chapter Exam

Multiple Choice Questions

1) Congress passed the Troubled Asset Relief Program to speed recovery from the poor economic conditions in the United States resulting from A) the stock market crash of 1929.B) the oil crisis of the 1970s.C) the stock market crash of 1987.D) the burst of the technology bubble in the 1990s.E) the sub-prime mortgage crisis in the 2000s.Answer: EReference: Chapter Opener, pgs. 568-570Skill: Understanding

2) The _________________ Act of 2009 was designed to create jobs and cut taxes through deficit spending.A) American Recovery and ReinvestmentB) Glass-SteagallC) Economic and Financial InvestmentD) Interstate CommerceE) McCain-FeingoldAnswer: AReference: Chapter Opener, pgs. 568-570Skill: Understanding

3) Which of the following would be the most likely to occur in a mixed free-enterprise system?A) The passage of a law that requires private businesses to share stockholdings with the governmentB) A government takeover of the airline industryC) A ban on interstate commerceD) A bidding war between two cable companies to offer the lowest priceE) The existence of only one utility company for the entire countryAnswer: DReference: LO 18.1, pgs. 570-577Skill: Application

4) During our nation's first century, most private economic regulation was done by the

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A) states. B) national government. C) U.S. Congress. D) courts. E) federal bureaucrats. Answer: AReference: LO 18.1, pgs. 570-577Skill: Understanding

5) The doctrine of ________ opposes government involvement in the economy. A) the business cycle B) unitarism C) laissez-faire D) noblesse obligeE) centralization Answer: CReference: LO 18.1, pgs. 570-577Skill: Understanding

6) The first major government effort to regulate business occurred followingA) Prohibition.B) the growth of railroads.C) a rise in the number of anti-trust suits.D) the Civil War.E) massive increases in export taxes.Answer: BReference: LO 18.1, pgs. 570-577Skill: Understanding

7) In 1887, Congress adopted the Interstate Commerce Act, which was designed to A) regulate any and all interstate commerce. B) regulate railroads. C) facilitate business transactions among the states. D) prohibit short hauling of goods. E) regulate trucking. Answer: BReference: LO 18.1, pgs. 570-577Skill: Understanding

8) Which of the following is MOST relevant to the growing concern over the prevalence

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of media conglomerates?A) The Parker-Dobbs ActB) The Sherman Anti-Trust ActC) The Federal Reserve ActD) The Anti-Monopoly ActE) The Interstate Commerce ActAnswer: BReference: LO 18.1, pgs. 570-577Skill: Application

9) In 1890, Congress passed the ________, a law designed to prohibit monopolies. A) Sherman Anti-Trust Act B) Law on Mergers and Acquisitions C) Interstate Commerce Act D) Hatch Act E) Monopolies Act Answer: AReference: LO 18.1, pgs. 570-577Skill: Understanding

10) Congress passed the Federal Reserve Act in 1913 to A) regulate the national banking system and provide flexibility to the money supply. B) encourage the production of domestic and offshore oil reserves. C) wean the United States off the gold standard. D) ensure that the federal budget was balanced. E) create a six-month supply of currency backed by gold bullion and stored at Fort Knox. Answer: AReference: LO 18.1, pgs. 570-577Skill: Understanding

11) The first major effort by the national government to protect consumers involved A) meatpacking. B) sugar. C) tea. D) chamomile. E) produce. Answer: AReference: LO 18.1, pgs. 570-577Skill: Understanding

12) When President George W. Bush signed the Economic Stimulus Act of 2008, he was

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practicing the doctrine of A) progressivism. B) populism. C) institutionalism. D) interventionism. E) activism. Answer: DReference: LO 18.1, pgs. 570-577Skill: Application

13) The program instituted by President Franklin D. Roosevelt to overcome the Great Depression was the A) War on Poverty. B) Federal Relief Policy. C) New Deal. D) Fair Deal. E) Great Society. Answer: CReference: LO 18.1, pgs. 570-577Skill: Understanding

14) The rights of labor to organize and bargain collectively come from the A) Glass-Steagall Act. B) Fair Labor Standards Act. C) Townshend Act. D) Organized Labor Act. E) Wagner Act. Answer: EReference: LO 18.1, pgs. 570-577Skill: Understanding

15) The Fair Labor Standard Act of 1938 established A) a federal minimum wage.B) limits on the number of hours citizens could work.C) anti-trust regulations.D) unions.E) the minimum age at which a person could work.Answer: AReference: LO 18.1, pgs. 570-577Skill: Understanding

16) During the New Deal, Congress established or enacted all of the following EXCEPT

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theA) Civil Aeronautics Board. B) Federal Communications Commission. C) Motor Carrier Act. D) National Labor Relations Board.E) Shipping Standards Act. Answer: EReference: LO 18.1, pgs. 570-577Skill: Analysis

17) ________ established the legitimacy and viability of national governmental interven-tion in the economy. A) The New Deal B) World War II C) The Fair Labor Standards Act D) The National Labor Relations Board E) The Wagner Act Answer: AReference: LO 18.1, pgs. 570-577Skill: Analysis

18) Which of the following was NOT a factor that contributed to the surge of social reg-ulation in the late 1960s and early 1970s? A) Group-based social activism B) Public awareness of hazards associated with modern products C) Members of Congress saw an opportunity to enhance their reelection prospects by championing such causes D) Business became much greedier, thus prompting a backlash E) Presidential support Answer: DReference: LO 18.1, pgs. 570-577Skill: Analysis

19) Before ____________________ a person in a small town would have had a better chance of living close to a commercial airport.A) the Great SocietyB) social regulationC) the New DealD) deregulationE) communismAnswer: DReference: LO 18.1, pgs. 570-577Skill: Application

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20) Which of the following organizations would be most supportive of an expansion of free trade?A) The Protectionist SocietyB) The AFL-CIOC) The Textile Workers of AmericaD) General MotorsE) The National Farmers UnionAnswer: DReference: LO 18.2, pgs. 577-583Skill: Application

21) Many people believe that it is necessary to set up ____________ to protect the U.S. from overseas competition. A) trade deficits B) outsourcing of manufacturing jobs C) a protectionist system D) limitations on imports E) ways of expanding free tradeAnswer: CReference: LO 18.2, pgs. 577-583Skill: Understanding

22) Workers earned their highest minimum wage during the _________ administration.A) Ronald Reagan B) George W. Bush C) Franklin D. Roosevelt D) Bill Clinton E) Gerald Ford Answer: EReference: LO 18.2, pgs. 577-583Skill: Application

23) China’s emergence as a major economic power has created all of the following EX-CEPTA) environmental degradation. B) a high death toll from cancer. C) an increasingly capitalist society. D) water shortages.E) death of aquatic life.Answer: CReference: LO 18.2, pgs. 577-583Skill: Analysis

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24) ___________________ is one of the two policy areas in which the government spends most of its money.A) Road repairB) Purchasing military weaponryC) Building new librariesD) Sending aid to HaitiE) Subsidizing the development of electric carsPage: BReference: LO 18.2, pgs. 577-583Skill: Application

25) If the president wanted to decrease defense spending and increase monetary aid to victims of natural disaster, which one of the following groups would be MOST likely to balance the new distribution of spending?A) The Department of TransportationB) The Office of Management and BudgetC) The Central Intelligence AgencyD) The Department of the InteriorE) The CabinetAnswer: BReference: LO 18.2, pgs. 577-583Skill: Application

26) Which of the following are likely reasons for the government to be running a deficit?I. Military invasionsII. Budget cutsIII. Economic recessionIV. Tax cuts

A) I onlyB) I and II C) I and IV D) III and IV E) I, III, and IV Answer: EReference: LO 18.2, pgs. 577-583Skill: Analysis

27) All of the following are reforms encouraged by Federal Reserve Board Chairman

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Ben Bernanke EXCEPTA) a focus on the whole financial system, not just individual banks.B) strengthening capital requirements for banks.C) the creation of one national bank to limit bank failures.D) the creation of a council of regulators to police risky financial practices.E) safe dismantling of failing financial firms.Answer: CReference: LO 18.3, pgs. 583-586Skill: Analysis

28) All of the following scenarios would be affected by income security EXCEPTA) a 70-year-old choosing to retire.B) an accident that limits a person’s ability to work.C) a college student’s decision to take summer classes and not take a job.D) the poor economy causing a person’s job to be eliminated.E) the death of a man with two children and a stay-at-home wife.Answer: CReference: LO 18.4, pgs. 586-593Skill: Application

29) Which of the following are components of the Social Security Act of 1935?I. Old-age insuranceII. Unemployment insuranceIII. Workers’ compensationIV. Increased tax refunds

A) I and II B) I and IV C) II and III D) III and IV E) I, II, and III Answer: AReference: LO 18.4, pgs. 586-593Skill: Understanding

30) All of the following are examples of entitlement programs EXCEPT

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A) Supplemental Security Income.B) public housing.C) Social Security.D) the Supplemental Nutrition Assistance Program.E) Temporary Assistance for Needy Families.Answer: BReference: LO 18.4, pgs. 586-593Skill: Understanding

31) How many Americans benefit from Social Security (OASDI)?A) Approximately 4 millionB) Between 5 and 10 millionC) Approximately 40 millionD) Between 50 and 55 millionE) Between 70 and 75 millionAnswer: DReference: LO 18.4, pgs. 586-593Skill: Understanding

32) The current debate over raising the retirement age affects which of the following programs?I. MedicaidII. Social SecurityIII. Veterans’ disability benefitsIV. Temporary Assistance for Needy Families

B) II onlyA) I and II C) I and III E) III and IV D) II, III, and IV Answer: AReference: LO 18.4, pgs. 586-593Skill: Analysis

33) The costs of Social Security A) have always exceeded revenues. B) are expected to exceed revenues in 2050. C) are expected to exceed revenues around 2015 or shortly thereafter. D) are mandated by law to equal revenues. E) are not expected to exceed revenues until 2085. Answer: CReference: LO 18.4, pgs. 586-593Skill: Understanding

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34) Unemployment insurance payments A) are available to all unemployed persons seeking work. B) vary based on unemployment rates. C) vary dramatically by state. D) are subject to mandated minimums set by the federal government. E) are most generous in southern states. Answer: CReference: LO 18.4, pgs. 586-593Skill: Understanding

35) The unemployment rate in 2010 wasA) below 5% percentB) around 10 percent.C) between 12 and 15 percent.D) around 20 percent.E) greater than 20 percent.Answer: BReference: LO 18.4, pgs. 586-593Skill: Understanding

36) Which of the following is/are true about Supplemental Security Income?I. It is non-means tested.II. Primary funding is provided by the states.III. Coverage includes needy people who are permanently disabled.IV. Beneficiaries can only have limited income.

A) I onlyB) I and II C) I and IV D) III and IV E) II, III, and IV Answer: DReference: LO 18.4, pgs. 586-593Skill: Understanding

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37) Which of the following states had an unemployment rate greater than 10 percent in 2010?A) MaineB) ColoradoC) TennesseeD) ArizonaE) North DakotaAnswer: CReference: LO 18.4, pgs. 586-593Skill: Analysis

38) What do the Great Society, the New Deal, and the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 have in common?A) They were all initiated by Republican presidents.B) They all prompted criticism from Democrats.C) They all significantly reformed health care.D) They all indicate major shifts in social policy.E) They all moved welfare away from work-oriented goals.Answer: DReference: LO 18.4, pgs. 586-593Skill: Analysis

39) All of the following are features of TANF EXCEPTA) single mothers with children over five must work within two years of receiving bene-fits. B) single, pregnant women must work through the ninth month of pregnancy. C) unmarried mothers under the age of 18 must live with an adult and attend school. D) mothers must provide information on the fathers of their children to get benefits. E) a five-year lifetime limit for aid from block grants. Answer: BReference: LO 18.4, pgs. 586-593Skill: Understanding

40) The Earned Income Tax Credit and Supplementary Security Income have what in common?A) Individuals receiving benefits must have children.B) Benefits are only distributed to those who earn less than a pre-determined income amount.C) Individuals enrolled in each program must be over the age of 65.D) Individuals enrolled in each program must be disabled.E) Only individuals in certain states can receive benefits from these programs.Answer: BReference: LO 18.4, pgs. 586-593Skill: Analysis

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41) The initial purpose of the food stamp program was to A) provide special nutritional programs for poor women. B) alleviate poverty during the Great Depression. C) alleviate poverty and hunger during the 1960s. D) reduce hunger and malnutrition in children. E) expand domestic markets for farm commodities. Answer: EReference: LO 18.4, pgs. 586-593Skill: Understanding

42) Which of the following can be purchased using food stamps in Alaska?I. Prepared hot foods sold in storesII. VitaminsIII. Herb seedsIV. Candy

A) II onlyB) II and III C) III and IV D) I and IV E) I, III, and IV Answer: CReference: LO 18.4, pgs. 586-593Skill: Analysis

43) All of the following indicate that 2008 marked the beginning of a period of economic instability in the U.S. economy EXCEPTA) furloughs for government employees instituted by many states.B) high voter turnout.C) a drastic increase in housing foreclosures.D) the collapse of the financial industry.E) high unemployment.Answer: BReference: LO 18.5, pgs. 593-599Skill: Understanding

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44) The $700 billion bailoutA) failed to win the support of both houses of Congress.B) was enacted using executive order.C) failed to pass Congress the first time, but succeeded the second.D) was authorized under the Glass-Steagall Act.E) was declared unconstitutional by the Supreme Court.Answer: CReference: LO 18.5, pgs. 593-599Skill: Understanding

45) One justification given for economic stimulus payments to Americans in 2008 was that the government has a responsibility to prevent economic downturns. This is an exam-ple of the philosophy of _________________.A) deregulationB) détente C) interventionismD) protectionismE) libertarianismAnswer: CReference: LO 18.5, pgs. 593-599Skill: Application

46) Which of the following are arguments against economic stimulus payments?I. Deficit spending has serious future ramifications.II. Stimulus payments send a powerful message to consumers, businesses, and investors.III. Government cannot control how stimulus payments are used.IV. The government has a responsibility to prevent economic downturns.

A) I and II B) I and IIIC) II and IVD) III and IV E) I, III and IV Answer: BReference: LO 18.5, pgs. 593-599Skill: Analysis

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47) ____________________ is a similar action to deficit spending.A) Opening a checking accountB) Declaring bankruptcyC) Using a credit card D) Renting a carE) Buying a car with cashAnswer: CReference: LO 18.5, pgs. 593-599Skill: Application

48) Which of the following policy areas appeared to be given the most priority in allocat-ing funds for the Recovery Act?A) EducationB) Low-income aidC) HealthcareD) EnergyE) Tax cutsAnswer: EReference: LO 18.5, pgs. 593-599Skill: Analysis

49) Which of the following is NOT a method used by the Republican Party to fix the economic downturn in early 2008?A) Increasing the supply of moneyB) Implementing a Keynesian deficit spending approachC) Lowering interest ratesD) Issuing tax rebates to citizensE) Working with the Federal Reserve BoardAnswer: BReference: LO 18.5, pgs. 593-599Skill: Analysis

50) Conservative scholars credit the _______ for creating the economic growth that stalled a rise in unemployment in 2010.A) Recovery ActB) TARP programC) tax and spend economic policiesD) Great Society programE) New DealAnswer: BReference: LO 18.5, pgs. 593-599Skill: Understanding

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True/False Questions

1) The OPEC oil crisis caused Congress to create the Troubled Asset Relief Program.Answer: FALSEReference: Chapter Opener, pgs. 568-570Skill: Understanding

2) Most economic regulation was undertaken by the national government during our na-tion's first century. Answer: FALSEReference: LO 18.1, pgs. 570-577Skill: Understanding

3) The laissez-faire state is when the government takes an active role in guiding and managing the private economy. Answer: FALSEReference: LO 18.1, pgs. 570-577Skill: Understanding

4) Microsoft’s almost total control over the computer software industry in the 1990s showed similarities to the era of trusts in the late nineteenth century.Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Analysis

5) One of the goals of the modern-day Tea Party movement – to limit government inter-action in citizen’s lives – is comparable to the goals of the Progressive movement in the early twentieth century.Answer: FALSEReference: LO 18.1, pgs. 570-577Skill: Analysis

6) During the 1930s, the interventionist state was replaced by the laissez-faire state. Answer: FALSEReference: LO 18.1, pgs. 570-577Skill: Understanding

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7) The New Deal established the national government as a major regulator of private businesses and provider of Social Security and as ultimately responsible for maintaining a stable economy. Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Understanding

8) Supporters of the Wagner Act would be disappointed at the relatively low level of union participation in the modern era.Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Application

9) Social regulation occurs when government regulates the quality and safety products as well as the conditions under which goods and services are produced. Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Understanding

10) President Gerald R. Ford was uninterested in deregulation. Answer: FALSEReference: LO 18.1, pgs. 570-577Skill: Understanding

11) Deregulation was a major priority for President Jimmy Carter. Answer: TRUEReference: LO 18.1, pgs. 570-577Skill: Understanding

12) The first significant application of fiscal policy theory occurred in 1890.Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

13) President Obama’s lack of support for tax cuts is similar to President Lyndon B. Johnson’s philosophy of economic policy reflected in the Revenue Act of 1964.Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Analysis

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14) The American Civil Liberties Union would be more inclined to support protectionist policies than free trade.Answer: TRUEReference: LO 18.2, pgs. 577-583Skill: Application

15) In 2009, the United States, the European Union, and Asia each represented between 25 and 30 percent of the world’s GDP.Answer: TRUEReference: LO 18.2, pgs. 577-583Skill: Understanding

16) A goal of the Progressive movement in the United States was to reduce the environ-mental impacts of industrialization. China has recently imposed similar policies to help with the massive environmental degradation caused by their economic expansion.Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

17) Developing a new type of tank would be an example of one of the two types of spending on which the U.S. budget is primarily focused.Answer: TRUEReference: LO 18.2, pgs. 577-583Skill: Application

18) States cannot implement a flat income tax because it is illegal.Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

19) The Office of Management and Budget’s mission is to defend presidential agencies’ missions.Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

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20) Congress has a strict deadline of passing all appropriations bill by October 1, the start of the fiscal year.Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

21) There was a budget surplus in 2006. Answer: FALSEReference: LO 18.2, pgs. 577-583Skill: Understanding

22) The Federal Reserve System was created to adjust the money supply to the needs of agriculture, commerce, and industry. Answer: TRUEReference: LO 18.3, pgs. 583-586Skill: Understanding

23) The Board of Governors is a bipartisan subcommittee of the National Governors’ Association.Answer: FALSEReference: LO 18.3, pgs. 583-586Skill: Understanding

24) The reserve requirement was established by the Supreme Court and implemented by the Federal Reserve Board. Answer: FALSEReference: LO 18.3, pgs. 583-586Skill: Understanding

25) The discount rate is the interest rate at which the Federal Reserve Board lends money to member banks.Answer: TRUEReference: LO 18.3, pgs. 583-586Skill: Understanding

26) One official tool the Fed might choose to use to stimulate the economy would be to purchase securities from member banks.Answer: TRUEReference: LO 18.3, pgs. 583-586Skill: Application

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27) In 2009, the United States ranked lower than Singapore on the Economic Freedom of the World Index.Answer: TRUEReference: LO 18.3, pgs. 583-586Skill: Understanding

28) The passage of the Social Security Act in 1935 represented a return to laissez-faire economic policy in America.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Analysis

29) Public housing is an example of an entitlement program.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Application

30) Less than 2 percent of Americans receive unemployment insurance.Answer: TRUEReference: LO 18.4, pgs. 586-593Skill: Understanding

31) Means-tested programs are available to all citizens regardless of income.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Understanding

32) The trustees of the Social Security Trust Fund estimate that, under current policy rules, payments to beneficiaries will exceed revenues collected from employees in 2050.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Understanding

33) On average, an American living in Arkansas would have less of a likelihood of being unemployed than an American living in Nebraska.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Analysis

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34) American citizens who are permanently disabled might rely on the Supplemental Se-curity Income program to help support themselves.Answer: TRUEReference: LO 18.4, pgs. 586-593Skill: Application

35) One of the rules of the Temporary Assistance for Needy Families program is that single mothers with children over the age of five are required to find work within two years of receiving benefits.Answer: TRUEReference: LO 18.4, pgs. 586-593Skill: Understanding

36) Vegetable and herb seeds cannot be purchased using food stamps in Alaska.Answer: FALSEReference: LO 18.4, pgs. 586-593Skill: Understanding

37) During the 1990s, when the U.S. economy saw tremendous job growth, low unem-ployment, and increased technological development, Americans were living in a period of economic stability.Answer: TRUEReference: LO 18.5, pgs. 593-599Skill: Application

38) Economic conditions were so poor in 2008 that Congress passed President George W. Bush’s bailout plan with bipartisan support after only one draft.Answer: FALSEReference: LO 18.5, pgs. 593-599Skill: Understanding

39) Both the Works Progress Administration and the economic stimulus payments plan follow the theory that the government has a responsibility to prevent economic down-turns.Answer: TRUEReference: LO 18.5, pgs. 593-599Skill: Analysis

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40) In the state of Michigan, one in every eight residents is enrolled in the Supplemental Nutrition Assistance Program.Answer: TRUEReference: LO 18.5, pgs. 593-599Skill: Understanding

41) Lowering interest rates is an example of deficit spending.Answer: FALSEReference: LO 18.5, pgs. 593-599Skill: Application

42) Many counties in the state of Maryland have recently imposed hiring freezes in local government, but another option they have to improve economic conditions would be to begin the process of deficit spending.Answer: FALSEReference: LO 18.5, pgs. 593-599Skill: Application

43) Modern-day conservatives would likely oppose the Works Progress Administration.Answer: TRUEReference: LO 18.5, pgs. 593-599Skill: Application

Short Answer Questions

1) Why was an economic bailout necessary in 2008?Reference: Chapter Opener, pgs. 568-570Skill: Analysis

2) What kind of economic system does the United States have? How does that affect economic policy? Reference: LO 18.1, pgs. 570-577Skill: Understanding, Analysis

3) What does it mean to have a laissez-faire economic system? Reference: LO 18.1, pgs. 570-577Skill: Understanding

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4) How did Congress attempt to regulate monopolies during the Progressive era?Reference: LO 18.1, pgs. 570-577Skill: Understanding

5) How did the Wagner Act affect American workers?Reference: LO 18.1, pgs. 570-577Skill: Analysis

6) What is deregulation? Why did it become popular in the 1970s and 1980s, and what impact has it had? Reference: LO 18.1, pgs. 570-577Skill: Analysis

7) What is the gross domestic product, and how can it be used to measure interdepen-dence of global markets?Reference: LO 18.2, pgs. 577-583Skill: Understanding

8) How does the Sixteenth Amendment of the U.S. Constitution affect the budget process?Reference: LO 18.2, pgs. 577-583Skill: Understanding

9) What is a budget deficit, and how is it different from the national debt?Reference: LO 18.2, pgs. 577-583Skill: Analysis

10) How is the Federal Reserve organized?Reference: LO 18.3, pgs. 583-586Skill: Understanding

11) What is the advantage of a reduced discount rate? Reference: LO 18.3, pgs. 583-586Skill: Understanding

12) What is economic freedom as defined by Economic Freedom Network? How does the United States compare to other countries?Reference: LO 18.3, pgs. 583-586Skill: Analysis

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13) How did the Works Progress Administration help to revive the faltering economy during the Great Depression?Reference: LO 18.4, pgs. 586-593Skill: Understanding

14) Discuss three examples of modern-day entitlement programs in the United States.Reference: LO 18.4, pgs. 586-593Skill: Application

15) Why is the Social Security program in danger of running out of funding?Reference: LO 18.4, pgs. 586-593Skill: Understanding

16) How does the TANF program aim to improve welfare recipients’ standard of living?Reference: LO 18.4, pgs. 586-593Skill: Understanding

17) What is economic stability?Reference: LO 18.5, pgs. 593-599Skill: Understanding

18) What were the effects of the American Recovery and Reinvestment Act of 2009?Reference: LO 18.5, pgs. 593-599Skill: Analysis

Essay Questions

1) As you have read, the economic policy in the United States has changed drastically since the earliest years of the republic. Trace some of the major changes, beginning with the concept of laissez-faire economics and ending with the New Deal. What events made these changes necessary?Reference: LO 18.1, pgs. 570-577Skill: Analysis

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2) The New Deal brought about a number of reforms in how the national government dealt with economic regulation. Discuss how the New Deal affected financial reforms, agriculture, labor, and industry regulations.Reference: LO 18.1, pgs. 570-577Skill: Analysis

3) Would an economic policy similar to the New Deal aid in the economic woes of to-day? Defend your opinion, speculating on the consequences a revamped New Deal would have on jobs, regulations, and financial reforms.Reference: LO 18.1, pgs. 570-577Skill: Application

4) What sorts of social regulation occurred in the 1960s and 1970s? Reference: LO 18.1, pgs. 570-577Skill: Analysis

5) What are the merits and disadvantages of free trade? Should the United States con-tinue down a path of free trade?Reference: LO 18.2, pgs. 577-583Skill: Evaluation

6) What are the stages of the budget process? How are funds allocated to different policy areas (i.e. how much goes to the military, to education, etc.)?Reference: LO 18.2, pgs. 577-583Skill: Analysis

7) Recent debates among conservatives revolve around the necessity of taxation in the United States. While taxes pay for education and the building and upkeep of public build-ings and services, they also reduce a person’s ability to spend and stimulate the economy. Is taxation necessary? Should the tax system be reformed, and if so, how?Reference: LO 18.2, pgs. 577-583Skill: Evaluation

8) What is the Federal Reserve System? What role does the Fed play in formulating eco-nomic policy in the United States?Reference: LO 18.3, pgs. 583-586Skill: Analysis

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9) Describe some of the tools that the Federal Reserve Board has to manipulate monetary policy in the United States.Reference: LO 18.3, pgs. 583-586Skill: Analysis

10) What income security programs exist in the United States today? How does this dif-fer from the earliest forms of income security?Reference: LO 18.4, pgs. 586-593Skill: Analysis

11) Politicians and pundits alike decry what they see as the inevitable death of Social Se-curity, and these predictions seem to be supported by many expert economic estimates. Why do you think Social Security is in such trouble, and what solutions would you pro-pose so that you can be a beneficiary of the system when you retire?Reference: LO 18.4, pgs. 586-593Skill: Application

12) How did the George W. Bush and Obama administrations attempt to remedy the eco-nomic recession in the late 2000s? Evaluate the effectiveness of these recovery policies.Reference: LO 18.5, pgs. 593-599Skill: Analysis, Evaluation

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