POSC 100 Study Guide Ricardo Salas

1
POSC 100 Study Guide Ricardo
Salas

• Part 4
• Assignment 26

2
Notice

• Dear students
• The odd-numbered questions are answered for
  you. The answers to the even-numbered questions
  are the result of your readings. This is to
  assure that you are understanding the material.
  Good luck!

3
Assignment 26
4
Fiscal Policy Government as Manager

• T or F Questions (4)
• Multiple Choice questions (16)
• Fill-in Questions (4)

5
True or False Questions

6
True or False

• 1/4
• Although the United States has had
  recessionary periods since the 1930s, none of
  these downturns has been anywhere near the
  severity of the Great Depression.

7
Answer

• 1/4
• True

8
True or False

• 2/4
• The president can choose not to pay interest
  on the federal owed on the national debt.

9
Answer

• 2/4

10
True or False

• 3/4
• In reality, even a large part of discretionary
  spending of the federal budget is not truly
  discretionary.

11
Answer

• 3/4
• True

12
True or False

• 4/4
• The fact is the Fed is a wholly impartial
  body, representing the public interest and no
  special interest.

13
Answer

• 4/4

14
Multiple Choice Questions

• The following questions are multiple choices.
  Select the most appropriate answer.

15
1/16

• Prior to the 1930s, the federal government
  adopted the following policy when dealing with
  the nation's economy
• a) had extensive policies in place to
  stimulate the
• economy
• b) believed that the market was
  self-regulating and
• assumed a passive role
• c) supported farm subsidies, but avoided an
  industrial
• policy
• d) limited support programs to the
  unemployed worker
• but no one else.

16
Answer

• 1/16
• b

17
2/16

• The government's efforts to maintain a stable
  economy are made mainly through its taxing and
  spending decisions, which together are referred
  to as
• a) fiscal policy
• b) monetary policy
• c) oversight role
• d) authorization responsibilities.

18
Answer

• 2/16

19
3/16

• John Maynard Keynes offered the following
• economic policy when a depression occurs
• a) The government should curtail its
  expenditures to bring
• needed capital into private hands
• b) The government should print less money to
  assure that
• consumers and investors can help stimulate
  the
• economy
• c) The government should let the market rectify
  the
• economic downturn by limiting its role
• d) The government should engage in deficit
  spending to
• help stimulate recovery.

20
Answer

• 3/16
• d

21
4/16

• Why did policymakers not apply a keynesian
• economic strategy to help bring the U.S.
• economy out of recession in the early 1990s?
• a) They felt that monetary policies were
  unsuitable for
• resolving most economic downturns
• b) Ideologues had taken over fiscal policy
  during the
• Bush presidency, limiting his options
• c) A huge national debt had accumulated over
  the past
• two decades
• d) Keynesian theory could only works during a
  severe economic
• crisis, like the Great Depression, not for
  less severe ones.

22
Answer

• 4/16

23
5/16

• How high had the federal government's
• national debt become in the early 1990s?
• a) 250 billion b) 1
  trillion
• c) 4 trillion d) 10
  trillion.

24
Answer

• 5/16
• c

25
6/16

• About how many people receive social
• security checks from the federal
• government?
• a) 10 million b) 17
  million
• c) 29 million d) 40
  million.

26
Answer

• 6/16

27
7/16

• Every day, the federal government spends
• about 4 billion, which is more than a
• typical corporation pumps into the economy
• during an entire
• a) week b) month
• c) half year d)
  year.

28
Answer

• 7/16
• d

29
8/16

• A cornerstone of President Reagan's
• economic program, whereby tax breaks for
• businesses and upper-income individuals
• was the way to stimulate economic growth
• a) demand-side fiscal policy
• b) business stimulation theory
• c) supply-side economics
• d) private-sector capital accumulation.

30
Answer

• 8/16

31
9/16

• A tax that individuals pay on capital-
• investments, such as property and stocks
• a) money-investment tax
• b) income-generated tax
• c) capital-gains tax
• d) capital-induced tax.

32
Answer

• 9/16
• c

33
10/16

• George Bush cut the federal government's
  capital-gains tax from 28 percent to
• a) 25 percent b) 20 percent
• c) 18 percent d) 15 percent

34
Answer

• 10/16

35
11/16

• Outgoing Federal Reserve board
• chairman Alan Greenspan said he would
• prefer to see the deficits reduced through
• a) tax increases on capital gains and
  wealthy incomes,
• b) privatizing social security and
  eliminating medicare,
• c) spending cuts
• d) continued borrowing.

36
Answer

• 11/16
• c

37
12/16

• An increase in the average level of prices of
• goods and services
• a) inflation b)
  deflation
• c) stagflation d)
  recession.

38
Answer

• 12/16

39
13/16

• To fight inflation, government should
• a) decrease taxes on both corporations and
  individuals,
• b) decrease interest rates via monetary
  policy and
• increase expenditures
• c) expand the federal budget while decreasing
  taxing
• d) cut expenditures and raise personal income
  taxes to
• lower demand.

40
Answer

• 13/16
• d

41
14/16

• Why would Republicans prefer to keep
• income taxes on wealthier individuals at a
• relatively low level?
• a) to encourage savings and investment that
  fosters
• economic growth
• b) based on the principle that the purpose of
  government is
• to protect property not take it
• c) wealthy people are better able to compel
  public figures
• to support policies that protects the
  former's interests
• d) elected officials are dependent on the rich
  and powerful
• to pay for the costs of their campaigns.

42
Answer

• 14/16

43
15/16

• The 2001 Bush tax proposal, the legislation
• contained the largest tax cut since 1981,
• primarily benefiting the
• a) poor b) the
  middle class
• c) the wealthy d) no one.

44
Answer

• 15/16
• c

45
16/16

• What is the key advantage that monetary
• policy has over fiscal policy according to
• Patterson?
• a) monetary policy is less complex than fiscal
  policy
• b) monetary policy can be implemented more
  quickly
• c) members of the Fed are independent of the
  public
• and powerful interest groups
• d) the Fed has the ability to affect taxes.

46
Answer

• 16/16

47
Fill-in Questions

• The following questions have missing critical
  words. Fill in the most appropriate missing word.

48
1/4

• How does the policy of demand-side economics
  contribute to economic recovery?
• a) When the economy is __________, the
  government
• can __________ its spending, thus placing
  more
• money in consumers' hands.
• b) With additional money to spend, consumers buy
  
• more _______ and __________.
• c) This increased demand ____________
• ____________ to produce more goods and
  hire
• more workers.

49
Answer

• 1/4
• sluggish, increase
• goods, services
• stimulates businesses

50
2/4

• What are the general steps by which the federal
  budget is
• achieved?
• a) In _________, the president transmits the full
  budget to Congress.
• b) In reviewing the president's proposed budget,
  the Congress relies heavily on the
  _______________ ________ __________.
• c) The House Appropriations Committee and the
  Senate Appropriations Committee and their
  subcommittees then takes on the primary task of
  ___________ the budget items, invariably making
  some changes at this stage.The subcommittees'
  recommendations are then submitted to the House
  and Senate Appropriations Committee for final
  review and submission for a full vote.
• d) After the work of the appropriations
  committees has been completed and is approved by
  the full House and Senate, differences in the
  Senate and House versions of the appropriations
  bill must be ____________ in ____________
  committee. The final version is sent to the
  president.
• e) Once the budget has been passed by both the
  House and the Senate and is signed by the
  president, it takes effect on _________ 1, the
  starting date of the federal government's fiscal
  year.

51
Answer

• 2/4

52
3/4

• The following are principles embraced by
  monetarists when evaluating the economy
• a) Too much money in circulation contributes to
• ___________ because
• b) too many _________ are chasing too few
  _______,
• which drives up prices.
• c) Too little money in circulation results in a
  slowing
• economy and rising ______________,
  because
• d) ___________ lack the ready cash and easy
  credit
• required to push spending levels up.

53
Answer

• 3/4
• inflation
• dollars, goods
• unemployment
• consumers

54
4/4

• How does the Fed affect the money supply?
• a) by raising or lowering the ______ _________
  that
• member banks are required to _________
  with the
• Federal Reserve,
• b) This reserve is a ____________ of each
  member's
• total deposits.
• c) By raising or lowering __________ _______.

55
Answer

• 4/4

56

The End