Chapter 18

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 D) social E) moral Answer: D Reference: LO 18.1, pgs. 570-577 Skill: 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: C Reference: LO 18.1, pgs. 570-577 Skill: 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: B Reference: LO 18.2, pgs. 577-583 Skill: Understanding 6) The _________________ allowed the federal government to impose an income tax on American citizens. A) Second Amendment B) Fair Tax Act C) Sixteenth Amendment D) Smoot-Hawley Tariff E) Articles of Confederation Answer: C Reference: LO 18.2, pgs. 577-583 Skill: Understanding 7) Which of the following countries owns the greatest percentage of American debt? A) Russia B) Great Britain C) Canada D) China E) Japan Answer: D Reference: LO 18.3, pgs. 583-586 Skill: Understanding
8) ________________ handles much of the day-to-day management of monetary policy. A) Congress B) The Federal Reserve System C) The Internal Revenue Service D) The Council of Economic Advisors E) The White House Answer: B Reference: LO 18.3, pgs. 583-586 Skill: Understanding 9) Studying rankings provided by the __________________ is one way to evaluate how hospitable a country is to business. A) Better Business Bureau B) Federal Reserve System C) AFL-CIO D)World Economy Fact Book E) Economic Freedom of the World Index Answer: E Reference: LO 18.3, pgs. 583-586 Skill: Understanding 10) Social Security was created in the A) 1790s. B) 1860s. C) 1930s. D) 1960s. E) 1970s. Answer: C Reference: LO 18.4, pgs. 586-593 Skill: 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: D Reference: LO 18.4, pgs. 586-593 Skill: Understanding
12) How are supplemental nutrition benefits distributed to citizens? A) Food delivery services B) An electronic debit program C) Paper coupons D) Food banks E) The government eliminated the program entirely. Answer: B Reference: LO 18.4, pgs. 586-593 Skill: Understanding 13) The modified version of the George W. Bush administrations initial bailout plan passed by Congress in 2008 was called the ______________________. A) Emergency Economic Stability Act B) Troubled Asset Relief Program C) Works Progress Administration D) American Recovery and Reinvestment Act E) Lilly Ledbetter Fair Pay Act Answer: A Reference: LO 18.5, pgs. 593-599 Skill: 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 funds B) A site set up by banks to improve their image after the financial crisis C) A site established by the government to offer resources to Americans with substance abuse problems D) A site planned by the government to educate citizens on where and how their stimulus funds are being spent E)A site designed to describe new state-level education reforms Answer: D Reference: LO 18.5, pgs. 593-599 Skill: Understanding 15) Education spending received approximately ________percent of the total Recovery Act funds. A) 5 B) 10 C) 15 D) 20 E) 35 Answer: B Reference: LO 18.5, pgs. 593-599 Skill: Understanding
True/False Questions 1) The U.S. economy is characterized by private ownership of property, private enterprise, and marketplace competition. Answer: TRUE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 2) The first major effort to regulate business was caused by growing concern over the power of the railroads. Answer: TRUE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 3) President Franklin D. Roosevelts New Deal decreased government intervention in many economic policy areas, such as labor and industry. Answer: FALSE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 4) After accounting for inflation, workers are currently earning their highest minimum wage. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Understanding 5) China holds the greatest percentage of American debt. Answer: TRUE Reference: LO 18.2, pgs. 577-583 Skill: 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: TRUE Reference: LO 18.3, pgs. 583-586 Skill: Understanding
7) The Federal Reserve has recently begun take a big-picture financial system approach to regulation as opposed to focusing on individual banks. Answer: TRUE Reference: LO 18.3, pgs. 583-586 Skill: Understanding 8) Both the New Deal and the Great Society lessened government involvement in Americans everyday lives. Answer: FALSE Reference: LO 18.4, pgs. 586-593 Skill: Understanding 9) The supplemental nutrition program was originally intended to increase the variety of international foods Americans were eating. Answer: FALSE Reference: LO 18.4, pgs. 586-593 Skill: Understanding 10) The majority of Recovery Act funds were allotted to improving health care. Answer: FALSE Reference: LO 18.5, pgs. 593-599 Skill: Understanding
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: E Reference: Chapter Opener, pgs. 568-570 Skill: Understanding 2) The _________________ Act of 2009 was designed to create jobs and cut taxes through deficit spending. A) American Recovery and Reinvestment B) Glass-Steagall C) Economic and Financial Investment D) Interstate Commerce E) McCain-Feingold Answer: A Reference: Chapter Opener, pgs. 568-570 Skill: 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 government B) A government takeover of the airline industry C) A ban on interstate commerce D) A bidding war between two cable companies to offer the lowest price E) The existence of only one utility company for the entire country Answer: D Reference: LO 18.1, pgs. 570-577 Skill: Application
4) During our nation's first century, most private economic regulation was done by the
A) states. B) national government. C) U.S. Congress. D) courts. E) federal bureaucrats. Answer: A Reference: LO 18.1, pgs. 570-577 Skill: Understanding 5) The doctrine of ________ opposes government involvement in the economy. A) the business cycle B) unitarism C) laissez-faire D) noblesse oblige E) centralization Answer: C Reference: LO 18.1, pgs. 570-577 Skill: Understanding 6) The first major government effort to regulate business occurred following A) 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: B Reference: LO 18.1, pgs. 570-577 Skill: 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: B Reference: LO 18.1, pgs. 570-577 Skill: Understanding
8) Which of the following is MOST relevant to the growing concern over the prevalence
of media conglomerates? A) The Parker-Dobbs Act B) The Sherman Anti-Trust Act C) The Federal Reserve Act D) The Anti-Monopoly Act E) The Interstate Commerce Act Answer: B Reference: LO 18.1, pgs. 570-577 Skill: 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: A Reference: LO 18.1, pgs. 570-577 Skill: 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: A Reference: LO 18.1, pgs. 570-577 Skill: 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: A Reference: LO 18.1, pgs. 570-577 Skill: Understanding
12) When President George W. Bush signed the Economic Stimulus Act of 2008, he was
practicing the doctrine of A) progressivism. B) populism. C) institutionalism. D) interventionism. E) activism. Answer: D Reference: LO 18.1, pgs. 570-577 Skill: 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: C Reference: LO 18.1, pgs. 570-577 Skill: 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: E Reference: LO 18.1, pgs. 570-577 Skill: 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: A Reference: LO 18.1, pgs. 570-577 Skill: Understanding 16) During the New Deal, Congress established or enacted all of the following EXCEPT
the A) Civil Aeronautics Board. B) Federal Communications Commission. C) Motor Carrier Act. D) National Labor Relations Board. E) Shipping Standards Act. Answer: E Reference: LO 18.1, pgs. 570-577 Skill: Analysis 17) ________ established the legitimacy and viability of national governmental intervention 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: A Reference: LO 18.1, pgs. 570-577 Skill: Analysis 18) Which of the following was NOT a factor that contributed to the surge of social regulation 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: D Reference: LO 18.1, pgs. 570-577 Skill: 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 Society B) social regulation C) the New Deal D) deregulation E) communism Answer: D Reference: LO 18.1, pgs. 570-577 Skill: Application
20) Which of the following organizations would be most supportive of an expansion of free trade? A) The Protectionist Society B) The AFL-CIO C) The Textile Workers of America D) General Motors E) The National Farmers Union Answer: D Reference: LO 18.2, pgs. 577-583 Skill: 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 trade Answer: C Reference: LO 18.2, pgs. 577-583 Skill: 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: E Reference: LO 18.2, pgs. 577-583 Skill: Application 23) Chinas emergence as a major economic power has created all of the following EXCEPT A) environmental degradation. B) a high death toll from cancer. C) an increasingly capitalist society. D) water shortages. E) death of aquatic life. Answer: C Reference: LO 18.2, pgs. 577-583 Skill: Analysis
24) ___________________ is one of the two policy areas in which the government spends most of its money. A) Road repair B) Purchasing military weaponry C) Building new libraries D) Sending aid to Haiti E) Subsidizing the development of electric cars Page: B Reference: LO 18.2, pgs. 577-583 Skill: 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 Transportation B) The Office of Management and Budget C) The Central Intelligence Agency D) The Department of the Interior E) The Cabinet Answer: B Reference: LO 18.2, pgs. 577-583 Skill: Application 26) Which of the following are likely reasons for the government to be running a deficit? I. Military invasions II. Budget cuts III. Economic recession IV. Tax cuts A) I only B) I and II C) I and IV D) III and IV E) I, III, and IV Answer: E Reference: LO 18.2, pgs. 577-583 Skill: Analysis
27) All of the following are reforms encouraged by Federal Reserve Board Chairman Ben
Bernanke EXCEPT A) 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: C Reference: LO 18.3, pgs. 583-586 Skill: Analysis 28) All of the following scenarios would be affected by income security EXCEPT A) a 70-year-old choosing to retire. B) an accident that limits a persons ability to work. C) a college students decision to take summer classes and not take a job. D) the poor economy causing a persons job to be eliminated. E) the death of a man with two children and a stay-at-home wife. Answer: C Reference: LO 18.4, pgs. 586-593 Skill: Application 29) Which of the following are components of the Social Security Act of 1935? I. Old-age insurance II. Unemployment insurance III. Workers compensation IV. 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: A Reference: LO 18.4, pgs. 586-593 Skill: Understanding
30) All of the following are examples of entitlement programs EXCEPT
A) Supplemental Security Income. B) public housing. C) Social Security. D) the Supplemental Nutrition Assistance Program. E) Temporary Assistance for Needy Families. Answer: B Reference: LO 18.4, pgs. 586-593 Skill: Understanding 31) How many Americans benefit from Social Security (OASDI)? A) Approximately 4 million B) Between 5 and 10 million C) Approximately 40 million D) Between 50 and 55 million E) Between 70 and 75 million Answer: D Reference: LO 18.4, pgs. 586-593 Skill: Understanding 32) The current debate over raising the retirement age affects which of the following programs? I. Medicaid II. Social Security III. Veterans disability benefits IV. Temporary Assistance for Needy Families B) II only A) I and II C) I and III E) III and IV D) II, III, and IV Answer: A Reference: LO 18.4, pgs. 586-593 Skill: 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: C Reference: LO 18.4, pgs. 586-593 Skill: Understanding
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: C Reference: LO 18.4, pgs. 586-593 Skill: Understanding 35) The unemployment rate in 2010 was A) below 5% percent B) around 10 percent. C) between 12 and 15 percent. D) around 20 percent. E) greater than 20 percent. Answer: B Reference: LO 18.4, pgs. 586-593 Skill: 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 only B) I and II C) I and IV D) III and IV E) II, III, and IV Answer: D Reference: LO 18.4, pgs. 586-593 Skill: Understanding
37) Which of the following states had an unemployment rate greater than 10 percent in 2010? A) Maine B) Colorado C) Tennessee D) Arizona E) North Dakota Answer: C Reference: LO 18.4, pgs. 586-593 Skill: 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: D Reference: LO 18.4, pgs. 586-593 Skill: Analysis 39) All of the following are features of TANF EXCEPT A) single mothers with children over five must work within two years of receiving benefits. 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: B Reference: LO 18.4, pgs. 586-593 Skill: 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: B Reference: LO 18.4, pgs. 586-593 Skill: Analysis
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: E Reference: LO 18.4, pgs. 586-593 Skill: Understanding 42) Which of the following can be purchased using food stamps in Alaska? I. Prepared hot foods sold in stores II. Vitamins III. Herb seeds IV. Candy A) II only B) II and III C) III and IV D) I and IV E) I, III, and IV Answer: C Reference: LO 18.4, pgs. 586-593 Skill: Analysis 43) All of the following indicate that 2008 marked the beginning of a period of economic instability in the U.S. economy EXCEPT A) 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: B Reference: LO 18.5, pgs. 593-599 Skill: Understanding
44) The $700 billion bailout
A) 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: C Reference: LO 18.5, pgs. 593-599 Skill: 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 example of the philosophy of _________________. A) deregulation B) dtente C) interventionism D) protectionism E) libertarianism Answer: C Reference: LO 18.5, pgs. 593-599 Skill: 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 III C) II and IV D) III and IV E) I, III and IV Answer: B Reference: LO 18.5, pgs. 593-599 Skill: Analysis
47) ____________________ is a similar action to deficit spending.
A) Opening a checking account B) Declaring bankruptcy C) Using a credit card D) Renting a car E) Buying a car with cash Answer: C Reference: LO 18.5, pgs. 593-599 Skill: Application 48) Which of the following policy areas appeared to be given the most priority in allocating funds for the Recovery Act? A) Education B) Low-income aid C) Healthcare D) Energy E) Tax cuts Answer: E Reference: LO 18.5, pgs. 593-599 Skill: 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 money B) Implementing a Keynesian deficit spending approach C) Lowering interest rates D) Issuing tax rebates to citizens E) Working with the Federal Reserve Board Answer: B Reference: LO 18.5, pgs. 593-599 Skill: Analysis 50) Conservative scholars credit the _______ for creating the economic growth that stalled a rise in unemployment in 2010. A) Recovery Act B) TARP program C) tax and spend economic policies D) Great Society program E) New Deal Answer: B Reference: LO 18.5, pgs. 593-599 Skill: Understanding True/False Questions
1) The OPEC oil crisis caused Congress to create the Troubled Asset Relief Program. Answer: FALSE Reference: Chapter Opener, pgs. 568-570 Skill: Understanding 2) Most economic regulation was undertaken by the national government during our nation's first century. Answer: FALSE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 3) The laissez-faire state is when the government takes an active role in guiding and managing the private economy. Answer: FALSE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 4) Microsofts almost total control over the computer software industry in the 1990s showed similarities to the era of trusts in the late nineteenth century. Answer: TRUE Reference: LO 18.1, pgs. 570-577 Skill: Analysis 5) One of the goals of the modern-day Tea Party movement to limit government interaction in citizens lives is comparable to the goals of the Progressive movement in the early twentieth century. Answer: FALSE Reference: LO 18.1, pgs. 570-577 Skill: Analysis 6) During the 1930s, the interventionist state was replaced by the laissez-faire state. Answer: FALSE Reference: LO 18.1, pgs. 570-577 Skill: Understanding
7) The New Deal established the national government as a major regulator of private busi-
nesses and provider of Social Security and as ultimately responsible for maintaining a stable economy. Answer: TRUE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 8) Supporters of the Wagner Act would be disappointed at the relatively low level of union participation in the modern era. Answer: TRUE Reference: LO 18.1, pgs. 570-577 Skill: 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: TRUE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 10) President Gerald R. Ford was uninterested in deregulation. Answer: FALSE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 11) Deregulation was a major priority for President Jimmy Carter. Answer: TRUE Reference: LO 18.1, pgs. 570-577 Skill: Understanding 12) The first significant application of fiscal policy theory occurred in 1890. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Understanding 13) President Obamas lack of support for tax cuts is similar to President Lyndon B. Johnsons philosophy of economic policy reflected in the Revenue Act of 1964. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Analysis
14) The American Civil Liberties Union would be more inclined to support protectionist policies than free trade. Answer: TRUE Reference: LO 18.2, pgs. 577-583 Skill: Application 15) In 2009, the United States, the European Union, and Asia each represented between 25 and 30 percent of the worlds GDP. Answer: TRUE Reference: LO 18.2, pgs. 577-583 Skill: Understanding 16) A goal of the Progressive movement in the United States was to reduce the environmental impacts of industrialization. China has recently imposed similar policies to help with the massive environmental degradation caused by their economic expansion. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: 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: TRUE Reference: LO 18.2, pgs. 577-583 Skill: Application 18) States cannot implement a flat income tax because it is illegal. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Understanding 19) The Office of Management and Budgets mission is to defend presidential agencies missions. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Understanding
20) Congress has a strict deadline of passing all appropriations bill by October 1, the start
of the fiscal year. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Understanding 21) There was a budget surplus in 2006. Answer: FALSE Reference: LO 18.2, pgs. 577-583 Skill: Understanding 22) The Federal Reserve System was created to adjust the money supply to the needs of agriculture, commerce, and industry. Answer: TRUE Reference: LO 18.3, pgs. 583-586 Skill: Understanding 23) The Board of Governors is a bipartisan subcommittee of the National Governors Association. Answer: FALSE Reference: LO 18.3, pgs. 583-586 Skill: Understanding 24) The reserve requirement was established by the Supreme Court and implemented by the Federal Reserve Board. Answer: FALSE Reference: LO 18.3, pgs. 583-586 Skill: Understanding 25) The discount rate is the interest rate at which the Federal Reserve Board lends money to member banks. Answer: TRUE Reference: LO 18.3, pgs. 583-586 Skill: Understanding 26) One official tool the Fed might choose to use to stimulate the economy would be to purchase securities from member banks. Answer: TRUE Reference: LO 18.3, pgs. 583-586 Skill: Application
27) In 2009, the United States ranked lower than Singapore on the Economic Freedom of the World Index. Answer: TRUE Reference: LO 18.3, pgs. 583-586 Skill: Understanding 28) The passage of the Social Security Act in 1935 represented a return to laissez-faire economic policy in America. Answer: FALSE Reference: LO 18.4, pgs. 586-593 Skill: Analysis 29) Public housing is an example of an entitlement program. Answer: FALSE Reference: LO 18.4, pgs. 586-593 Skill: Application 30) Less than 2 percent of Americans receive unemployment insurance. Answer: TRUE Reference: LO 18.4, pgs. 586-593 Skill: Understanding 31) Means-tested programs are available to all citizens regardless of income. Answer: FALSE Reference: LO 18.4, pgs. 586-593 Skill: 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: FALSE Reference: LO 18.4, pgs. 586-593 Skill: 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: FALSE Reference: LO 18.4, pgs. 586-593 Skill: Analysis
34) American citizens who are permanently disabled might rely on the Supplemental Security Income program to help support themselves. Answer: TRUE Reference: LO 18.4, pgs. 586-593 Skill: 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: TRUE Reference: LO 18.4, pgs. 586-593 Skill: Understanding 36) Vegetable and herb seeds cannot be purchased using food stamps in Alaska. Answer: FALSE Reference: LO 18.4, pgs. 586-593 Skill: Understanding 37) During the 1990s, when the U.S. economy saw tremendous job growth, low unemployment, and increased technological development, Americans were living in a period of economic stability. Answer: TRUE Reference: LO 18.5, pgs. 593-599 Skill: Application 38) Economic conditions were so poor in 2008 that Congress passed President George W. Bushs bailout plan with bipartisan support after only one draft. Answer: FALSE Reference: LO 18.5, pgs. 593-599 Skill: 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 downturns. Answer: TRUE Reference: LO 18.5, pgs. 593-599 Skill: Analysis
40) In the state of Michigan, one in every eight residents is enrolled in the Supplemental Nutrition Assistance Program.
Answer: TRUE Reference: LO 18.5, pgs. 593-599 Skill: Understanding 41) Lowering interest rates is an example of deficit spending. Answer: FALSE Reference: LO 18.5, pgs. 593-599 Skill: 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: FALSE Reference: LO 18.5, pgs. 593-599 Skill: Application 43) Modern-day conservatives would likely oppose the Works Progress Administration. Answer: TRUE Reference: LO 18.5, pgs. 593-599 Skill: Application Short Answer Questions 1) Why was an economic bailout necessary in 2008? Reference: Chapter Opener, pgs. 568-570 Skill: Analysis 2) What kind of economic system does the United States have? How does that affect economic policy? Reference: LO 18.1, pgs. 570-577 Skill: Understanding, Analysis 3) What does it mean to have a laissez-faire economic system? Reference: LO 18.1, pgs. 570-577 Skill: Understanding 4) How did Congress attempt to regulate monopolies during the Progressive era? Reference: LO 18.1, pgs. 570-577
Skill: Understanding 5) How did the Wagner Act affect American workers? Reference: LO 18.1, pgs. 570-577 Skill: 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. 570-577 Skill: Analysis 7) What is the gross domestic product, and how can it be used to measure interdependence of global markets? Reference: LO 18.2, pgs. 577-583 Skill: Understanding 8) How does the Sixteenth Amendment of the U.S. Constitution affect the budget process? Reference: LO 18.2, pgs. 577-583 Skill: Understanding 9) What is a budget deficit, and how is it different from the national debt? Reference: LO 18.2, pgs. 577-583 Skill: Analysis 10) How is the Federal Reserve organized? Reference: LO 18.3, pgs. 583-586 Skill: Understanding 11) What is the advantage of a reduced discount rate? Reference: LO 18.3, pgs. 583-586 Skill: 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. 583-586 Skill: Analysis 13) How did the Works Progress Administration help to revive the faltering economy dur-
ing the Great Depression? Reference: LO 18.4, pgs. 586-593 Skill: Understanding 14) Discuss three examples of modern-day entitlement programs in the United States. Reference: LO 18.4, pgs. 586-593 Skill: Application 15) Why is the Social Security program in danger of running out of funding? Reference: LO 18.4, pgs. 586-593 Skill: Understanding 16) How does the TANF program aim to improve welfare recipients standard of living? Reference: LO 18.4, pgs. 586-593 Skill: Understanding 17) What is economic stability? Reference: LO 18.5, pgs. 593-599 Skill: Understanding 18) What were the effects of the American Recovery and Reinvestment Act of 2009? Reference: LO 18.5, pgs. 593-599 Skill: 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. 570-577 Skill: Analysis
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. 570-577 Skill: Analysis 3) Would an economic policy similar to the New Deal aid in the economic woes of today? Defend your opinion, speculating on the consequences a revamped New Deal would have on jobs, regulations, and financial reforms. Reference: LO 18.1, pgs. 570-577 Skill: Application 4) What sorts of social regulation occurred in the 1960s and 1970s? Reference: LO 18.1, pgs. 570-577 Skill: Analysis 5) What are the merits and disadvantages of free trade? Should the United States continue down a path of free trade? Reference: LO 18.2, pgs. 577-583 Skill: 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. 577-583 Skill: 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 buildings and services, they also reduce a persons 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. 577-583 Skill: Evaluation 8) What is the Federal Reserve System? What role does the Fed play in formulating economic policy in the United States? Reference: LO 18.3, pgs. 583-586 Skill: Analysis 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. 583-586 Skill: Analysis
10) What income security programs exist in the United States today? How does this differ from the earliest forms of income security? Reference: LO 18.4, pgs. 586-593 Skill: Analysis 11) Politicians and pundits alike decry what they see as the inevitable death of Social Security, 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 propose so that you can be a beneficiary of the system when you retire? Reference: LO 18.4, pgs. 586-593 Skill: Application 12) How did the George W. Bush and Obama administrations attempt to remedy the economic recession in the late 2000s? Evaluate the effectiveness of these recovery policies. Reference: LO 18.5, pgs. 593-599 Skill: Analysis, Evaluation

Chapter 18

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Chapter 18: Economic Policy Reading Comprehension Quiz

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

44) The $700 billion bailout

47) ____________________ is a similar action to deficit spending.

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