20. President embraced supply-side economics.

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1 1. A good method of evaluating a countryís amount of national debt, according to the authors, is a. looking at the raw amount of debt, without any fancy statistics. b. looking at the amount of debt controlling for inflation. c. dividing the debt as a percentage of the amount of U.S. currency in active circulation. *d. dividing the debt as a percentage of gross domestic product. e. comparing the net debt load today to the net debt load in the same month, but ten years ago. 3. Market economies are loosely called *a. capitalist economies. b. monetarist models. c. command economies. d. planning models. e. competition constructs. 5. Adam Smithís ìinvisible handî refers to *a. the uncontrollable forces of nature that affect the economy. b. a successful gothic novel Smith wrote, thereby gaining the income necessary to pursue less lucrative academic speculation. c. the control that government exercises over the economy. d. the economic force that converts individual pursuit of personal profit into societal good. e. the fact that the basic cost of goods will always increase. 7. The business cycle is a. the process of investing and gaining a profit. b. the period during which the federal government compiles the budget. *c. periods of expansion and inflation alternating with periods of contraction and unemployment. d. the process of extracting money from the economy through taxes and then returning it through spending. e. inflation and recession. 8. The value of the goods and services actually produced is called the nationís a. productive capacity. b. economic outlook. c. GSB. d. composite wealth. *e. gross domestic product. 9. The simultaneous occurrence of slow growth, unemployment, and inflation is referred to as. a. depression *b. stagflation c. recession d. authorization e. monetarism

2 10. If government cuts taxes to encourage people to spend more money in order to stimulate economic growth, it is using a. business cycling. *b. fiscal policy. c. monetary policy. d. pro-growth economics. e. public income reductions. 12. A government spending in excess of tax revenues to combat an economic slump is known as a. net increase. b. anticipated shortfall. c. reconciliation. d. readjustment. *e. deficit financing. 13. Monetary policies are largely determined by a. Congress. b. state legislatures. c. select members of the Senate. d. the Congressional Budget Office. *e. the Federal Reserve Board. 16. Monetarists argue that government can control the economyís performance simply by a. raising the interest rate. b. cutting back on loans. c. reducing the interest rate. *d. controlling the money supply. e. cutting back on loans and reducing the interest rate. 18. The Federal Reserve can increase the money supply in all but which of the following ways? a. The Fed can buy government securities. b. The Fed can lower interest rates by altering the federal funds rate. c. The Fed may change its discount rate. *d. The Fed can increase its reserve requirement for member banks. e. All of these choices are true. 19. Traditionally the Federal Reserve has tended to be more concerned about than. a. deficits; inflation b. unemployment; deficits c. unemployment; inflation d. the reelection of Congress; the reelection of the president *e. inflation; unemployment 20. President embraced supply-side economics.

3 a. Clinton b. Carter c. Roosevelt *d. Reagan 21. The essence of supply-side economics is that a. government spending should be used to ìprime the pumpî and aid economic recovery. b. industry should be centrally coordinated to ensure a steady supply of necessary goods. *c. taxes should be cut to stimulate investment, and government regulation of business should be decreased. d. government should tax heavily and redistribute the money in an equitable fashion. e. business should be forced by government to allow inventories of goods to grow, thereby reducing costs. 26. The Budget and Accounting Act of 1921 placed the responsibility for preparing the federal budget in the hands of a. Congress. b. the Federal Reserve Board. c. the Treasury Department. d. the Council of Economic Advisers. *e. the president. 31. The role of appropriations committees is to a. monitor overall spending. b. oversee implementation of the Gramm-Rudman-Hollings Act. *c. authorize spending in particular legislative areas. d. offer a comprehensive budget review process. e. decide which programs will be funded. 33. Social Security and veteransí pensions, which provide benefits to which individuals have a legal right and which cannot be reduced without changing the law, are also referred to as a. retroactive programs. b. discretionary spending. c. controllable spending. d. earmarks. *e. entitlements 41. A tax allocated based on a personís ability to pay, rather than, for example, requiring everyone to pay an equal percentage of their income, is known as a tax. *a. progressive b. mandatory c. discretionary d. regressive e. flat

4 56. The Amendment empowered the national government to collect taxes on income. *a. Sixteenth b. Nineteenth c. Twenty-first d. Twenty-sixth e. Twenty-eighth 46. The federal governmentís single largest budgeted spending item is *a. Social Security. b. national defense. c. Medicare. d. humanitarian foreign aid. e. food stamps. 1. A(n) is a general plan of action adopted by government to solve a social problem, counter a threat, or pursue an objective. a. program evaluation b. agenda c. issue network *d. public policy e. plan of action 5. A citizen who donates money to a favored charity is taking advantage of a a. distributive policy. b. regulation. *c. tax deduction. d. redistributional policy. e. tax expenditure. 7. Which of the following is the correct sequential order for the policymaking process? *a. Agenda setting, policy formulation, implementation, policy evaluation b. Policy formulation, agenda setting, policy evaluation, implementation c. Policy formulation, agenda setting, implementation, policy evaluation d. Implementation, policy evaluation, agenda setting, policy formulation 19. The Johnson administrationís promise to end poverty in a decade did not come to pass, and critics who claimed President Johnsonís War on Poverty failed based their assessments on the fact that a. the states had too much control over the Great Society programs. b. taxes were increased on the poor to pay for the Great Society programs.

5 *c. poverty became more concentrated in rural and inner city areas. d. poverty rates increased nationwide. 25. Social Security is designed to provide economic assistance to people faced with all of the following except a. unemployment. b. disability. c. old age. *d. poverty. e. All of these choices are included in the Social Security program. 28. Social Security is referred to as a pay-as-you-go system, meaning that a. the U.S. government borrows the proceeds to pay recipients. b. the system must be reappropriated by Congress each year. *c. todayís workers support todayís program beneficiaries. d. all workers in effect pay for their own retirement by a mandatory process of savings. e. any surpluses from the Social Security system go back into the governmentís general revenue. 37. In the wake of President Johnsonís Great Society programs, critics of social welfare spending argued that antipoverty policies *a. made poverty more attractive by removing incentives to work. b. would be more successful if they were provided with better funding. c. had been generally successful, but had not lived up to their promise and therefore should be discontinued. d. fail because of bureaucratic cultures that oppose them. e. would achieve most of their goals, given the proper amount of time to work. 51. Which of the following is not a criticism that has been made of Obamacare? a. Even with government subsidies, families will not be able to pay premiums. b. Privacy of medical information may not be adequately protected. c. It is unconstitutional to require individuals to purchase insurance. d. The government is not competent to manage a large-scale program like Obamacare. *e. All of these choices are criticisms that have been made of Obamacare. 57. Concerning the controversy over illegal immigration, several states are requiring employers to check their workersí residency status using a federal program known as a. the Arizona Model. b. the Commerce Model. *c. E-Verify.

6 d. the Real ID Model. 58. The national DREAM Act would a. provide federal college tuition aid to illegal immigrants who are accepted to colleges and universities. *b. allow illegal immigrants brought to the United States as children to become eligible for legalized status. c. make illegal immigrants legally eligible for private health insurance. d. allow the children of illegal immigrants U.S. citizenship if they were born on U. S. soil. e. All of these choices are true.