5.14.T - Quiz: Government & the Economy LUOA Economics

Contractionary fiscal policy is beneficial when the economy is growing at a greater rate than

2-3% per year

An asset bubble occurs when assets like housing, oil, or gold increase significantly, beyond their actual ______.

value

The Great Recession was partially caused by an asset bubble what market?

housing

What happens when providing employment becomes the primary reason (the end instead of the means) for government spending?

-Need becomes a subordinate consideration

-Government projects have to be invented

Hazlitt writes about an example of government spending where bureaucrats want to build a new bridge connecting two towns, even when existing bridges can easily handle the current traffic. What are the arguments made for building the bridge even though it isn't needed? (choose all that apply)

-Building the bridge will provide employment.

-The bridge will exist thanks to government spending, when otherwise it wouldn't have.

What does the United States government do when the budget is in deficit?

It sells securities to individuals, corporations, financial institutions, and other governments

America's budget deficit reached a trillion dollars during the terms of which presidents? (choose all that apply)

-Barack Obama

-Donald Trump

Each year, the finer points of America's federal budget are first debated in twelve _____________.

appropriations committees

Hazlitt writes that the "pleasant dreams" of government being able to spend without taxing and being able to endlessly pile up debt "have always been shattered by" what?

national insolvency or runaway inflation

In the United States, the bulk of spending by local and state governments goes to which of the following areas? (choose all that apply)

-public safety

-road construction and repair

-public education

-public welfare

The major excise taxes in the United States are on which of the following products? (choose all that apply)

-alcohol

-gasoline

-tobacco

Taxes on imported goods are called ______________.

tariffs

In the United States, government welfare services include which of the following programs? (choose all that apply)

-unemployment benefits

-food stamps

-public housing

Which of the following is an example of a good or service that would not be profitable for the private sector to provide because non-payers would reap the benefits as much as the payers would?

police protection

When a borrower stops making payments on their loan for several months, the loan is considered to be in __________.

default

Hazlitt writes, "Government 'encouragement' to business is sometimes as much to be feared as government hostility." This "supposed encouragement" often takes which of the following forms? (choose all that apply)

-direct grant of government credit

-a guarantee of private loans

A legal agreement enforceable by law is called a __________.

contract

What was the name of a 2011 movement that protested economic inequality?

Occupy Wall Street

Which of the following taxes are considered regressive taxes? (choose all that apply)

-Social Security payroll tax

-sales tax

According to Hazlitt, which of the following are necessary for the health of a dynamic economy? (choose all that apply)

-growing industries should be allowed to grow

-dying industries should be allowed to die

Which of the following describes the concept of parity pricing in the 1930s and 1940s?

the desire to raise the prices of agricultural products to "parity" with the prices of the products that the farmer buys

According to Hazlitt, the fact that parity pricing for agricultural products was "merely a device for subsidizing a special interest" is proven by which of the following? (choose all that apply)

-When agricultural prices go above "parity," there is no demand that the prices be decreased back to "parity."

-the refusal to universalize the principle of parity pricing

Which of the following is a way that governments combat the market failure of inequity?

-redistributing income

Which of the following is a way that governments combat negative externalities, such as environmental damage?

establishing regulations

What is the primary federal organization responsible for enforcing antitrust laws and preventing anti-competitive practices?

Federal Trade Commission

Which organization protects consumers by ensuring their food and medicines are safe?

Food and Drug Administration

Which of the following are arguments made against OSHA? (choose all that apply)

-OSHA's regulations disrupt the market forces of supply and demand.

-OSHA creates many superfluous regulations that do little to improve worker safety.

-OSHA's regulations hurt both workers and consumers.

Which school of economic thought believes that the best way to reduce the length and severity of recessions is by increasing aggregate demand through government intervention?

Keynesian school

Which school of economic thought believes the government's role in the economy is to control inflation through monetary policy but rejects the idea that the government can control demand?

Monetarist school

Which of the following are principal areas of focus for the Keynesian school of economics? (choose all that apply)

-aggregate demand

-price stickiness

In one or two sentences, explain what benefit the government hoped to achieve for America by helping students pay for education.

(The government hoped to increased educated individuals by paying for the education, which would help the economy because there would be an increase in diversity of the workforce. There would be more people eligible in jobs that required education.)

In one sentence, explain how the Neoclassical school of economics differs from the Classical school.

(Neoclassical school of economics believes that the consumer can control the economy, while Classical school follows Adam Smith's "invisible hand" idea.)