William_T._Bianco,_David_T._Canon]_American_Polit

570 Chapter 15 | Economic Policy

Practice Quiz Questions

6. Budget reconciliation has the advantages of
   and.
   a decreasing bipartisanship; preventing a Senate filibuster
   b allowing members to get everything they want; not being subject
   to a presidential veto
   c making it difficult for members to vote against the bill; preventing
   a Senate filibuster
   d not being subject to a presidential veto; decreasing bipartisanship
   e making it difficult for members to vote against the bill; not being
   subject to presidential veto


7. The Federal Reserve Board’s actions subject to
   presidential or congressional review, while the appointment
   terms of personnel overlap with the federal election
   calendar.
   a are; do
   b are; do not
   c are sometimes; do
   d are not; do
   e are not; do not


8. The Treasury generally prefers interest rates; the
   Federal Reserve Board generally prefers interest rates.
   a higher; lower
   b higher; higher
   c lower; lower
   d lower; higher
   e stable; lower

Tools and theories of economic

policy

Examine how fiscal, monetary, regulatory, and trade policies

influence the economy. (Pages 551–567)

Summary

Policy makers have a variety of tools at their disposal to help push

the economy in their desired direction. Although there are different

theories on the best approach, the use of fiscal policy, monetary policy,

and regulation allows the government to influence the country’s

economic performance.

Key terms

Keynesian economics (p. 551)

supply-side economics (p. 551)

marginal tax rate (p. 551)

business cycle (p. 552)

mandatory spending (p. 553)

discretionary spending (p. 553)

regressive (p. 556)

progressive (p. 556)

monetarist theory (p. 557 )

reserve requirement

(p. 558)

discount rate (p. 558)

federal funds rate (FFR)

(p. 558)

open market operations

(p. 559)

Practice Quiz Questions

9. Keynesian economics argues that the effects of an economic
   recession can be reduced by.
   a decreasing government spending
   b increasing government spending
   c increasing income taxes
   d reducing the budget deficit
   e discouraging consumer spending


10. Reducing the federal deficit by cutting spending is difficult
    because.
    a the interest rates are too high
    b a growing portion of the budget is mandatory spending
    c a growing portion of the budget is discretionary spending
    d members of Congress put too much pork in budgetary bills
    e large deficits benefit the economy in the long run


11. Regressive taxes, like the payroll tax, mean that compared
    with the wealthy, poor people spend of their
    income on taxes.
    a none
    b much less
    c slightly less
    d an equal amount
    e more


12. What does the “reserve requirement” refer to?
    a the interest rate the Fed charges to member banks
    b the rate member banks charge one another on overnight loans
    c the minimum activity level of the Fed’s open market operations
    d the lowest price for government bonds
    e the minimum level of money banks must always have on hand


13. When the competitive situation is a natural monopoly, the
    government generally.
    a regulates prices
    b breaks up the monopoly
    c stimulates competition
    d works to reduce negative externalities
    e does not intervene


14. In general, Congress supports ; the president
    supports.
    a protectionism; free trade
    b protectionism; protectionism
    c free trade; protectionism
    d free trade; free trade
    e tariffs; protectionism

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