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Last economic test review

Josie Wilson avatar Josie Wilson
12 February 2024
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18 test answers

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question
The Constitution places which two limits on the government's power to tax?
answer
Federal taxes must be for the common defense and general welfare, and they must be the same in every state.
question
To what category do a person's earnings, the dollar value of a good or service, the value of a property, and the value of a company's profits belong?
answer
tax bases
question
What kind of tax is represented in the federal income tax rates graph, and what are the qualities of this kind of tax?
answer
It is a progressive tax because the tax rate rises with the amount of taxable income.
question
What are the differences between the entitlement programs Medicaid and Medicare?
answer
Medicare provides health care for people over 65, and Medicaid offers benefits for low-income families and individuals.
question
Entitlement programs such as Social Security fall into what type of federal spending category?
answer
mandatory spending programs
question
Which two types of taxes provide the largest amount of revenue to states?
answer
sales taxes and individual income taxes
question
What is the role of the Congressional Budget Office (CBO) in the federal budgetary process?
answer
The CBO gives Congress independent economic data to help members fully understand and make decisions about the President's proposed budget.
question
According to the graph, how do expansionary fiscal policies affect the economy?
answer
The government increases spending to raise output of goods and services and create jobs in the short term.
question
What is one important distinction between classical economics and Keynesian economics?
answer
Classical economics teaches that free markets regulate themselves, and Keynesian economics teaches that government action affects the economy.
question
How did economic events during World War II demonstrate the principles of Keynesian economics?
answer
As government spending increased, America came out of the Great Depression and moved toward higher productivity.
question
How does the "crowding-out effect" influence businesses?
answer
The federal government makes it harder for private businesses to borrow.
question
In the mid-1980s, Congress passed the Gramm-Rudman-Hollings Act. What was the effect of this legislation?
answer
It created automatic cuts in some federal expenditures if the deficit exceeded certain amounts.
question
How did the Federal Reserve System hold up during the Great Depression?
answer
The Federal Reserve System did not work well because the twelve regional banks each acted independently.
question
What role does the Federal Reserve play in regulating the banking system?
answer
The Federal Reserve coordinates all regulatory activities and examines banks periodically.
question
How do changes in interest rates affect the money supply?
answer
As interest rates rise, people generally keep their wealth in assets that pay returns, restricting the money supply.
question
The money multiplier formula shows the effects of
answer
a cash deposit into the banking system on the money supply.
question
How would an increase in the required reserve ratio affect borrowers?
answer
It would force banks to recall a significant number of loans, which would hurt many borrowers.
question
What is the primary difference between inside and outside policy lags?
answer
Inside lags are delays in the implementation of policy, and outside lags indicate the time it takes a new policy to become effective.