Chapter 17- American Government

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Inflation is best understood as the rate at which __________.

prices for goods and services increase

In the nineteenth century, industrialization worsened the effects of natural __________.

business cycles

Which of the following is true with respect to Keynesian economic policy?

Keynesian economic policy relies on taxation and expenditures by government to control inflation and unemployment.

Which of the following is true about Social Security?

It is a retirement benefit program for citizens.

What is the source for the money in the Social Security Trust Fund?

payroll taxes

What is a government program called that provides benefits to all citizens who meet eligibility requirements?

an entitlement program

The total market value of all goods and services produced in an area during a year is termed which of the following?

gross domestic product

Medicare is what type of federal program?

social insurance

Which of the following entities is responsible for setting interest rates in the United States?

the Federal Reserve Board

What is the main purpose of monetary policy?

to affect how much money is available to businesses and banks

The main goal of fiscal policy is __________.

to use taxes and government spending to help stimulate or slow down economic growth

What distinguishes a means-tested program from a social insurance program?

A social insurance program provides benefits based upon lifetime contributions, while a means tested program provides benefits based upon demonstrated need.

Why are some safety net programs referred to as entitlements?

because benefits are distributed automatically to citizens who qualify, based on a set of guidelines

What is the purpose of deregulation in the American political economy?

Deregulation seeks to increase the barriers to economic productivity.

The primary purpose of the Troubled Assets Relief Program (TARP) was to __________.

bail out the banking sector

The annual shortfall between federal revenues and expenditures is known as which of the following?

the budget deficit

If the Federal Reserve wanted to slow the rate of economic growth, it would most likely __________.

increase interest rates

In general, a recession does which of these?

generates a response by the federal government

Which of the following is true regarding mandatory spending policies?

They create a serious ongoing financial burden on the federal government.

In a(n) __________ state, the government takes an active role in guiding and regulating the private economy.


U.S. monetary policy involves which of the following?

interest rates and the money supply

Which of the following statements regarding the role of the federal government in the economy is correct?

Presidential election outcomes are heavily influenced by the health of the economy.

Which of these statements best characterizes the effects of the recent economic crisis?

The overall influence of the federal government in the economy has increased.

If the Federal Reserve Board needed curb inflation, it would most likely __________.

raise interest rates

Lowering the discount rate would have which of the following effects?

It would encourage banks to borrow more and to extend more loans at lower rates.

An entitlement program provides benefits to __________.

citizens who meet eligibility criteria

Which of the following provides the greatest source of revenue for the federal government?

income taxes

In an economic slowdown, Keynesian economic policy would advocate __________.

increasing government spending

Upon taking office in 2009, which of the following did President Obama advocate to deal with the economic crisis?

increasing government spending

If Congress adopts a policy to make cars more fuel efficient, they have adopted a __________.

regulatory policy

Which of the following would indicate that the economy is experiencing inflation?

Interest rates are increasing.

Which of these is most consistent with the philosophy of Keynesianism?

government provision of the 2008 federal stimulus package

Which of the following is accurate with regard to the national debt?

The national debt as a percentage of GDP has drastically increased in recent years.

Which of the following most accurately describes the recent financial crisis in the United States?

a severe recession

If you support laissez-faire economic policies, you would generally favor __________.

a reduction in the amount of economic regulation by the government

Which of the following would be considered a regulatory policy?

a food safety policy

Which of the following is an example of monetary policy?

lowering interest rates

If the Federal Reserve wanted to increase lending by banks, what would it do to reserve requirements?

Lower the reserve requirements for banks

Why might some businesses lobby for increased regulation by the federal government?

to protect themselves from domestic and foreign competitors

Which of the following best characterizes the federal budget process?


Which of these statements best describes the influence of interest rate adjustments by the Federal Reserve?

They can spur economic growth by increasing the available money supply.

What is the purpose of government regulation of the economy?

to minimize the effects of negative externalities

What is the long-term concern about the Social Security Trust Fund?

There will be too few workers contributing to support the increasing number of retirees.

Which of the following was the biggest contributor to the economic crisis that began in 2008?

deregulation of the investment banking industry

If a government wanted to use monetary policy to increase economic growth, which of the following steps should be taken?

Decrease interest rates to increase the amount of money in supply.

According to Table 17.1, the largest number of Americans benefit from which means-tested program?

Supplemental Nutrition Assistance Program

Which of the following is a possible solution to the long-term problem of solvency in the Social Security program?

Increase the minimum retirement age.

If you subscribe to Keynesian economic policies, you are most concerned with __________.


Deregulation of which of the following industries was probably the biggest factor contributing to the economic crisis that began in 2008?

the investment banking industry

Why is monetary policy often the preferred way to address an economic crisis?

because it is both easy to implement and has fewer long-term consequences than deficit spending

Which of the following was the biggest contributor to the economic crisis that began in 2008?

deregulation of the investment banking industry

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