Chapter 17 Review
1. The “father of the American economy” is
a. George Washington.
b. James Madison.
c. Alexander Hamilton.
d. Thomas Jefferson.
2. A system in which the government, while not commanding the economy, is
deeply involved in economic decisions is called
a. capitalism.
b. a mixed economy.
c. socialism.
d. communism.
3. Some multinational corporations have budgets greater than many foreign
governments.
True
False
4. Wal-Mart
a. generated as much revenue as the state of California collected in taxes.
b. is partly responsible for the low rate of inflation in the United States.
c. has been responsible for 12 percent of all productivity growth in the
United States.
d. all of the above
5. The main regulatory agency responsible for regulation of business practices is the
a. Federal Reserve Board.
b. Securities and Exchange Commission.
c. Department of Commerce.
d. Justice Department.
6. Economic conditions are the best single predictor of voters’ evaluations of how
the president is doing his job.
True
False
7. People who feel that unemployment is a serious national problem tend to
a. lean toward the Democratic party.
b. lean toward the Republican party.
c. be unaffected by party politics.
d. not vote.
8. Which of the following statements is FALSE?
a. Republicans appeal primarily to working-class voters.
b. Voters concerned with unemployment are more likely to vote Democratic.
c. The parties pay close attention to economic conditions when selecting
their policies.
d. Republicans worry more about inflation.
9. The coalition behind the Republican Party is most likely to be concerned with
a. inflation.
b. inflation and unemployment.
c. unemployment.
d. expanding government's role.
10. The Bureau of Labor Statistics measures the unemployment rate as the total
number of adults without jobs.
True False
11. Our key measure of inflation is called the
a. Consumer Price Index (CPI).
b. Gross National Product (GNP).
c. Laffer Curve.
d. National Inflation Index (NII).
12. Laissez-faire was an economic philosophy embraced by
a. Herbert Hoover.
b. Franklin D. Roosevelt.
c. Lyndon Johnson.
d. Jimmy Carter.
13. Monetarists seek to keep the money supply in line with the
a. Consumer Price Index.
b. gross domestic product.
c. unemployment rate.
d. amount of available credit.
14. According to monetarists, too much money and credit leads to
a. recession.
b. unemployment.
c. inflation.
d. a budget surplus.
15. The Board of Governors of the Federal Reserve System
a. consists of 12 members.
b. belong to the president's party.
c. regulates the lending practices of banks.
d. is formally controlled by Congress and the president.
16. The Fed attempts to affect the money supply by each of the following means
EXCEPT
a. determining tax rates.
b. buying and selling government bonds.
c. setting the federal funds rate.
d. determining whether banks have more or less money to lend.
17. The financial dealings of the Federal Reserve Board directly or indirectly affect
a. interest rates.
b. inflation.
c. availability of jobs.
d. all of the above
18. The president has ultimate influence over the policies of the Federal Reserve
System.
True
False
19. The impact of the federal budget—taxes, spending, and borrowing—on the
economy describes
a. laissez-faire policy.
b. monetary policy.
c. fiscal policy.
d. economic policy.
20. Fiscal policy is almost entirely determined by
a. Congress and the president.
b. the Federal Reserve System.
c. the Internal Revenue Service.
d. the Office of Management and Budget.
21. The dominant economic philosophy most associated with the Roosevelt
administration was
a. laissez-faire.
b. monetarism.
c. Keynesianism.
d. supply-side economics.
22. Which of the following statements is TRUE?
a. Fiscal policy uses the Federal Reserve System.
b. Supply-side economics holds that tax cuts will stimulate the economy.
c. Conservative politicians have long favored Keynesian economic theory.
d. The Laffer Curve shows the relationship between inflation and
unemployment.
23. (bonus) Who, according to legend, wrote his economic theory on the back of a cocktail napkin?
a. Karl Marx
b. John Maynard Keynes
c. Arthur Laffer
d. Adam Smith
24. Economists have shown that decisions to artificially influence the economy at
election time have been made on a regular basis.
True
False
25. Our capitalist system presents a restraint on controlling the economy because
a. the private sector dominates the economy.
b. big business dominates economic policymaking.
c. no one can predict American consumer behavior.
d. none of the above
26. Emerging economies tend to favor an economic policy of
a. Keynesianism.
b. protectionism.
c. globalization.
d. laissez-faire capitalism.
27. Which of the following statements regarding free trade is FALSE?
a. Both Republican and Democratic presidents have supported free trade.
b. The World Trade Organization was established to promote free trade.
c. Free trade became increasingly popular after World War II.
d. Trade unions tend to be the strongest supporters of free trade.
28. (bonus) Who said, "the business of America is business"?
a. John Maynard Keynes
b. Calvin Coolidge
c. Herbert Hoover
d. Ronald Reagan
29. At the center of the American economy has long stood the
a. corporation.
b. family farm.
c. consumer.
d. labor union.
30. The beginning of the twenty-first century showed
a. a new respect for American corporations.
b. a sharp rise in the stock market.
c. an increase in corporate corruption.
d. a decrease in corporate concentration.
31. Since the 1980s, corporate capitalism was characterized by
a. hard times.
b. increased regulation.
c. an increased number of mergers.
d. nationalism.
32. Antitrust policy is implemented by the
a. Justice Department.
b. General Service Administration.
c. Small Business Administration.
d. Patent Office.
33. The Clinton administration filed a major antitrust suit against
a. International Business Machines (IBM).
b. General Motors.
c. Microsoft.
d. Exxon.
34. The government aids American business by
a. collecting data on products and markets.
b. issuing and protecting patents.
c. providing research and development funds.
d. all of the above
35. The first major consumer protection policy was the
a. Food and Drug Act.
b. Consumer Product Safety Act.
c. Consumer Credit Protection Act.
d. Wagner Act.
36. The agency that became a zealous defender of consumer interests in truth in
advertising in the 1960s and 1970s was the
a. Small Business Administration.
b. Food and Drug Administration.
c. Consumer Product Safety Commission.
d. Federal Trade Commission.
37. Perhaps the biggest change in economic policymaking over the past century has been the virtual 180-degree turn in public policy toward
a. consumers.
b. business.
c. labor unions.
d. farmers.
38. The National Labor Relations Act
a. provided for a right-to-work law.
b. enforced "yellow dog contracts."
c. exempted unions from antitrust laws.
d. guaranteed the right of collective bargaining.
39. The Taft-Hartley Act
a. continued to guarantee unions the right of collective bargaining.
b. gave the president a means to halt major strikes.
c. permitted states to adopt right-to-work laws.
d. all of the above
40. Right-to-work laws forbid labor contracts from requiring workers to join unions
to hold their jobs.
True
False
41. Voters rarely expect politicians to do much about the economy.
True
False
42. For the last two generations, U.S. policymakers have followed the near-universal
advice of economists by supporting
a. protectionism.
b. free trade.
c. supply-side economics.
d. regulation.
43. Democracy regularly facilitates an economic policy that looks after general
interests for long-term gain and ignores specific interests of particular groups.
True False
44. In general, liberals would favor letting business and the free market create new jobs and prepare people for them.
True False
45. Liberals tend to focus on the imperfections of
a. government.
b. the market.
c. regulatory agencies.
d. states.