American Government 100 Part IV
Patterson, pgs. 446-461, AG25-17
Economic & Environmental Policy
True or False Questions
1. According to Patterson, the turnaround from the 2008 meltdown was slower and more fitful than many economists had predicted, but government intervention had helped prevent a repeat of the 1930s. True or False
2. One of the few areas that government maintains a hand’s off policy is the environment for fear that it will destroy a more efficient free market. True or False
3. Compared to the partially socialized Scandinavian countries, the United States relies more heavily on free-market mechanisms. True or False
4. Price fixing was prevalent in the United States in the late nineteenth century when large trusts came to dominate many areas of the economy. True or False
5. Additional costs that are the result of government regulation are efficient to the degree that they produce corresponding benefits. True or False
6. The result of overregulation is higher-priced goods that are more expensive for consumers and less competitive in the domestic and global markets. True or False
7. In 2010, Congress enacted the most substantial regulation of financial institutions since the New Deal, designed to curb some of the abuses that contributed to the financial crisis. True or False
8. Under the reforms of the Dodd-Frank Act, financial institutions were to be more heavily regulated but consumer protection was not included in the new law. True or False
9. An example of the failure of excess government regulation was the rule eliminating lead in paint and gasoline. True or False
10. In working cooperatively with the FDA, the pharmaceutical industry has been able to streamline the process since the 1990s, experiencing no problems with any of the drugs that have been “fast-tracked” to market. True or False
11. The majority of the regulatory agencies established during the third wave have a much more restrictive policy mandate than those created earlier. True or False
12. The president cannot remove the members of older agencies that are run by commissions even though the chief executive may have originally nominated them. True or False
13. It was Richard Nixon who created the Environmental Protection Agency (EPA) , an action that was backed by a Democratically-controlled Congress. True or False
14. Back in 1975, President Gerald Ford argued that the requirements of the EPA were having a positive impact on the U.S. economy. True or False
15. According to Patterson, climate change is a myth created by extremist environmentalists as a means to generate revenue for their movement. True or False
16. The United States lags behind most Western countries, including Germany, France, and Great Britain, in reducing its greenhouse gas emissions. True or False
17. The European Commission data indicate that the five leading countries of sources of carbon-fuel emissions account for two-thirds of the world’s total. True or False
18. At various times and in different ways, as in the case of the FDA and pharmaceutical firms, some regulatory agencies have sided with the very industries they are supposed to regulate in the public interest. True or False
19. It is illegal for the government to provide direct loans to business interests in the U.S. because it violates the laissez-faire philosophy. True or False
20. Colleges and universities, which are funded primarily by government, furnish business with most of its professional and technical workforce and with much of the basic research that goes into product development. True or False
21. The federal government’s support of labor is more extensive than its support of business. True or False
Multiple Choice Questions
1. At the height of the Great Depression of the 1930s, what was the level of unemployment?
a) 12%, b) 19%, c) 25%, d) 35%.
2. What is public policy? a) an action by financial institutions to direct government activity, b) a decision by government to follow a course of action designed to produce a particular result, c) the ability and the power to direct major institutions by either the government or the private sector, d) the evolution of the bureaucracy to compel wavering sectors of the economy to accept outside interference.
3. The U. S. government imposes restraints on business activity for the purpose of promoting economic efficiency and equity: a) fiscal policy, b) regulatory policy, c) educational policy, d) environmental policy.
4. The tax and spend side of government is referred to as: a) federal policy, b) monetary policy, c) fiscal policy, d) regulatory policy.
5. The following seeks to maintain a level of inflation consistent with sustained, controllable economic growth through its money supply decisions: a) The Department of Homeland Security, b) The Securities and Exchange Commission, c) The Commerce Department, d) The Federal Reserve System.
6. In the Wealth of Nations (1776), Adam Smith presented the case, which holds that private individuals and firms should be allowed to make their own production decisions: a) public enterprise, b) the welfare state, c) laissez-faire doctrine, d) liberty.
7. Smith argued that the profit motive guides supply decisions in a capitalist system: a) demand for goods, b) entrepreneurial talent, c) free enterprise, d) the invisible hand.
8. What areas of the economy did Adam Smith say needed to be regulated or run by government? a) natural monopolies, b) industries, c) agriculture, d) small businesses.
9. An economy that is predominantly private but also assigns a substantial part to government: a) free enterprise, b) corporatist economy, c) command economy, d) mixed economy.
10. The stock market is regulated by the following which requires publicly traded companies to disclose their assets to investors: a) the U.S. Trade Organization, b) the Financial Disclosure Agency, c) the Office of the Exchequer, d) the Securities and Exchange Commission.
11. The following results when the output of goods and services is the highest possible given the amount of input (such as labor and material) that is used to produce them: a) equity, b) efficiency, c) externalities, d) diminishing returns.
12. Where is the optimal place to achieve efficiency according to Adam Smith and other classical economists? a) the government through its regulatory agencies, b) the free market, c) a combination of both the free market and government agencies, d) public ownership of industry.
13. What is flawed about the assumption that the market always determines the price? a) The profit motive forces producers to use as few resources as possible, resulting in shoddy goods, b) If a producer can acquire a monopoly or can successfully conspire with other producers to fix the price of the product, then efficiency is lost, c) Prices are a reflection of collusion throughout the market that only government regulation can contain, d) Competition is a consequence of the character and values of society, necessary ingredients for honesty.
14. Congress took the first step toward regulating railroad price-gauging by enacting the following legislation in 1887: a) the Mann-Elkins Act, b) the Sherman Antitrust Act, c) the Interstate Commerce Act, d) the Clayton Act.
15. In 2016, why did the Federal Trade Commission block the merger between Office Depot and Staples? a) corruption practices by one of the parties was discovered, b) to maintain competition in its areas of the market, c) Staples failed to submit an environmental impact statement, d) Office Depot had earlier filed for bankruptcy.
16. The federal government tolerates business concentration, even permitting the merger of competing firms because: a) capital costs are low in key sectors, b) such firms have friendly relations with members of Congress, c) government officials realize that market competition is no longer limited to domestic competition, d) government officials realize that collusion of prices maybe a healthy condition for the market.
17. The passage of the Airlines Deregulation Act in 1977 resulted in: a) air fares declining in price and there was more competition between airlines on most routes, b) air fares going up as a result of less competition and airlines refusing to fly many routes as a result of collusion, c) air fares being stabilized after a downward trend, preventing smaller carriers from going under, d) the airlines successfully fighting the legislation, having it rescinded after a short period.
18. According to economist Paul Krugman, a situation where “one person makes the decision about how much risk to take, while someone else bears the cost if things go badly.” a) collective indulgence, b) satisfactory efficiency, c) balanced risk, d) moral hazard.
19. In 2008, who saved the banks, such as Bank of America, Citibank and other major banks from going bankrupt? a) the government, b) the insurance industry, c) wealthy private financiers, d) no institution did.
20. The crisis in America’s financial system demonstrates that: a) Too little government regulation results in greater efficiencies, b) Too much government regulation eliminates waste, c) Either too little or too much regulation can result in economic inefficiency requiring the need to find the proper balance, d) In the final analysis, the government has no business regulating the economy or its businesses because it’s unconstitutional.
21. The following occurs when an economic transaction is fair to each party, focusing on outcomes: a) mobilized capital, b) economies of scale, c) supply and demand, d) economic equity.
22. The government agency which serves to protect consumers from unsafe products: a) the Product Liability Commission, b) the Consumer Product Safety Commission, c) the Product Protection Regulatory Commission, d) the Commission on Product Safety.
23. At the time the federal government required cigarette manufacturers to put warning labels about the dangers of smoking on cigarette packs, more than 40 percent of American adults were cigarette smokers. Today, the number of adult cigarette smokers has dropped too: a) 35%, b) 31%, c) 29%, d) 20%.
24. Why are newer federal agencies more responsive to the president than to the firms they regulate? a) with the changes in the power of the president, he has the ability and power to expand the size of newer agencies, b) unlike the past, the media is a powerful tool available to contemporary presidents, c) most of the newer agencies are headed by a single director who can be removed from office at the president’s discretion, d) the president can remove mandates that have been passed by Congress.
25. The unpaid costs of production to society, such as a local chemical plant releasing toxic wastes in a local river: a) contagion, b) production inequality, c) societal losses, d) externalities.
26. The modern environmental movement gained impetus with the publication of Rachel Carson's, “The Silent Spring,” which: a) discussed the serious problems of deforestation, b) criticized the overutilization of the oceans, c) revealed the threat of harmful pesticides such as DDT, d) identified the links between processed foods and cancer.
27. Because of the efforts of environmental regulation since the 1960s, urban air pollution has declined by: a) 35%, b) 46%, c) 51%, d) 60%.
28. What dominated government’s attitude toward labor into the twentieth century? a) collective action by labor was to be protected based on the First Amendment's right of assembly, b) it interfered with the rights of business, c) unionized labor was a natural growth of industrial development, d) federal troops were sent in to protect the workers from goon squads hired by industry to break strikes.
29. Government support for labor now includes: a) minimum wage and maximum-work-hour guarantees, b) unemployment benefits, c) safer and more healthful working conditions, d) all the above.
30. The following opened government-owned lands to settlement by providing 160 acres of land free to any family that staked a claim, built a house, and farmed the land for five years: a) The Land Management Act of 1890, b) The Homestead Act of 1862, c) The Reclamation Act of 1829, d) The Dispersal Territory Act of 1839.
31. Government programs today provide billions of dollars of assistance annually to farmers, small and large, accounting for about what amount of net agricultural income? a) more than half, b) more than one third, c) more than one fourth, d) more than a fifth.
Fill-in Questions
1. What was the response to the 1929-1931 drop in stock prices that made matters worse?
a) Businesses cut back ______,
b) investors fled the ______,
c) depositors withdrew their bank ______,
d) consumers slowed their ______.
2. What was the result of deregulation of the subprime mortgage market during the 2000s?
a) Mortgage firms lured marginally qualified homebuyers by offering low ______and ______payments.
b) When the economy ______, many homeowners ______on their mortgages,
c) causing the 2008 ______crisis.
3. The following agencies were created as a result of a need to regulate key sectors of the economy:
a) This agency was created in 1907 because unsafe food and drugs were being widely marketed. Its role was to clean up the problem: The ______.
b) This legislation was designed in part to protect investors from dishonest or imprudent stock and bond brokers: The ______of 1934.
c) This legislation required employers to pay workers a minimum wage: The ______of 1938.
4. Why is the problem of effectively addressing climate change such a difficult challenge?