Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 485
Skill Level: Apply What You Know
Difficulty Level: Difficult
56. What has been the result of regulatory policies designed to curb air pollution, such
as the Clean Air Act?
a. Levels of air pollution have fallen only slightly, much to the disappointment of
the Environmental Protection Agency.
b. Levels of air pollution have continued to increase, despite the regulations.
c. Levels of air pollution have fallen dramatically, though pollution has not been
completely eliminated.
d. Levels of air pollution have remained the same, though they probably would be
higher without the government policies.
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 496
Skill Level: Analyze It
Difficulty Level: Difficult
57. Which of the following is a consequence of offshore outsourcing?
a. a decrease in monopolies and other unfair business practices
b. stronger international policies to protect the environment
c. higher prices on consumer goods
d. widespread unemployment in heavy industries
Topic: Promoting the Economy
Learning Objective: LO 16.4: Identify ways in which the federal government
seeks to promote economic growth.
Page Reference: 489
Skill Level: Analyze It
Difficulty Level: Difficult
58. The signing of the North American Free Trade Agreement has had a significant
impact on the economies of __________.
565
a. the United States, Mexico, and Canada
b. the United States, Canada, and Greenland
c. the United States and Cuba
d. the United States and Panama
Topic: Promoting the Economy
Learning Objective: LO 16.4: Identify ways in which the federal government
seeks to promote economic growth.
Page Reference: 490
Skill Level: Understand the Concepts
Difficulty Level: Moderate
59. Which of the following is an ongoing challenge in the area of environmental
regulation?
a. convincing the public to support environmental protection
b. convincing the federal government to become involved, given that most
environmental problems are dealt with at the state level
c. anticipating the impacts of increasingly sophisticated technology
d. finding ways to reverse the trend of increasing air and water pollution
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 496
Skill Level: Analyze It
Difficulty Level: Difficult
60. Which of the following is an advantage of deregulation?
a. Deregulation would decrease the inflationary pressures in the economy.
b. Deregulation would encourage corporate social responsibility.
c. Deregulation would reduce compliance costs for business.
d. Deregulation would strengthen American labor unions.
Topic: The Deregulation Movement
Learning Objective: LO 16.6: Evaluate the advantages and disadvantages of the
deregulation movement.
Page Reference: 496
Skill Level: Analyze It
566
Difficulty Level: Difficult
True–False Questions
61. Government regulation of the economy is often criticized for imposing heavy
paperwork and reporting burdens on the economy.
Topic: The Deregulation Movement
Learning Objective: LO 16.6: Evaluate the advantages and disadvantages of the
deregulation movement.
Page Reference: 496
Skill Level: Remember the Facts
Difficulty Level: Easy
62. Congress has the primary responsibility for setting interest rates in the United
States.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 485
Skill Level: Remember the Facts
Difficulty Level: Easy
63. Corporate income taxes account for the largest share of the federal government’s
tax revenue.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 481
Skill Level: Remember the Facts
Difficulty Level: Easy
64. The federal income tax is considered a progressive tax.
567
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 481
Skill Level: Understand the Concepts
Difficulty Level: Moderate
65. Monetary economic policy uses the money supply to affect growth in the U.S.
economy.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 484
Skill Level: Remember the Facts
Difficulty Level: Easy
66. The most recent economic crisis was a depression.
Topic: An Introduction to Economic Policy
Learning Objective: LO 16.1: Describe the federal government’s role in making
economic policy and how the economy’s performance is measured.
Page Reference: 478
Skill Level: Understand the Concepts
Difficulty Level: Moderate
67. The Federal Reserve Board is responsible for fiscal policy.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 480
Skill Level: Remember the Facts
Difficulty Level: Easy
68. Federal regulations protect workers through labor injunctions and collective
bargaining.
568
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 493
Skill Level: Understand the Concepts
Difficulty Level: Moderate
69. Regulatory activities exist to help control the negative effects of economic
activity.
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 491
Skill Level: Understand the Concepts
Difficulty Level: Moderate
70. The national debt is the yearly difference between government revenues and the
deficit.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 481
Skill Level: Remember the Facts
Difficulty Level: Easy
71. The U.S. Constitution prohibits the use of taxing and spending to influence the
national economy.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 481 – 482
Skill Level: Understand the Concepts
Difficulty Level: Moderate
72. One of the goals of U.S. economic policy is to work to make sure that no single
industry or company has an unfair advantage.
569
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 491
Skill Level: Understand the Concepts
Difficulty Level: Moderate
73. Keynesians would likely approve of the recent government stimulus package
passed by Congress to deal with the economic crisis of the Great Recession.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 486 – 487
Skill Level: Apply What You Know
Difficulty Level: Difficult
74. The best way to influence the money supply is through fiscal policy.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 484
Skill Level: Apply What You Know
Difficulty Level: Difficult
75. Because of the Great Recession, Congress is more likely to deregulate
commercial and investment banks.
Topic: The Deregulation Movement
Learning Objective: LO 16.6: Evaluate the advantages and disadvantages of the
deregulation movement.
Page Reference: 499
Skill Level: Apply What You Know
Difficulty Level: Difficult
Fill–in–the–Blank Questions
570
76. The ___________ is responsible for overseeing the budget process on behalf of
the president.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 482
Skill Level: Remember the Facts
Difficulty Level: Easy
77. The Fed’s most important tool for monetary policy is its ___________.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 485
Skill Level: Understand the Concepts
Difficulty Level: Moderate
78. When members of Congress talk about the ___________, they are talking about
the difference between annual government expenditures and revenues.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 481
Skill Level: Remember the Facts
Difficulty Level: Easy
79. The federal government relies on a ___________ tax to fund the Social Security
program.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 481
571
Skill Level: Remember the Facts
Difficulty Level: Easy
80. Deregulation of the __________ industry was the first major victory in the
deregulation movement and remains one of its most visible successes.
Topic: The Deregulation Movement
Learning Objective: LO 16.6: Evaluate the advantages and disadvantages of the
deregulation movement.
Page Reference: 498
Skill Level: Understand the Concepts
Difficulty Level: Moderate
81. Economists measure inflation with the __________, which shows how much
more or how much less consumers are paying for the same “basket of goods” over
time.
Topic: An Introduction to Economic Policy
Learning Objective: LO 16.1: Describe the federal government’s role in making
economic policy and how the economy’s performance is measured.
Page Reference: 478
Skill Level: Remember the Facts
Difficulty Level: Easy
82. The __________ tax is only used at the state and local level.
Topic: Fiscal Policy
Learning Objective: LO 16.2: Outline the tools and impact of fiscal policy on
the economy.
Page Reference: 483
Skill Level: Remember the Facts
Difficulty Level: Easy
83. The money supply __________ when the Federal Reserve Board increases
interest rates.
Topic: Monetary Policy
572
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 484 – 485
Skill Level: Apply What You Know
Difficulty Level: Difficult
84. The federal government uses fiscal policy when it raises __________.
Topic: Fiscal Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 480
Skill Level: Apply What You Know
Difficulty Level: Difficult
85. Giving to charity is a form of corporate __________.
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 495
Skill Level: Understand the Concepts
Difficulty Level: Moderate
86. __________ generally endorses a hands-off approach to government management
of the economy.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 486
Skill Level: Understand the Concepts
Difficulty Level: Moderate
87. The primary purpose of deregulation is to __________ the amount of government
intervention in the economy.
Topic: The Deregulation Movement
573
Learning Objective: LO 16.6: Evaluate the advantages and disadvantages of the
deregulation movement.
Page Reference: 498
Skill Level: Understand the Concepts
Difficulty Level: Moderate
88. The economic downturn that began in 2008 is often referred to as __________.
Topic: An Introduction to Economic Policy
Learning Objective: LO 16.1: Describe the federal government’s role in making
economic policy and how the economy’s performance is measured.
Page Reference: 478
Skill Level: Remember the Facts
Difficulty Level: Easy
89. The federal government regulated the formation of monopolies by enacting
__________ legislation.
Topic: Regulating the Economy
Learning Objective: LO 16.5: Categorize ways in which the federal government
seeks to regulate the economy.
Page Reference: 492
Skill Level: Understand the Concepts
Difficulty Level: Moderate
90. Keynesians in Congress would support increasing ___________ as a means to
address high levels of unemployment.
Topic: Monetary Policy
Learning Objective: LO 16.3: Outline the tools and impact of monetary policy
on the economy.
Page Reference: 486
Skill Level: Apply What You Know
Difficulty Level: Difficult
Short Answer Questions
91. What is fiscal policy?