normative.
40. Which of the following is an example of a normative, as opposed to positive, statement?
a.
Gasoline prices ought to be lower than they are now.
b.
The federal government should raise taxes on wealthy people.
c.
The social security system is a good system and it deserves to be preserved as it is.
d.
All of the above are normative statements.
Moderate
normative.
41. Which of the following is an example of a normative, as opposed to positive, statement?
a.
If the price of a product decreases, people’s willingness to buy that product will increase.
b.
Reducing tax rates on the wealthy would benefit the nation.
c.
If the national saving rate were to increase, so would the rate of economic growth.
d.
The elimination of trade restrictions would increase an economy’s standard of living.
Moderate
42. Which of the following is an example of a normative, as opposed to positive, statement?
a.
Following the most recent recession, the economy is recovering at a slower than usual pace.
b.
To stimulate the economy during the most recent recession, the federal government increased spending.
c.
In response to the most recent recession, the federal government extended the duration of unemployment
benefits.
d.
The federal government’s responses to the most recent recession were insufficient.
Moderate
normative.
43. Which of the following is an example of a normative – as opposed to a positive – statement?
a.
The discount rate is the interest rate the Federal Reserve charges banks to borrow funds.
b.
The US income tax rate increases with the amount of income earned.
c.
The government should increase the tax on gasoline.
d.
The US unemployment rate increased to 10 percent in 2009.
44. President Truman once said he wanted to find a one-armed economist because when he asked his economists for
advice, they always answered, “On the one hand, … On the other hand, …” Truman’s observation that economists’ advice
is not always straightforward
a.
is rooted in the principle that people face tradeoffs.
b.
indicates that economists recognize that there are opportunity costs associated with policy decisions.
c.
confirms that economists are not suited to be presidential advisers.
d.
More than one of the above is correct.
45. Which of the following is the best explanation for why President Harry Truman once said that he wanted to find a one–
armed economist?
a.
President Truman received input from so many economists that he only wanted one view from each.
b.
President Truman thought economists should analyze policies but not make or enforce them.
c.
Economists understand that most policy decisions involve trade-offs so they are likely to present multiple
views of policies.
d.
A one-armed economist would conduct only positive analysis and no normative analysis.
46. The Council of Economic Advisers
a.
was created in 1776 and consists of three members and a staff of several dozen economists.
b.
was created in 1776 and consists of thirty members and a staff of a dozen economists.
c.
was created in 1946 and consists of three members and a staff of several dozen economists.
d.
was created in 1946 and consists of thirty members and a staff of a dozen economists.
47. The Council of Economic Advisers
a.
was created in 1946.
b.
advises the president of the United States on economic policy matters.
c.
writes the annual Economic Report of the President.
d.
All of the above are correct.
48. Duties of the Council of Economic Advisers include
a.
advising the president and writing the annual Economic Report of the President.
b.
implementing the president’s tax policies.
c.
tracking the behavior of the nation’s money supply.
d.
All of the above are correct.
49. In addition to advising the president, one duty of the Council of Economic Advisers is to
a.
prepare the federal budget.
b.
write government regulations.
c.
advise Congress on economic matters.
d.
write the annual Economic Report of the President.
50. The Economic Report of the President
a.
discusses recent developments in the economy and presents analysis of current policy issues.
b.
is written by the Council of Economic Advisers.
c.
is the responsibility of the economists at the Office of Management and Budget.
d.
Both a and b are correct.
51. Economists at which of the following offices help formulate spending plans and regulatory policies?
a.
Office of Management and Budget
b.
Department of the Treasury
c.
Congressional Budget Office
d.
The Federal Reserve
52. Economists at the Department of the Treasury
a.
design U.S. currency and coins.
b.
provide Congress with the annual budget.
c.
enforce the U.S. antitrust laws.
d.
provide advice on tax policy to the President.
53. The president of the United States receives tax policy advice from economists in the
a.
Federal Reserve.
b.
Department of Justice.
c.
Department of the Treasury.
d.
Congressional Budget Office.
54. The design of tax policy is one of the responsibilities of economists who work at the
a.
Council of Economic Advisers.
b.
Federal Reserve.
c.
Department of the Treasury.
d.
Congressional Budget Office.
55. A duty of economists at the Department of Labor is to
a.
analyze data on workers.
b.
schedule federal holidays.
c.
enforce the nation’s antitrust laws.
d.
All of the above are correct.
56. Analysis of data on workers and those looking for work is conducted by economists at the
a.
Office of Management and Budget.
b.
Department of Labor.
c.
Congressional Budget Office.
d.
Department of the Treasury.
57. Economists at the Department of Justice
a.
track the behavior of the nation’s money supply.
b.
advise Congress on economic matters.
c.
help enforce the nation’s antitrust laws.
d.
prepare the federal budget.
58. The nation’s antitrust laws are enforced by economists at the Department of
a.
Labor.
b.
Health and Human Services.
c.
Justice.
d.
Treasury.
59. Some, but not all, government economists are employed within the administrative branch of government. Which of the
following government agencies employs economists outside of the administrative branch?
a.
the Department of Labor
b.
the Department of the Treasury
c.
the Congressional Budget Office
d.
the Council of Economic Advisers
60. Economists who are primarily responsible for advising Congress on economic matters work in which agency?
a.
the Federal Reserve
b.
the Congressional Budget Office
c.
the Department of the Treasury
d.
the Department of Commerce
61. Congress relies on economists at the Congressional Budget Office to
a.
enforce the nation’s antitrust laws.
b.
set the nation’s monetary policy.
c.
provide evidence that incumbent members of Congress are performing well in their jobs.
d.
provide independent evaluations of policy proposals.
62. The President receives economic policy advice from economists at each of the following except
a.
the Council of Economic Advisors.
b.
the Department of the Treasury.
c.
the Congressional Budget office.
d.
the Department of Labor.
63. The Federal Reserve
a.
designs tax policy.
b.
enforces the nation’s antitrust laws.
c.
sets the nation’s monetary policy.
d.
analyzes data on workers.
64. Economists hold many positions advising the president and Congress including
a.
being a member of the Council of Economic Advisers.
b.
helping to enforce antitrust laws at the Department of Justice.
c.
conducting research at the Congressional Budget Office.
d.
All of these are possible positions that economists hold.
65. John Maynard Keynes believed the ideas of economists to be
a.
generally incorrect.
b.
powerful.
c.
academic and without practical application.
d.
rantings of madmen.
66. One difference between a hypothetical benevolent king implementing the best policy and the president implementing
the best policy in the real world is the president has to be concerned about
a.
any misunderstandings in communicating the policy to the public.
b.
whether the policy will affect his standing among different groups in the electorate.
c.
what amendments will be suggested by members of Congress.
d.
All of the above are correct.
67. Policymaking in a representative democracy
a.
is straightforward and does not involve any disagreement.
b.
benefits from the input of economists, even if their advice is not always followed.
c.
is conducted without the input of economists.
d.
is always based exclusively on the results of economic analysis.
68. Suppose an economist advises a city’s mayor to begin charging drivers a fee to drive on a busy highway during
congested times. The mayor does not implement the policy because it would not be popular with voters. Which of the
following statements best describes the scenario?
a.
This is a common occurrence. The policymaker knows the best policy but chooses not to institute it for other
reasons.
b.
This is a common occurrence. The policymaker usually disregards an economist’s advice because they do not
believe it is the most efficient policy.
c.
This is an unlikely occurrence. Most of the time, policymakers follow the advice of economists and institute
the most efficient policies.
d.
This would never happen. Policymakers always follow the advice of economists.
69. Which of the following is an example of a normative, as opposed to positive, statement?
a.
The growth rate of the economy last year was higher than any other year in the last decade.
b.
The federal government reduced spending in the last quarter of the fiscal year.
c.
The Federal Reserve Bank adjusted interest rates in response to the lower-than-expected growth rate of the
economy.
d.
The federal government should decrease unemployment benefits to stimulate the economy out of the
recession.
70. Which of the following is an example of a positive, as opposed to normative, statement?
a.
The federal government should decrease coverage of unemployment benefits to stimulate the economy out of
the recession.
b.
Congress should agree on lower government spending for the next fiscal year.
c.
The Federal Reserve Bank should increase interest rates in response to the higher-than-expected inflation in
the economy.
d.
The unemployment rate last year was lower than any other year in the last century.
