Unit 8: Government's Role in the Economy

The government regulates private businesses for all of the following reasons except

• to protect competition

• to protect monopolies

• to protect consumers

• to stabilize the economy

What reason does the government give to place an excise tax on alcohol and tobacco?

• to make it expensive to import the products

• to make it harder for companies to sell these products

• to discourage the use of these products

• to raise money for the federal government

A tax for which the percentage of income paid in taxes remains the same for all income levels is known as 

• a proportional tax

• a regressive tax

• sales tax

• a progressive tax

When considering the business cycle, one problem of Classical Economics was that 

• it couldn’t make the peaks last

• it involved the cutting of taxes to increase overall revenue

• it involved the use of government spending to influence the economy

• it didn’t address how long a trough would last or how deep the trough would be

Sales tax is an example of a regressive tax. How can a state make their sales tax less regressive?

• by placing the tax on only services

• by placing the tax on necessities

• by placing the tax on luxury goods

• by placing the tax on all goods

Which of the following actions is an example of expansionary fiscal policy?

• a decrease in the corporate income tax rates

• a purchase of government securities in the open market

• a decrease in welfare payments

• a decrease in the discount rate

What is the subject of the Federal Open Market Committee decisions?

• scheduling of banking days and hours of member banks

• chartering of new banks and other lending institutions

• appointment of members of the Federal Reserve Board of Governors

• the buying and selling of bonds to affect the money supply

Everyone who drives over the Scudder Falls Bridge is required to pay a toll that is used for upkeep of the bridge and roadway. Because only users of the bridge must pay, the toll is called

• a benefits-received tax

• a progressive tax

• a regressive tax

• an ability-to-pay-tax

The Federal Reserve can decrease the supply of money and slow inflation by 

• decreasing the reserve requirement

• selling government bonds in the open market

• decreasing the discount rate

• buying government bond in the open market

If the federal government uses an expansionary fiscal policy, it will lead to ___________ in the short run and __________ in the long run. 

• preventing inflation, a contraction

• preventing inflation, an expansion

• decreasing spending, inflation

• increasing spending, inflation