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WorksheetsECONOMICS TOPIC 9 TEST REVIEW
Total questions: 20
Worksheet time: 13mins
Which of the following conclusions is supported by the data in this illustration?
The growth in defense spending is responsible for most spending growth since 1970.
Spending growth would be flat if not for large defense expenditures
The United States is failing to pay the annual cost of borrowing
Human resources represents by far the largest category of spending in 2012
This photograph likely shows the result of which of the following?
collapse of open market operations
failure to establish a federal budget
Keynesian economics
an inside lag
What is the first step in creating the federal budget?
The House Budget Committee and the Senate Budget Committee combine their work into a single budget proposal
The Office of Budget and Management works with the President’s staff to create an overall spending plan
Congress breaks into small committees and works with the Congressional Budget Office
Each federal agency writes an estimate of how much it expects to spend in the coming fiscal year
This photograph shows the implementation of which of the following?
a contractionary fiscal policy
application of the Laffer curve
a tight-money monetary policy
an expansionary fiscal policy
Keynesian economics differed from classical economics in which of the following ways?
It encouraged a laissez-faire approach to the economy
It relied on adjustments in monetary policy to impact the economy
It paid little attention to impact of policies in the short term
It relied on government to maximize economic output in some cases
Analyze this political cartoon, which shows President Roosevelt in a rowboat and Uncle Sam in the water
the depression was a threat to the nation and required Roosevelt’s bold response.
Keynesian policies threatened to swamp the United States in debt
the New Deal was an overreaction that was harmful to the country
Roosevelt’s actions to rescue the nation from disaster were insufficient
“[W]e cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. We can't afford it.”
—President Barack Obama, April 13, 2011
This statement is most clearly opposed to which of the following?
an easy money monetary policy
supply-side economics
Keynesian economic theory
Expansionary fiscal policy
Which of the following BEST summarizes the idea represented by this graph?
Very low taxes produce high revenues
Revenues will fall steadily with any increase in taxes
Raising taxes can actually lead to reduced revenues
Revenues continue to rise as tax rates increase
In what 10-year span has the government had the highest deficits?
1960–1970
1980–1990
1990–2000
2000–2010
What is an example of an opportunity cost of the federal government having to service its debt?
It has less money for the crowding-out effect
It has less money to pay to bondholders
It is unable to pay for entitlement programs
It has less money to spend on infrastructure
This political cartoon illustrates the political “tug of war” between Republicans, represented by the elephant, and Democrats, represented by the donkey. Which of the following BEST summarizes the issue raised by this cartoon?
Differences over preferred monetary policy approaches hurt citizens
Between spending cuts and tax hikes, ordinary citizens often suffer the consequences of political conflicts over balancing the budget
The combination of lower spending and higher taxes creates inflation
Foreign countries are poised to defeat us because we have disarmed ourselves
“In an effort to live within the short-term budget constraints, the President and Congress evaded the targets by relying on overly optimistic economic assumptions and outright gimmickry. This smoke-and-mirrors strategy enabled policymakers to live within the annual constraints while doing little to reduce the actual deficit.”
—Congressional Budget Office Chairman Robert D. Reischauer, May 13, 1993
This testimony describes what happened under the Gramm-Rudman-Hollings Act, a law that sought to force smaller deficits. According to this testimony, the law failed to achieve its goals because
lawmakers and the President found ways to ignore its requirements
the law was based on inaccurate economic projections
the language of the law was not strong enough
the public was furious with the impact of the law’s required spending cuts
Using the money multiplier formula, if you have an initial cash deposit of $10,000 and an RRR of .2, by what amount will the money supply be increased?
$25,000
$50,000
$75,000
$100,000
“. . . .Yellen has strong Democratic support, but a number of Republicans likely will oppose her because she has been a strong supporter of the Fed's unprecedented stimulus efforts, which conservatives believe are risking high inflation.”
— Los Angeles Times, Oct. 28, 2013
This article describes reaction to a nominee to serve as Chair of the Federal Reserve. Based on what you’ve read, you can assume that Ms. Yellen supported which of the following?
tight money monetary policy
contractionary fiscal policy
easy money monetary policy
the goal of budget surpluses
Why does the Fed rarely change reserve requirements?
It could end open market operations.
It might force banks to require many borrowers to repay their loans
It might cause the government to default on its debt.
It would affect the discount rate.
What is the prime rate?
the interest rate the Fed charges to boost private spending
the interest rate banks charge on loans to their best customers
the interest rate the Fed charges when it sells securities
the interest rate that the government charges on required reserve ratios
Based on this diagram, the cause that directly produces the effect of a change in economic activity is the
change in the interest rates
desire to alter economic activity.
adjustment of monetary policy.
change in the supply of money.
In practice, the lags . . . make monetary and fiscal policy difficult to apply. The lags and the general complexity of the national economy also make it difficult to sort out how different policies have affected the economy in the past. Economists have debated these matters for many years.
This statement explains which of the following?
why most economists today are monetarists
why the national debt has grown so alarmingly
why the business cycle exists
why there is often disagreement over monetary and other economic policies
"Importantly, in the 1930s, in the Great Depression, the Federal Reserve, despite its mandate, was quite passive and as a result, financial crisis became very severe, lasted essentially from 1929 to 1933."
—Federal Reserve Chairman Ben Bernanke, interview for Time magazine, Dec. 8, 2009
Based on what you know, you can predict that Chairman Bernanke would have favored which of the following in response to the Great Depression?
a loosening of the money supply
greatly reduced federal budgets
a tightening of the money supply
a sharp reduction in open market operations
How can an inflationary economy be stabilized?
by cutting taxes
with a tight monetary policy
with an expansionary monetary policy
by utilizing the outside lag
