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Government and the Economy

Total questions: 125

Worksheet time: 3hrs 8mins

Name
Class
Date
1.

What do taxes collected under the Federal Insurance Contribution Act (FICA) fund?

a)

Social Security and Medicaid

b)

Social Security and Medicare

c)

Medicare and Medicaid

d)

Medicaid and Supplemental Security Income

2.

Who generally bears most of a sales tax when the demand for the good taxed is inelastic?

a)

the retailer

b)

the consumer

c)

the wholesaler

d)

the producer

3.

What do social security taxes pay for?

a)

benefits to federal workers and military personnel

b)

benefits to those who are unemployed

c)

transportation and training expenses for low-income people

d)

benefits to older citizens, surviving family members of wage earners, and people with certain disabilities

4.

Our tax money is spent on all of the following EXCEPT:

a)

Social Security

b)

The Military

c)

Private School Education

d)

National Parks

5.

The W-4 form lets...

a)

the government know how much you paid in taxes last year

b)

your employer know how much to withhold from your paycheck

c)

the 3 major credit bureaus know how many dependents you have

d)

you know how much you paid in taxes last year

6.

Jess is 21, in college, & has a job that provides 65% of her support. Is she a dependent?

a)

Yes

b)

No

7.

By claiming "exempt" on the W-4 form...

a)

You are paying all income taxes upfront at the START of the year.

b)

You are requesting an extension to file your taxes

c)

You will NOT have income taxes withheld from your paycheck.

d)

You are paying all income taxes at the END of the calendar year.

8.

Fort Bend county charges tax each year on the house that Jennifer owns. Which type of tax does she pay?

a)

Property Tax

b)

Sales Tax

c)

Income Tax

d)

Payroll Tax

9.

Louis's dad pays a tax to the federal government each year based off the money he earns from his lawn mowing business. What type of tax does Louis's dad pay each year?

a)

Payroll Tax

b)

Income Tax

c)

Sales Tax

d)

Property Tax

10.

Curtis purchased a new pair of jeans for $18. When Curtis pays for his jeans his total is almost $20 because of taxes. Which type of tax does Curtis pay?

a)

Payroll Tax

b)

Income Tax

c)

Sales Tax

d)

Property Tax

11.

Money that is taken out of a paycheck that goes to city/state/country and for programs that help people when they retire

a)

Property tax

b)

Income/payroll taxes

c)

sales tax

12.

Mr. Mann owns a ranch that has 45 acres of land. Each year Mr. Mann pays $5,340 in taxes on the land for his ranch. Which type of tax does Mr. Mann pay?

a)

Payroll Tax

b)

Income Tax

c)

Sales Tax

d)

Property Tax

13.

Jarrod was a contestant on a popular game show and won a $1,000 prize on the show. Jarrod had to pay $200 of his winnings in taxes. Which type of tax did Jarrod have to pay?

a)

Payroll Tax

b)

Income Tax

c)

Sales Tax

d)

Property Tax

14.

Brooke spent $45.98, including tax, at the grocery store. Which type of tax did Brooke pay?

a)

Payroll Tax

b)

Income Tax

c)

Sales Tax

d)

Property Tax

15.

Jan pays federal taxes every year based off her yearly income. Which type of tax is calculated by the amount of your income?

a)

Payroll Tax

b)

Income Tax

c)

Sales Tax

d)

Property Tax

16.

Property Tax is-

a)

Tax on things you buy or purchase

b)

tax on the house or land you own

c)

tax taken out of your paycheck

d)

tax that you pay based on your income

17.

Taxes are collected by

a)

Businesses

b)

Parents

c)

Foreign countries

d)

Government

18.

Federal Contribution Insurance Act (FICA) are withheld from your paycheck and sent to the government. These are used for (Two answers are to be selected)

a)

Social Security

b)

State

c)

Medicare

d)

Sale

19.

When you receive a new job, you are mandated to file a

a)

Complaint

b)

Divorce

c)

W-4

d)

W-2

20.

When you are ready to file for taxes you must have form

a)

W-2

b)

W-6

c)

WD40

d)

W-2484

21.
a tax in which the tax rate increases as the taxable amount increases
a)
progressive
b)
regressive
c)
flat
d)
proportional
22.
A popular suggestion is to eliminate the income tax and replace it with a national sales tax, called the fair _____. The idea is that everyone pays their fair share based on what they spend rather than what they earn.
a)
play rule
b)
tax
c)
implementation 
d)
lady
23.

A _____________tax may at first appear to be a fair way of taxing citizens because everyone, regardless of income level, pays the same dollar amount. By taking a closer look, it is easy to see that such a tax causes lower-income people to pay a larger share of their income than wealthier people pay

a)

progressive

b)

income

c)

flat

d)

regressive

24.
A _________ tax, also referred to as a flat tax, impacts low-, middle- and high-income earners relatively equally. 
a)
regressive
b)
proportional
c)
income
25.
Under a ________ tax system, individuals and entities with low incomes pay a higher amount of that income in taxes compared to high-income earners. 
a)
Regressive
b)
Progressive
c)
Proportional
d)
Flat
26.
 Rather than implementing a tax liability based on the individual or entity's ability to pay, the government assesses tax as a percentage of the asset that the taxpayer purchases or owns.
a)
Regressive
b)
Proportional
c)
Flat
d)
Progressive
27.
Federal Income tax is a _______tax
a)
proportional
b)
flat
c)
regressive
d)
progressive
28.
Who is in charge of fiscal policy?
a)
Government
b)
Federal Reserve
29.
Which of the following are responsible for making fiscal policy decision? 
a)
The President and Congress
b)
The Federal Reserve System
c)
The National Council of Economic Advisors
d)
The commerce Department
30.
Taxing & spending to help the economy grow is referred to as
a)
expansionary policy
b)
monetary policy
c)
contractionary policy
d)
budget deficit
31.
Taxing & spending to slow the economy is referred to as 
a)
budget surplus 
b)
monetary policy
c)
contractionary policy
d)
budget deficit
32.
The federal government's overall approach to spending and taxes is called
a)
Physical Policy
b)
Fiscal Policy
c)
Money
d)
Monetary Policy
33.
An example of expansionary fiscal policy would be
a)
cutting taxes.
b)
cutting government spending.
c)
cutting production of consumer goods.
d)
cutting prices of consumer goods.
34.
If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is 
a)
decreasing taxes.
b)
decreasing spending.
c)
decreasing the money supply.
d)
decreasing the reserve requirement.
35.
If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?
a)
Selling securities on the open market
b)
Raising interest rates
c)
Reducing government spending
d)
Raising reserve requirements
36.
Fiscal Policy is the means by which the government keeps the economy stable through taxes and programs provided to the people.
a)
True
b)
False
37.
The Federal government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies  might be enacted to reduce inflation?
a)
Increasing taxation
b)
Open market sales
c)
decreasing taxation
d)
Increasing government spending
38.
An example of expansionary fiscal policy would be
a)
cutting taxes.
b)
cutting government spending.
c)
cutting production of consumer goods.
d)
cutting prices of consumer goods.
39.
Which of the following is not a tool of fiscal policy?
a)
Taxing
b)
Spending
c)
Interest Rates
d)
All of these options are tools of fiscal policy.
40.
When the government raises taxes, what does it take out of circulation?
a)
Money
b)
Credit
c)
People
d)
Jobs
41.
True or False-- the Federal Reserve helps with fiscal policy
a)
True
b)
False
42.

Fiscal Policy is controlled by...

a)

The Government

b)

The Federal Reserve System

c)

The states

d)

The Department of Commerce

43.
Taxing & spending to help the economy grow is referred to as
a)
expansionary policy
b)
monetary policy
c)
contractionary policy
d)
budget deficit
44.
Taxing & spending to slow the economy is referred to as 
a)
budget surplus 
b)
monetary policy
c)
contractionary policy
d)
budget deficit
45.

During a economic expansion, the Federal Government should use...

a)

an expansionary fiscal policy

b)

a contractionary fiscal policy

46.

During a contraction / recession, the Federal Government should use

a)

an expansionary fiscal policy

b)

a contractionary fiscal policy

47.
An example of expansionary fiscal policy would be
a)
cutting taxes.
b)
cutting government spending.
c)
cutting production of consumer goods.
d)
cutting prices of consumer goods.
48.
If the unemployment rate is rising and GDP is falling, the fiscal policy action that the federal government should MOST likely follow is 
a)
decreasing taxes.
b)
decreasing spending.
c)
decreasing the money supply.
d)
decreasing the reserve requirement.
49.
If and economy experiences a dramatic rise in prices, which fiscal policy action could be taken?
a)
Selling securities on the open market
b)
Raising interest rates
c)
Reducing government spending
d)
Raising reserve requirements
50.
The Federal government is concerned that economic growth is too high, that it is unsustainable, and that inflation is resulting. Which of the following fiscal policies  might be enacted to reduce inflation?
a)
Increasing taxation
b)
Open market sales
c)
decreasing taxation
d)
Increasing government spending
51.
When the government raises taxes, what does it take out of circulation?
a)
Money
b)
Credit
c)
People
d)
Jobs
52.

Which of the following statements is true?

a)

Contractionary monetary policy would increase government revenue & slow down the economy.

b)

Contractionary fiscal policy would decrease the reserve requirement & slow down the economy.

c)

Contractionary fiscal policy would lead to an increase in the national debt.

d)

Contractionary monetary never works

53.

What makes up the largest area of government spending?

a)

Food Stamps

b)

Medicare

c)

Social Security

d)

Interest payments

54.
Which of the following is an example of expansionary policy?
a)
The Fed sells bonds
b)
the Fed raises reserve requirements
c)
the Fed buys bonds
d)
the Fed raises the Fed funds rate
55.
An example of a contractionary fiscal policy would be if:
a)
taxes were cut
b)
the government bailed out GM 
c)
the Fed decrease the fed funds rate
d)
taxes were increased
56.
If Congress increases government spending by the same amount it increases taxes aggregate demand will
a)
remain the same
b)
decrease, these are both contractionary
c)
increase
d)
shift down
57.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
58.
Which items on the graph are part of M1?
a)
currency and savings deposits
b)
currency, traveler’s checks plus demand deposits, and other checkable deposits
c)
other checkable deposits, money market mutual funds, and small time deposits
d)
currency, savings deposits, and small time deposits
59.
If the Federal Reserve raises interest rates to combat rapid inflation, what might be a negative outcome?
a)
Unemployment rates would rise
b)
taxes will rise 
c)
The government would put a freeze on prices
d)
international trade would stop 
60.
The Federal Reserve wants to reduce the nation's money supply. This could be accomplished by doing all of the following EXCEPT
a)
decreasing the discount rate.
b)
increasing the reserve requirement.
c)
selling securities on the open market.
d)
making banks hold a reserve for all types of deposits.
61.
If the Federal Reserve System wanted to stimulate the U.S. economy and reduce unemployment, it would
a)
A. cause interest rates to decrease because low interest rates encourage businessgrowth and expansion
b)
B. cause interest rates to rise because high interest rates encourage business growthand expansion
c)
C. increase the discount rate it charges banks, which would increase the money supply
d)
D. increase consumer spending by reducing the money supply
62.
If the Federal reserve and Government are attempting to encourage growth and stimulate the economy, which actions would each take? 
(monetary / fiscal)
a)
increase the Required reserve / increase government spending
b)
sell government securities / decrease taxes
c)
decrease the interest rate / increase government spending
d)
buy government securities / decrease government spending
63.
How much must the bank keep on hand if the Required Reserve is 10%  and there is a deposit of $100.
a)
100
b)
110
c)
90
d)
10
64.
If the federal government is attempting to encourage spending by consumers and businesses, a fiscal policy BEST serving this purpose would be
a)
decreasing taxes.
b)
decreasing government spending.
c)
reducing the investment tax credit.
d)
balancing the budget.
65.
The rate the Fed charges banks for a loan
a)
Discount rate
b)
Federal fund rate
c)
reserve ratio
d)
prime rate
66.

Fiscal Policy is the

a)

use of taxing and interest rates to influence the economy

b)

use of money supply and interest rates to influence the economy

c)

use of taxing and govt. spending to influence the economy

d)

use of govt. spending and money supply to influence the economy

67.

The annual plan for spending by Congress and the President is

a)

Federal Budget

b)

Fiscal Policy

c)

Money supply

d)

recession

68.

Expansionary Monetary Policy involves increasing the money supply and govt. spending

a)

True

b)

False

69.

Contractionary Fiscal Policy involves

a)

increase the money supply and increase interest rates

b)

increasing govt. spending and decrease taxes

c)

decrease interest rates decrease money supply

d)

decrease govt. spending and increase taxes

70.

Increase in the national debt would be caused by

a)

increasing govt. spending and increase taxes

b)

increasing govt. spending and decrease taxes

c)

decreasing govt. spending and increase taxes

d)

increase interest rates and decrease the money supply

71.

Inflation is caused by

a)

increase in prices in the economy

b)

to little money in the economy

c)

greater demand than supply

d)

greater supply than demand

72.

During a period of recession the best action would be

a)

increase the money supply and lower interest rates

b)

decrease govt. spending and decrease taxes

c)

decrease the money supply and increase govt. spending

d)

increase interest rates and decrease the money supply

73.

Keynesian Economics believes that increased govt. spending will bring the economy out of recession

a)

True

b)

False

74.

Monetary Policy is implemented by

a)

The Federal Budget

b)

The Federal Reserve

c)

Congress and the President

d)

Taxing and govt. spending

75.
"The Fed" refers to the....
a)
Federal Bureau of Investigation
b)
Federal Government
c)
Federal Reserve System
d)
Federal Income Tax
76.
The Federal Reserve
a)
is made up of 12 district banks and 25 branch banks.
b)
is managed by a 12-member board of directors.
c)
is made up of district banks that operate independently from one another.
77.
Fee charged to borrow money
a)
Inflation
b)
Interest
c)
Discount rate
d)
Reserve requirement
78.
Which part of the Fed decides when to raise or lower interest rates?
a)
Board of Governors
b)
Advisory Committee
c)
Chairman
d)
Federal Open Market Committee
79.
Influencing the economy by changing the reserve requirement is called:
a)
Fiscal policy
b)
Monetary policy
c)
Tight Money
d)
Easy Money
80.
What does Inflation do to the value of money?
a)
Makes it go up.
b)
Makes it go down.
c)
Makes it stay the same.
81.
Does increasing the money supply cause inflation or deflation?
a)
Inflation
b)
Deflation
82.
The primary role of the Federal Reserve Bank is to steer the economy by
a)
controlling the budget
b)
setting spending levels.
c)
controlling the money supply.
d)
loaning out money.
83.
In a recession, the Fed would likely
a)
Increase the supply of money in the economy
b)
Decrease the supply of the money in the economy
84.
What is the gold standard?
a)
one unit of currency is equal to a set amount of gold
b)
the level by which gold is judged
c)
the use of gold as a medium of exchange
d)
the idea that gold can buy everything
85.
The American Dollar bill is an example of
a)
Commodity Currency
b)
Representative Currency
c)
Fiat Currency
d)
Public Currency
86.
The Federal Reserve can increase __________, which makes banks more selective when loaning out money
a)
Reserve Requirements
b)
Percentage/Earnings Ratios
c)
Dividends
d)
Blue Chip Stocks
87.
If the economy is expanding too quickly, the Federal Reserve will institute which type of monetary policy?
a)
Expansionary
b)
Contractionary
c)
Equanimitous
d)
Whole Dollar
88.
Influencing the economy by changing the reserve requirement is called:
a)
Fiscal policy
b)
Monetary policy
c)
Tight Money
d)
Easy Money
89.
Does increasing the money supply cause inflation or deflation?
a)
Inflation
b)
Deflation
90.
The primary role of the Federal Reserve Bank is to steer the economy by
a)
controlling the budget
b)
setting spending levels.
c)
controlling the money supply.
d)
loaning out money.
91.
In a recession, the Fed would likely
a)
Increase the supply of money in the economy
b)
Decrease the supply of the money in the economy
92.
The Federal Reserve can increase __________, which makes banks more selective when loaning out money
a)
Reserve Requirements
b)
Percentage/Earnings Ratios
c)
Dividends
d)
Blue Chip Stocks
93.
The central bank of the United States is the:
a)
Federal Reserve Banking System.
b)
Comptroller's Bank.
c)
United States National Bank.
d)
U.S. Treasury Bank.
94.
If the United States is experiencing inflation, the Fed will likely
a)
Increase the supply of money in the economy
b)
Decrease the supply of money in the economy
95.

The Fed keeps a certain amount of money out of circulation. This is referred to as the...

a)

Reserve requirement

b)

Emergency Fund

c)

Stockpile

d)

Hoard

96.

The tools and strategies used by the Fed to stabilize the economy are called...

a)

Fiscal policy

b)

Monetary policy

c)

Tight Money

d)

Easy Money

97.

A rise in the cost of goods and services is called...

a)

inflation

b)

discount rate

c)

interest

d)

deflation

98.
Money loses its value when it
a)
It becomes too plentiful
b)
becomes too portabale
c)
is divisible
d)
is durable
99.
The goal of monetary policy is to 
a)
sell bonds
b)
reduce unemployment
c)
seek price stability
d)
red and blue
100.
The Federal Reserve uses ______ to regulate the economy.
a)
Monetary Policy
b)
Fiscal Policy
101.
When inflation is high the _______________of the dollar decreases
a)
cost value
b)
purchasing power
c)
importance
d)
validity
102.

This reflects those who are actively seeking employment.

a)

full employment

b)

unemployment rate

c)

labor force

d)

underemployed

103.

What is GDP?

a)

Gross Domestic Product

b)

Get Duties Prior

c)

Gross Department Power

d)

Gross Duties Peer

104.
Taxing & spending to help the economy grow is referred to as
a)
expansionary policy
b)
monetary policy
c)
contractionary policy
d)
budget deficit
105.
Taxing & spending to slow the economy is referred to as 
a)
budget surplus 
b)
monetary policy
c)
contractionary policy
d)
budget deficit
106.
The federal government's overall approach to spending and taxes is called
a)
Physical Policy
b)
Fiscal Policy
c)
Money
d)
Monetary Policy
107.
"The Fed" refers to the....
a)
Federal Bureau of Investigation
b)
Federal Government
c)
Federal Reserve System
d)
Federal Income Tax
108.

Who is in charge of Monetary Policy

a)

The Government

b)

The Federal Reserve System

c)

The states

d)

The Department of the Treasury

109.

What is a major difference between an operating budget and a capital budget?

a)

In an operating budget, legislation is needed; in a capital budget, no legislation is needed.

b)

An operating budget is raised by bonds; a capital budget is

raised by taxes.

c)

An operating budget consists of small amounts of money; a capital budget consists of large amounts of money.

d)

An operating budget is for day-to-day expenses; a capital budget is for investment spending.

110.

How many Federal Reserve Districts are there?

a)

6

b)

3

c)

12

d)

20

111.

What is the role of the Federal Open Market Committee?

a)

It collects information about each Federal Reserve District and reports on economic conditions to the Board of Governors

b)

Composed of seven members appointed by the President, it oversees the Federal Reserve System.

c)

It redraws the map of the twelve Federal Reserve Districts every ten years in response to economic changes.

d)

It makes key decisions about interest rates and the growth of the United States money supply.

112.

Which of the following instruments is NOT used by the Federal Reserve to change the money supply?

a)

the discount rate

b)

the required reserve ratio

c)

the federal tax code

d)

open market operations

113.

The idea that every one dollar change in fiscal policy creates a greater than one dollar change in the national income

a)

Crowding-out effect

b)

federal budget

c)

treasury bond

d)

multiplier effect

114.

A type of short-term bond that must be repaid within a year or less.

a)

Crowding-out effect

b)

treasury bill

c)

treasury bond

d)

multiplier effect

115.

When the level of federal borrowing makes it more difficult for private businesses to borrow

a)

Crowding-out effect

b)

treasury bill

c)

treasury bond

d)

multiplier effect

116.

A written document indicating the amount of money the government expects to receive for a certain year and authorizing the amount of money the government can spend that year

a)

fiscal policy

b)

federal budget

c)

productive capacity

d)

national debt

117.

The federal government’s use of taxing and spending to keep the economy stable

a)

fiscal policy

b)

federal budget

c)

productive capacity

d)

national debt

118.

The maximum output that an economy can sustain over a period of time

a)

fiscal policy

b)

federal budget

c)

productive capacity

d)

national debt

119.

The idea that every one dollar change in fiscal policy creates a greater than one dollar change in the national income

a)

multiplier effect

b)

federal budget

c)

productive capacity

d)

national debt

120.

The fraction of deposits that banks must keep on hand

a)

Prime rate

b)

required reserve ratio

c)

federal funds rate

d)

open market operations

121.

The buying and selling of government securities to alter the supply of money

a)

Prime rate

b)

required reserve ratio

c)

federal funds rate

d)

open market operations

122.

Interest rate banks charge each other for loans

a)

Prime rate

b)

required reserve ratio

c)

federal funds rate

d)

open market operations

123.

Monetary policy that increases the money supply

a)

Prime rate

b)

required reserve ratio

c)

easy money policy

d)

open market operations

124.

Delay in implementing monetary policy

a)

outside lag

b)

money creation

c)

Inside lag

d)

open market operations

125.

The time it takes for monetary policy to have an effect

a)

outside lag

b)

money creation

c)

Inside lag

d)

open market operations

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