Economic and Deficit Reduction Policy
Quiz objective:
Understand the major goals of budgetary policy; tools of economic policy; different alternatives to address the deficit and national debt.
1.
How might a deficit affect the economy?
A) it may drive up interest rates
B) it can decrease private investment since savings are being used to finance the deficit
C) it increase the national debt, which in turn raises interest payments and prevents spending on other budetary items
D) all of the above
E) b and c only
2.
Where does most of the nation's budgetary dollar go?
A) defense expenditures
B) interest on the debt
C) payments to individuals (entitlements)
D) discretionary spending
E) foreign aid
3.
Those believing that the government is doing too much in our lives and we need to stop spending money on unaffordable luxuries and providing subsidies to industries would likely favor which deficit reduction strategy.
A) reducing discretionary spending
B) reducing defense spending
C) reducing entitlements
D) increasing the income tax rates
E) b and c only
4.
A nation with strong economic growth
A) has a population that is happy since the government can provide for a lot of requests
B) will have more income tax revenue since wages are increasing
C) may have to worry about inflation
D) all of the above
E) a and b only
5.
Why has the U.S. government been more concerned about the economic goal of stable prices rather than unemployment?
A) unemployment has never been a problem in the U.S.
B) unstable prices contribute to the deficit
C) there are no policies available to address unemployment
D) unstable prices (inflation) affects everybody whereas unemployment affects significantly less people directly
E) all of the above
6.
What can the president and Congress do in order deal with an overheated (inflationary) economy?
A) decrease taxes
B) increase government spending
C) increase interest rates
D) increase taxes
E) increase the reserve requirement
7.
Monetary policy is performed by what organization?
A) Office of Management and Budget
B) Congressional Budget Office
C) Federal Reserve Board
D) Council of Economic Advisors
E) Treasury Department
8.
Which issue concerning tax policy would be most probematic if a flat tax was implemented in the United States?
A) Collectability
B) Buoyancy
C) Visibility
D) Vertical Equity
E) Horizontal Equity
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