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Lanter - Econ Unit 6 Test Review Flashcards | StudBud
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Lanter - Econ Unit 6 Test Review
Lanter - Econ Unit 6 Test Review
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1
Which of the following would likely be a part of a state government's budget?
environmental protection
police
parks, beaches, and recreation areas
all of the above
2
Which of the following statements about government budgets is/are true?
The federal government eliminated the national debt around the year 2000
Classical economists believe there is no harm in the government borrowing
The 27th Amendment to the US Constitution requires balanced federal budgets
Most state constitutions require balanced state budgets
3
Why is some money withheld from your paycheck?
Your employer saves it for you in case you get laid off
Your employer gets to invest it for his/her own financial gain
Your employer holds onto it in case you steal or damage company property
Your employer sends it to the government to pay your taxes
4
Why was the sales tax in the previous question a
regressive
tax?
The 7% tax would automatically adjust to a 15% tax for wealthier people
The 7% tax is a larger share of poorer people's income
The 7% tax is an equal burden on people of all incomes
The 7% tax is a larger share of wealthier people's income
5
The money multiplier formula shows the effects of
Federal Reserve discount rate reductions on the bond markets.
low interest rates on creditors over a long period.
a required reserve ratio on excess reserves.
a cash deposit into the banking system on the money supply.
6
Which of the following would most likely be subjected to both federal and state taxes?
a "dollar store" (e.g. Family Dollar, Dollar General, etc.)
a homeless shelter
a US Military base
a church
7
How do interest rates ("IRs") affect the money supply?
Higher IRs encourage savings, which expands the money supply
Higher IRs encourage savings, which restricts the money supply
As IRs rise, people borrow more, expanding the money supply
As IRs fall, people generally hold more cash, restricting the money supply
8
It is difficult for the government to restrain spending on Social Security because it is
a state-run program
a variable-spending program
a mandatory spending program
a discretionary spending program
9
Why does the Fed rarely raise the required reserve ratio?
It would force banks to lower their interest rates
It would force banks to raise their monthly charges
It would force banks to recall a significant number of loans
It would prompt banks to lend more money
10
When would it make sense for the Fed to pursue a "tight money" policy?
When the economy is prosperous with strong growth and low inflation
When a recession looms and unemployment is rising
When the federal government reduces its budget deficit
When the economy is rapidly expanding and the CPI is rising
11
The federal government's budget is put together
to collect taxes from the 50 state governments according to population
to report on the government's expenditures for the preceding year
by Congress and the President
once every five years
12
What are the differences between Medicare and Medicaid?
Medicaid is for people with disabilities, and Medicare is for the poor
Medicaid is for the poor, and Medicare is primarily for the elderly
Medicaid is primarily for the elderly, and Medicare is for children
Medicaid is strictly a state program, and Medicare is a federal program
13
What is an entitlement program?
Pays benefits to people based on their income and/or employment status
Pays for operating expenses for the government itself
Pays for programs based on annual amounts determined by Congress
Pays benefits to people who meet eligibility requirements
14
What two types of taxes are most important to most state governments?
individual income taxes and corporate income taxes
sales taxes and corporate income taxes
sales taxes and individual income taxes
property taxes and corporate income taxes
15
What is the Federal Reserve's role as a
regulator
of American banks?
The Fed controls the daily operations of the American banking system
The Fed insures deposits in case banks run out of reserves
The Fed examines banks and ensures they have sufficient reserves
The Fed approves all loans and major transactions
16
Which of these terms accurately describes the federal government's annual budget for most of the last 20 years?
debt
surplus
balance
deficit
17
What is a major difference between an operating budget and a capital budget?
Legislation must be passed for operating budgets, but not capital budgets
An operating budget is funded by bonds; a capital budget is funded by taxes
An operating budget is for smaller expenses than a capital budget
Operating budgets for daily expenses; capital budgets are for investments
18
Your department store receipt says that you pay a 7% sales tax on sports equipment. This sales tax is an example of a
regressive tax
proportional tax
progressive tax
income tax
19
Why does the Fed manage monetary policy?
to manage business cycles and regulate overall economic performance
to make sure US banks do not discriminate in whom they lend to
to prevent money laundering by terrorist groups & foreign adversaries
to preent banks from making excessively profitable loans
