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Business and Government — Test Answers

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1
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Which of these would be a good title for this diagram?

A
Fiscal Policy
B
The Federal Debt
C
The National Economy
D
Government Spending
2
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To create a state budget, what needs to happen first?

A
The governor must ask state agencies for requests.
B
The judiciary must certify a balanced budget.
C
The executive branch must propose a budget.
D
The legislature must approve funding for the budget.
3

Which best describes a central bank's primary role?

A
increasing credit
B
controlling inflation
C
printing money
D
creating monetary policy
4

Which best summarizes the philosophical difference between economists John Maynard Keynes and Adam Smith?

A
Keynes said government was the key to solving economic issues, while Smith believed government should take a hands-off approach.
B
Smith said government was the key to solving economic issues, while Keynes believed government should take a hands-off approach.
C
Keynes believed in an "invisible hand" with which consumers push the economy, while Smith did not agree with this idea.
D
Smith believed in an "invisible hand" with which government pushes the economy, while Keynes did not agree with this idea.
5

Governments collect taxes to ensure that

A
there is sufficient money to fund private businesses.
B
citizens contribute to meeting society's needs.
C
politicians get paid in a timely manner.
D
a government program exists for every need that arises.
6

Spending that can change from year to year is known as

A
deficit spending.
B
expansionary spending.
C
mandatory spending.
D
discretionary spending.
8

How are progressive taxes and regressive taxes similar?

A
Both are considered flat taxes.
B
Both are determined based on income.
C
Both are types of indirect taxes.
D
Both charge high-income individuals more.
9

Which best describes a central bank's primary goals?

A
controlling stagflation and reducing unemployment
B
limiting inflation and reducing unemployment
C
managing credit and ensuring the money supply's liquidity
D
reducing unemployment and maintaining cash flow
11

In which situation would government regulation most likely be necessary?

A
A factory requires employees to work in unsafe conditions.
B
A power plant requires employees to take safety training classes.
C
A restaurant requires employees to work overtime on weekends.
D
A computer company requires employees to work long hours.
12

Which type of tax do state governments collect?

A
customs/duty
B
sales
C
social security
D
federal income tax
13

What gives the US government the power to collect taxes?

A
an executive order
B
common law
C
the Constitution
D
laws passed by Congress
14

What is the difference between an excise tax and a sales tax?

A
Excise taxes apply to most items and sales taxes apply to certain items.
B
Excise taxes apply to certain items and sales taxes apply to most items.
C
Excise taxes are collected by the state and sales taxes are collected by cities.
D
Excise taxes are collected by cities and sales taxes are collected federally.
15

A purpose of government regulation in a mixed-market economy is to protect

A
property rights.
B
states' rights.
C
investor rights.
D
corporate rights.
16

Which of these are goals of an expansionary policy? Choose three correct answers.

A
decreased interest rates
B
increased money supply
C
increased available credit
D
decreased available credit
E
increased interest rates
F
increased inflation
17

What led to Henry Ford’s success as an entrepreneur?

A
His innovative production methods.
B
His personal wealth.
C
His commitment to improving labor laws.
D
His desire to pay high wages.
21

Regulatory policy requires a balance between protecting safety and

A
improving corporate profits.
B
improving environmental conditions.
C
protecting states’ rights.
D
protecting constitutional rights.

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