AnswersMO-EconomicsMonetary Policy: The Federal Reserve

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1
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Which type of tax do state governments collect?

A
federal income tax
B
social security
C
customs/duty
D
sales
2
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What is the difference between an excise tax and a sales tax?

A
Excise taxes are collected by the state and sales taxes are collected by cities.
B
Excise taxes are collected by cities and sales taxes are collected federally.
C
Excise taxes apply to certain items and sales taxes apply to most items.
D
Excise taxes apply to most items and sales taxes apply to certain items.
3

What is the most direct way that increasing the minimum wage can lead to more government revenue?

A
It causes inflation, which is known to be an effective economic stimulator.
B
It reduces purchasing power, so the government makes money on savings interest.
C
It encourages spending, which increases other kinds of tax revenue.
D
It increases the amount of taxes paid through payroll and personal income taxes.
4

To create a state budget, what needs to happen first?

A
The legislature must approve funding for the budget.
B
The executive branch must propose a budget.
C
The judiciary must certify a balanced budget.
D
The governor must ask state agencies for requests.
5

If expansionary taxation policies encourage growth, are they always appropriate to implement?

N
No, government services could encourage growth but other practices could be more effective based on the economic situation.
Y
Yes, the private sector can easily and affordably replace all services and facilities cut by the government.
N
No, the government is capable of providing many but not all services individuals and businesses need.
Y
Yes, the government will still ensure that individuals and businesses continue to receive all necessary services.
6

Read the chart.

Question illustration
A
Department of Defense
B
Health and Human Services Department
C
Social Security
D
emergency funding
7

Governments collect taxes to ensure that

t
there is sufficient money to fund private businesses.
c
citizens contribute to meeting society's needs.
p
politicians get paid in a timely manner.
a
a government program exists for every need that arises.
8

Read the scenario.The citizens of Country D have noticed that the average prices of most goods within their nation have begun to rise. At the same time, employers are not raising wages at the same rate. The combination of these challenges has resulted in a decrease in overall demand, causing a decline in GDP.

u
unemployment
s
stagflation
h
high production
h
high wages
9

Which occurred during the Great Depression? Check all that apply.increased aggregate demandnew forms of moneyfalling wagesincreasing pricesplummeting growthsurging unemployment

A
increased aggregate demand
B
new forms of money
C
falling wages
D
increasing prices
E
plummeting growth
F
surging unemployment
10

Under a contractionary taxation policy, the government can reduce the deficit by

i
increasing taxes.
r
reducing taxes.
i
increasing spending.
i
increasing inflation.
11

High government expenditures can lead to a bigger

A
revenue.
B
stimulus.
C
deficit.
D
surplus.
12

Which of these is most likely the US government’s aim in taxing imported goods?

A
to protect domestic businesses
B
to decrease international trade
C
to end reliance on foreign goods
D
to make US markets less desirable
13

Which best explains how contractionary policies can hamper economic growth?

A
They increase consumer demand.
B
They can increase inflation.
C
They reduce taxes which raises deficits.
D
They reduce disposable income.
14

Why did Friedrich Hayek call expansionary spending dangerous?

A
He felt it could lower the money supply and cause deflation.
B
He felt it could lead to inflation and poor decisions by consumers.
C
He felt it could lead to deflation and poor decisions by consumers.
D
He felt it could lower available credit and cause a drop in prices.
15

Police and fire funds are mostly funded by which budget?

A
federal
B
state
C
city
D
private
16

Read the chart.What conclusion about state and local spending responsibilities can be drawn from the chart?

Question illustration
A
Neither states nor cities are responsible for funding the police.
B
States and cities share the responsibility of public welfare equally.
C
Cities are responsible for most elementary and secondary education costs.
D
States are responsible for all road and highway maintenance and development.
17

Gino is writing a paper about the effects of fiscal policies on the economy. Gino is describing a fiscal policy that aims to improve inflation.How does the policy that Gino is describing most likely affect interest rates and unemployment?

A
The policy would most likely increase interest rates and unemployment.
B
The policy would most likely decrease interest rates and unemployment.
C
The policy would most likely increase unemployment but decrease interest rates.
D
The policy would most likely increase interest rates but decrease unemployment.
18

When an economy suffers from low production, a country cannot

A
worry about unemployment.
B
change the tax rate.
C
provide adequate funding for public safety.
D
enjoy a steady rate of economic growth.
20

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

A
property rights.
B
corporate rights.
C
monetary rights.
D
states' rights.
21

What is the most effective method of decreasing taxes to increase revenue?

A
giving property tax breaks to corporations
B
reducing the minimum wage
C
decreasing the sales tax
D
exempting individuals from income taxes

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