3E1 - Relationship Between Government and Economics

Question 1

What is a market economy?

Answer 1

A system of trade in which businesses are free to compete with each other, setting the value of products and services and encouraging production.

Question 2

According to Adam Smith, what does the invisible hand refer to?

Answer 2

The free market itself determining prices and other aspects of the economy.

Question 3

What economic theory was introduced in the early to middle part of the 20th century?

Answer 3

Keynesian economics.

Question 4

What did J.M. Keynes suggest regarding the role of government in the economy?

Answer 4

It should increase to regulate economic inequities and fairness.

Question 5

What is one of the roles of the U.S. government in a market economy?

Answer 5

Implementing policies and laws to protect property rights.

Question 6

How are roads and infrastructure classified?

Answer 6

Public goods and services.

Question 7

What is one of the government’s most difficult roles in a market economy?

Answer 7

Ensuring stability in the market.

Question 8

What type of policy is used to encourage economic growth and control negative factors in the market?

Answer 8

Monetary and fiscal policy.

Question 9

What major legislation was enacted in the U.S. to break up monopolies like Standard Oil and AT&T?

Answer 9

Sherman Antitrust Act

Question 10

What were the goals of New Deal policies enacted by President Franklin Delano Roosevelt?

Answer 10

• Rebuild crippled industry.
• Get people back to work and out of poverty.
• Regulate stock trading and secure the federal banking system.

Question 11

What laws were implemented to increase corporate transparency and accountability after scandals like Enron and Bernie Madoff?

Answer 11

Sarbanes-Oxley Act

Question 12

What is the purpose of the Sarbanes-Oxley Act?

Answer 12

• Create corporate accountability and transparency.
• Protect employees who report illegal acts within a corporation.

Question 13

What is the role of the Environmental Protection Agency?

Answer 13

Enforce clean air, water, and pollution laws.

Question 14

How does the government protect intellectual property?

Answer 14

Through copyright, trademark, and patent laws.

Question 15

What are some examples of public services provided by the government?

Answer 15

• Public education.
• Health and human services.

Question 16

What is the importance of property rights in a market economy?

Answer 16

Key component for a successful work economy, protected by the U.S. Constitution.

Question 17

How does the government protect consumers from harm?

Answer 17

By requiring product warnings, recalling harmful products, and implementing price controls.

Question 18

Why is government intervention important for protecting the environment in a market economy?

Answer 18

Prevents harm to the environment caused by private industry, ensures clean air, water, and pollution laws are enforced.

Question 19

How does protecting the environment contribute to a strong economy?

Answer 19

• Ensures healthy food and drinking water.
• Leads to a healthy population and workforce.
• Allows individuals to spend wealth on goods and services.

Question 20

What are the 4 roles of government in a market economy?

Answer 20

1. Provide property rights.
2. Ensure infrastructure is sound.
3. Offer adequate public services.
4. Protect both the consumer and the environment.

The government plays a crucial role in ensuring balance and fairness in the marketplace.

Question 21

What is Reaganomics?

Answer 21

• Supply-Side Economics: Focuses on reducing taxes, particularly for businesses and high-income earners, to encourage investment, production, and economic growth.

Question 22

What are the Fed’s tools for controlling inflation?

Answer 22

1. Interest Rates
2. Open Market Operations
3. Reserve Requirements
4. Forward Guidance

Question 23

What are some of the federal government regulatory agencies?

Answer 23

• Securities and Exchange Commission (SEC)
• Federal Trade Commission (FTC)
• Consumer Financial Protection Bureau (CFPB)
• Food and Drug Administration (FDA)

Securities and Exchange Commission (SEC):
Regulates the securities markets and protects investors by enforcing securities laws.
Federal Trade Commission (FTC): Enforces antitrust laws and promotes consumer protection.
Consumer Financial Protection Bureau (CFPB): Ensures consumers are treated fairly by banks, lenders, and other financial institutions.
Food and Drug Administration (FDA): Regulates food safety, pharmaceuticals, and medical devices to protect public health.

Question 24

What are imports?

Answer 24

• Goods and services purchased from other countries.
• High levels of imports can indicate strong consumer demand but can also lead to trade deficits.

Question 25

What are exports?

Answer 25

• Goods and services sold to other countries.
• High levels of exports contribute to economic growth and trade surpluses.