Reaganomics

Question 1

What problems did Reagan initially face economically when he came into power? (2)

Answer 1

• Roosevelt’s New Deal had increased federal control and responsibility and letting the budget go far into deficit as was needed
• Later administrations felt obliged to keep up federal involvement in social welfare and funded it with higher taxes and federal borrowing

Question 2

What theory was Reagan drawn to?

Answer 2

Supply-side theory

Question 3

Supply-side theory

Answer 3

• Argues that the economy isn’t driven by consumer demand but by keeping up production and encourage saving and investment.
• Believe restraints on government regulation, high taxes and strong unions should be removed
• ‘Trickle down theory’

Question 4

‘Trickle Down Theory’

Question 5

What did Reagan do in the first 3 days of his presidency? (4)

Answer 5

• Sacked many White House staff
• Put a federal government hiring freeze in place
• Put a freeze on office furnishings
• Cut travel expenses by 15%

Question 6

By cutting taxes and controlling money supply. Reagan was trying to: (7)

Answer 6

• Stop inflation
• Reduce unemployment
• Increase personal wealth
• Increase productivity
• Encouraged personal saving and investing
• Cut federal spending
• Reduce the federal deficit

Question 7

How many federal programmes’ funding was cut?

Answer 7

212 (Most of which were welfare)

Question 8

In Senate there was a …

Answer 8

Republican majority

Question 9

In House of Representatives there was …

Answer 9

Almost a republican majority

Question 10

How did the Reagan’s failed assassination attempt benefit him?

Answer 10

• Increased his popularity as people felt sympathetic towards him
• Shown as tough and determined as many doubted his age (69)

Question 11

What did ERTA (Economy Recovery Tax Act) of 1981 reduce marginal income tax by?

Answer 11

23% over 3 years

Question 12

Tax Indexing (ERTA)

Answer 12

Tax indexing is the adjustment of the various rates of taxation in response to inflation and to avoid bracket creep

Question 13

What did the highest income tax band fall from?

Answer 13

70% - 50% - lowest rate since 1925

Question 14

What did the lowest income tax band fall from?

Answer 14

14% - 11%

Question 15

What happened on the 30 March 1981?

Answer 15

Reagan’s Assassination attempt

Question 16

How did Reagan deregulate on industry and businesses?

Answer 16

Cutbacks in staff or regulatory agencies

Question 17

How much did the cutbacks on industries and businesses average to?

Answer 17

29%

Question 18

in 1982 what was the retirement age changed to?

Answer 18

65 to 67

Question 19

What was Reagan’s defence spending in 1981?

Answer 19

$157.5 billion

Question 20

What was Reagan’s defence spending in 1989?

Answer 20

$303.6 billion

Question 21

Budget deficit when Reagan came into power?

Answer 21

$70 billion

Question 22

Budget deficit When Reagan left office?

Answer 22

$175 billion

Question 23

What had the increasing deficit forced Congress to pass?

Answer 23

Balanced Budget and Emergency Deficits Control Act of 1985 - which enforced spending cuts

Question 24

What did the FRB (Federal Reserve Board) tighten?

Answer 24

Money supply

Question 25

What was the problem of tightening the money supply during and increase in unemployment?

Answer 25

Led to a sharp rise in interest rates which hurt industries that had to buy supplies on credit or had loans

Question 26

Unemployment rate in 1980:

Answer 26

7.1%

Question 27

Unemployment rate in 1983:

Answer 27

9.6%

Question 28

Inflation in 1980:

Answer 28

13.5%

Question 29

Inflation in 1982:

Answer 29

6.2%

Question 30

By 1996 inflation never reached ...

Answer 30

double figures again and spent most of its time under 5%

Question 31

Part time or temporary work (people employed but not earning at their full capacity):

Answer 31

Had risen

Question 32

in 1988, how many individuals were millionaires by assets?

Answer 32

1.3 million

Question 33

in 1980, how many individuals were millionaires?

Answer 33

574,000

Question 34

How much of the workforce was not included in the unemployment figures in 1988?

Answer 34

34.5% as they were considered unemployable, through drug use, or chose not to register for work)

Question 35

What was the average manufacturing productivity growth annually since 1982?

Answer 35

4.6%

Question 35

What was the average manufacturing productivity growth annually since 1982?

Answer 35

4.6%

Question 36

What was the average manufacturing productivity growth annually in the 1970s?

Answer 36

2.7%

Question 37

When did more people begin to save and invest?

Answer 37

As the economy came out of the recession

Question 38

What was the deficit in 1980?and what percentage of federal spending would it cost to pay it off?

Answer 38

$59 billion - 9%

Question 39

What was the deficit in 1980?and what percentage of federal spending would it cost to pay it off?

Answer 39

$208 billion, 14%

Question 40

What had the immense deficit led to?

Answer 40

USA became a borrowing nation for the first time ever rather than a lending nation

Question 41

What percentage did defence spending take in 1987?

Answer 41

28%

Question 42

During Reagans first term what did America experience?

Answer 42

The longest ever period of economic growth in peacetime