PUP test 2, PUP 3002 Chapter 5-8
Exam 2, PUP 3002 Exam 2 Review
Questions with Complete Answers
Works Progress Administration - ANSWER-New Deal agency that helped create jobs
for those that needed them. It created around 9 million jobs working on bridges,
roads, and buildings.
Fiscal policy - ANSWER-government policy that attempts to manage the economy by
controlling taxing and spending.
Monetary policy - ANSWER-government policy that attempts to manage the
economy by controlling the money supply and thus interest rates.
Regulation - ANSWER-involves government intervention in the decisions that firms
make or in market outcomes.
Federal reserve board - ANSWER-responsible for managing the supply of money in
the economy
Progressive taxation - ANSWER-involves wealthier members of society paying a
higher portion of their incomes as taxes (ex: property tax, sales tax on luxury goods)
flat tax - ANSWER-All people pay the same amount of taxes regardless of their
income (ex: Social Security and Medicare)
regressive taxation - ANSWER-When poorer persons pay a larger share of their
income (ex: sales tax and excise taxes on alcohol and tobacco)
Tax incidence - ANSWER-refers to who pays the tax (see page 157 in textbook)
Price setting - ANSWER-may involve an outside source, like a government, to
establish a price ceiling or floor on an industry with limited competition (ex: US gov
and stats set prices for for Medicaid)
Entry restrictions - ANSWER-examples are licensing fees and certificates needed for
certain jobs
Barriers to entry - ANSWER-a form of economic protection for a trade (ex:
physicians must be certified by examiners, this creates barriers for unqualified
people seeking to practice medicine)
,Supply-side - ANSWER-approach to economics which favors tax cuts which leads to
less progressive taxation
Trickle Down Economics - ANSWER-similar to supply side, says that tax breaks for
corporations and the wealthy will trickle down to everyone else
Laffer curve - ANSWER-says that tax cuts can lead to an increase in tax collections
Tax deductions - ANSWER-a form of tax incentives in which a reduction of income is
able to be taxed
Tax expenditures - ANSWER-revenue losses that result from special exemptions,
exclusions, or deductions on federal tax law.
Unemployment - ANSWER-measures the number of people in the non-
institutionalized civilian work force (people not in prison or other institutions who are
16 or over) that do not have a job
Veil of ignorance - ANSWER-making decisions with a blind eye to extraneous factors
that could affect the decision
Income inequality - ANSWER-the extent of the difference in total earnings between
the highest income people in the area
Redistribution - ANSWER-involves taking from the people who have income and
giving it to people who do not have enough income
Cash transfer - ANSWER-programs in which eligible persons receive checks each
month
Social Security - ANSWER-federal program of disability and retirement benefits that
covers most working people
Social insurance - ANSWER-when the government intervenes in the insurance
market to ensure that a group of individuals are insured
Redistributive policy - ANSWER-a type of policy that takes benefits (usually through
taxes) from one group of Americans and gives them to another (usually through
spending).
Means tested - ANSWER-involves officials determining whether persons have
income low enough to qualify for benefits
Block grant - ANSWER-money given to states for general programs within a broad
category, they provide states more discretion in program design
Categorical grants - ANSWER-federal grants for specific purposes, such as building
an airport
, Earned Income Tax Credit (EITC) - ANSWER-when people are given tax credits as
an inducement to work
Minimum wage - ANSWER-a minimum price that an employer can pay a worker for
an hour of labor
Recession - ANSWER-period of reduced economic activity
Negative externalities - ANSWER-costs borne by parties not included in a
transaction
Inefficient outcome - ANSWER-too much of a certain good will be produced or
consumed relative to the overall costs and benefits to society.
Deadweight loss - ANSWER-the fall in total surplus that results from a market
distortion, such as a tax
Pigouvian Tax - ANSWER-taxes designed to reduce external costs
Consumption tax - ANSWER-an added cost applied to a good or service thought to
be generating a negative externality
Positive externalities - ANSWER-benefits to parties not included in a transaction
Subsidies - ANSWER-reward people for making choices that society considers
desirable
Output standards - ANSWER-either bans or limitations on the amount of a given
externality
Command and control - ANSWER-when government bureaus are created and are
responsible for creating the level of output standards and punishing firms or
individuals who exceed their output limitations
Saliency trap - ANSWER-the logical fallacy of believing that, because a citizen has
an opinion on some policy issue, this opinion is a salient or important issue to them
relative to other issues
Cross-cutting cleavages - ANSWER-a person with two conflicting factors affecting
political ideology
Satisfice - ANSWER-citizens must make the best choice that they can at an given
moment
Policy window - ANSWER-opportunity presented by circumstances and attitudes to
enact a policy into law
Stationary sources - ANSWER-non-moving sources of pollution
EX: power plants, commercial facilities
Exam 2, PUP 3002 Exam 2 Review
Questions with Complete Answers
Works Progress Administration - ANSWER-New Deal agency that helped create jobs
for those that needed them. It created around 9 million jobs working on bridges,
roads, and buildings.
Fiscal policy - ANSWER-government policy that attempts to manage the economy by
controlling taxing and spending.
Monetary policy - ANSWER-government policy that attempts to manage the
economy by controlling the money supply and thus interest rates.
Regulation - ANSWER-involves government intervention in the decisions that firms
make or in market outcomes.
Federal reserve board - ANSWER-responsible for managing the supply of money in
the economy
Progressive taxation - ANSWER-involves wealthier members of society paying a
higher portion of their incomes as taxes (ex: property tax, sales tax on luxury goods)
flat tax - ANSWER-All people pay the same amount of taxes regardless of their
income (ex: Social Security and Medicare)
regressive taxation - ANSWER-When poorer persons pay a larger share of their
income (ex: sales tax and excise taxes on alcohol and tobacco)
Tax incidence - ANSWER-refers to who pays the tax (see page 157 in textbook)
Price setting - ANSWER-may involve an outside source, like a government, to
establish a price ceiling or floor on an industry with limited competition (ex: US gov
and stats set prices for for Medicaid)
Entry restrictions - ANSWER-examples are licensing fees and certificates needed for
certain jobs
Barriers to entry - ANSWER-a form of economic protection for a trade (ex:
physicians must be certified by examiners, this creates barriers for unqualified
people seeking to practice medicine)
,Supply-side - ANSWER-approach to economics which favors tax cuts which leads to
less progressive taxation
Trickle Down Economics - ANSWER-similar to supply side, says that tax breaks for
corporations and the wealthy will trickle down to everyone else
Laffer curve - ANSWER-says that tax cuts can lead to an increase in tax collections
Tax deductions - ANSWER-a form of tax incentives in which a reduction of income is
able to be taxed
Tax expenditures - ANSWER-revenue losses that result from special exemptions,
exclusions, or deductions on federal tax law.
Unemployment - ANSWER-measures the number of people in the non-
institutionalized civilian work force (people not in prison or other institutions who are
16 or over) that do not have a job
Veil of ignorance - ANSWER-making decisions with a blind eye to extraneous factors
that could affect the decision
Income inequality - ANSWER-the extent of the difference in total earnings between
the highest income people in the area
Redistribution - ANSWER-involves taking from the people who have income and
giving it to people who do not have enough income
Cash transfer - ANSWER-programs in which eligible persons receive checks each
month
Social Security - ANSWER-federal program of disability and retirement benefits that
covers most working people
Social insurance - ANSWER-when the government intervenes in the insurance
market to ensure that a group of individuals are insured
Redistributive policy - ANSWER-a type of policy that takes benefits (usually through
taxes) from one group of Americans and gives them to another (usually through
spending).
Means tested - ANSWER-involves officials determining whether persons have
income low enough to qualify for benefits
Block grant - ANSWER-money given to states for general programs within a broad
category, they provide states more discretion in program design
Categorical grants - ANSWER-federal grants for specific purposes, such as building
an airport
, Earned Income Tax Credit (EITC) - ANSWER-when people are given tax credits as
an inducement to work
Minimum wage - ANSWER-a minimum price that an employer can pay a worker for
an hour of labor
Recession - ANSWER-period of reduced economic activity
Negative externalities - ANSWER-costs borne by parties not included in a
transaction
Inefficient outcome - ANSWER-too much of a certain good will be produced or
consumed relative to the overall costs and benefits to society.
Deadweight loss - ANSWER-the fall in total surplus that results from a market
distortion, such as a tax
Pigouvian Tax - ANSWER-taxes designed to reduce external costs
Consumption tax - ANSWER-an added cost applied to a good or service thought to
be generating a negative externality
Positive externalities - ANSWER-benefits to parties not included in a transaction
Subsidies - ANSWER-reward people for making choices that society considers
desirable
Output standards - ANSWER-either bans or limitations on the amount of a given
externality
Command and control - ANSWER-when government bureaus are created and are
responsible for creating the level of output standards and punishing firms or
individuals who exceed their output limitations
Saliency trap - ANSWER-the logical fallacy of believing that, because a citizen has
an opinion on some policy issue, this opinion is a salient or important issue to them
relative to other issues
Cross-cutting cleavages - ANSWER-a person with two conflicting factors affecting
political ideology
Satisfice - ANSWER-citizens must make the best choice that they can at an given
moment
Policy window - ANSWER-opportunity presented by circumstances and attitudes to
enact a policy into law
Stationary sources - ANSWER-non-moving sources of pollution
EX: power plants, commercial facilities
