Mock Practice Test-1
John Maynard Keynes, the trendiest dead economist of this apocalyptic moment, was the godfather of government stimulus. Keynes had the radical idea that throwing money at recessions through aggressive deficit spending would resuscitate flatinged economies and he wasn’t too particular about where the money was thrown. In the depths of the Depression, he suggested that the Treasury could “fill old bottles with banknotes, bury them at suitable depths in disused coal mines” then sit back and watch a money-mining boom create jobs and prosperity. “It would, indeed, be more sensible to build houses and the like,” he wrote, but above would be better than nothing.
As President-elect Barack Obama prepares to throw money at the current down urn a stimulus package starting at about $350 billion chunk of the financial bailout-we all really do seem to be Keynesians now. Just about every expect agrees that pumping $1 trillion into a moribund economy will rev up the ethereal goods-and services engine that Keynes called “aggregate demand” and stimulate at least some short-term activity, even if it is all wasted on money pits. But Keynes was also right that there would be more sensible ways to spend it. A trillion dollars’ worth of bad ideas sprawl-inducing highways and bridges to nowhere, ethanol plants and pipelines that accelerate global warming, tax breaks for overleveraged Mac mansion builders and burdensome new long-term federal entitlements-would be worse than mere waste. It would be smarter to buy every American an iPod, a set of Ginsu knives and 600 Subway foot-longs.
It would be smarter still to throw all that money at things we need to do anyway which is the goal of Obama’s upcoming American Recovery and Reinvestment Plan. It will include a mix of tax cuts, aid to beleaguered state and local governments, and spending to address needed ranging from food stamps to computerized health records to bridge repairs to broadband networks to energy-efficiency retrofits, all designed to save or create 3 million to
4 million jobs by the end of 2010. Obama has said speed is his top priority because the faster Washington injects cash into the financial bloodstream, the better it stands to help avert a multiyear slump with double-digit unemployment and deflation. But he also wants to use the stimulus to advance his long-term priorities: reducing energy use and carbon emissions, cutting middle-class taxes, upgrading neglected infrastructure, reining in health-care costs and eventually reducing the budget deficits that exploded under Gerorge W. Bush. Obama’s goal is to exploit this crisis in the best sense of the word, to start pursuing his vision of a greener, fairer, more competitive, more sustainable economy.
Unfortunately, while 21st century Washington has demonstrated an impressive ability to spend money quickly, it has yet to prove that it can spend money wisely. And the chum of a 1 with 12 zeros is already creating a feeding frenzy for the ages. Lobbyists for shoe companies, zoos, catfish farmers. Mall owners, airlines, public broadcasters, car dealers and everyone else who can afford their retainers are lining up for a piece of the stimulus. States that embarked on raucous spending and tax-cutting sprees when they were flush are begging for bailouts now that they’re broke. And politicians are dusting off their unfunded mobster museums, waterslides and other pet projects for regrinding as shovel ready in frastructure investments. As Obama’s aides scramble to assemble something effectives and transformative as well as politically achievable, they acknowledge the tension between his desires for speed and reform.
Obama’s upcoming American Recovery and Reinvestment Plan focuses on which of the following?
A (A) only
B (B) only
C (C) only
D (B) and (C) only