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Explain how inflation can have redistributive effects in the economy.

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Explain how inflation can have redistributive effects in the economy. Do you think the Federal Reserve over-emphasizes inflation as a policy concern? Why, or why not?

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Here is a great article summarizing these issues:
Here is a more academic source:

In terms of redistributive effects:

Inflation means higher prices. But of course, this extra money changes hands - where does it go? Those with high debt gain. This is because the value of their debt has fallen. Creditors, of course, lose, since what they are owed has less value.

Now, as far as manufacturers are concerned, it is a bit more complicated. The price rises of inflation are fairly rapid. But the rise in prices for raw materials or labor are fairly slow. This means, for a time, manufacturers are making larger profits, since their average price is going up while their materials (etc) are remaining the same.

It should also be noted that inflation can ...

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The solution explains how inflation can have redistributive effects in the economy.

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Policy Analysis Multiple Choice Practice Problems

Question 1
A _______ is an economic justification for government involvement in a policy problem.

a. policy impact
b. market failure
c. policy subsystem
d. referendum

Question 2

________refers to the processes by which government structures and authority are established and maintained.

a. Separation of Powers
b. Federalism
c. Policy analysis
d. Politics

Question 3

The formation of the __________ caused one of the largest federal reorganizations in history.

a. Department of Environmental Protection
b. Department of Education
c.Department of Health and Human Services
d. Department of Homeland Security

Question 4

There has been increased interest in recent history for _________ the transfer of more authority to state government.

a. decentralization
b. deregulation
c. federalism
d. mandates

Question 5

The first step in the policy process model is typically:
a. policy evaluation
b. agenda setting
c. policy implementation
d. policy formulation

Question 6

Which of the following is considered a redistributive policy?

a. Pell grant problems
b. workp1ace safety regulations
c. Social Security
d. crib safety regulations

Question 7

What is the president's major forum for agenda setting and announcing the coming year's

a. the State of the Union Address
b. the weekly breakfast with congressional leaders
c. cabinet speeches and briefings
d. daily news briefings

Question 8

When policymakers want to take a population's thoughts about a policy into consideration, they take
part in a:

a. democratic political process.
b. rational analysis
c. rational choice.
d. value critical approach.

Question 9

Which of the following policy analysis criteria is used if the acceptability of a particular alternative to
interest groups, the general public, or politicians is a concern?

a. political effectiveness
b. efficiency
c. equity
d. political feasibility

Question 10

________________ tools encourage the target population to participate in and find out about a policy issues

a. Learning
b. Capacity-building
c. Hortatory
d. Authority

Question 11

____ _ is probably the government's best known tool in public policy.

a. Charging fees
b. Spending money
c. Education
d. Regulating

Question 12
Which of the following criteria for evaluating public policies deals most explicitly with whether the
program achieves its goals or not?

a. equity
b. efficiency
c. effectiveness
d. equality
Question 13

__________ requires knowledge of who the major actors are in the policy subsystem and how
much they may support a particular alternative.

a. Program evaluation
b. Political feasibility analysis
c. Risk assessment
d. Cost-benefit analysis

Question 14

Which government office is in charge of monitoring how other agencies conduct cost-benefit

a. Office of Cost Efficiency
b. Office of Management and Budget
c. Council of Economic Advisors
d. Council of Accountability

Question 15

Concern about the reaction of interest groups to a proposed policy alternative is addressed by

a. social effectiveness.
b. administrative feasibility.
c. political feasibility .
d. technical efficiency.

Question 16

Which of the following institutions is responsible for initiating the budget process?

a. Department of the Treasury
b. Federal Reserve Board
c. Congress
d. presidency

Question 17

Sales tax can be problematic because of which of the following criteria for evaluating tax policy?
a. distributive effects
b. buoyancy
c. visibility
d. collect ability

Question 18

________________ is one way to use policy to lower inflation.

a. Increasing income taxes
b. Decreasing interest rates
c. Standardizing interest rates
d. Standardizing income taxes
4 points

Question 19

In Dye, learning about the consequences of public policy is often referred to as

a. policy advocacy
b. policy evaluation.
c. policy analysis .
d. policy description.

Question 20

In Dye, studying the consequences of public policy decisions is referred to as

a. agenda setting
b. policy advocacy
c. policy evaluation
d. policy analysis

Question 21

In Dye, one problem that researchers have in their attempt to find solutions for public problems is

a. an inability to quantify data.
b. a lack of understanding of the scientific method.
c. a disagreement about what the problems are.
d. the lack of understanding of the social and economic environment.

Question 22

The most serious reservation about policy analysis is the inability to make accurate predictions
because of

a. lack of accurate data.
b. the complexity of social problems and human behavior.
c. value conflicts among researchers.
d. the Hawthorne effect.

Question 23

In Dye, which of the following is not part of the policy process?

a. agenda setting
b. policy evaluation
c. problem identification
d. policy input

Question 24

In Dye, group theory views public policy as

a. the balance that is achieved between competing interests.
b. the desires of the elites.
c. the continuation of past policies.
d. the most cost effective alternative.

Question 25

In Dye. public choice theory,

a. views individuals as reacting very differently in politics than in the marketplace.
b. does not agree with the Lockean social contract view as 10the origin of government.
) c. helps explain why political particles and candidates do not like to offer clear policy
d. does not examine the economic cost of externalities.

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