Capitalism and Freedom Test | Mid-Book Test - Medium

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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. What is the name of the system with the purpose of regulating monetary policy between leading countries?
(a) The Bretton Woods System.
(b) The Gold Standard System.
(c) The World Bank System.
(d) The International Monetary System.

2. One argument for government spending that Friedman refutes is that it will reduce what?
(a) Competition.
(b) Fraud.
(c) Unemployment.
(d) Crime.

3. What does Friedman believe will markets do over time to monopolies?
(a) Make them obsolete.
(b) Break them up.
(c) Strengthen them.
(d) Separate them slowly.

4. In Friedman's time, what was illegal to buy or sell?
(a) Gold.
(b) Alcohol.
(c) Ethanol.
(d) Silver.

5. What is one example of a negative externality?
(a) Lack of voting.
(b) Private education.
(c) Pollution.
(d) Welfare.

Short Answer Questions

1. What term refers to the circumstance under which the action of one individual imposes significant costs on other individuals for which it is not feasible to make him compensate them?

2. A major point for Friedman is that politics and economics are not ______.

3. What does Friedman believe needs protection in order for the freedom of the market to arise?

4. According to Friedman, what is one problem with government stimulus during a recession?

5. According to Friedman, what is liberty's greatest enemy?

Short Essay Questions

1. How does Friedman argue that floating exchange rates can affect international trade?

2. What was the definition of liberalism prior to 1900?

3. Explain "floating exchange rates."

4. What reason does Friedman refute for government spending?

5. What is the neighborhood effect?

6. Explain Friedman's voucher proposal.

7. What is the balance wheel theory?

8. Friedman explains that the economic activities of large numbers of individuals can be coordinated. In what two ways?

9. What is the relationship Friedman describes between economic freedom and political freedom?

10. According to Friedman what is the role of government?

(see the answer keys)

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