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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. Which term refers to the government stimulating spending?
(a) "Charge the battery."
(b) "Prime the pump."
(c) "Rev the engine."
(d) "Grease the skids."

2. One of Friedman's claims for government involvement in education asserts that there are ______ to education.
(a) Positive externalities.
(b) Minimal costs.
(c) Negative externalities.
(d) Extreme costs.

3. According to Friedman, what is a necessary condition for political freedom?
(a) A high gross domestic product.
(b) Competitive capitalism.
(c) Fair trade.
(d) Governmental regulation.

4. What caused all the major nations to abandon the gold standard?
(a) Decline in the value of gold.
(b) World War I.
(c) World War II.
(d) The Great Depression.

5. In Chapter 3, what does Friedman provide a history of?
(a) British colonialism.
(b) The Federal Reserve System.
(c) American monetary policy.
(d) World War I.

Short Answer Questions

1. What does Friedman claim that governments abuse?

2. For Friedman, what is an all-embracing ethic?

3. Friedman believes that all of the following are appropriate for fiscal policy except ______.

4. Friedman believes that one governmental action that is justifiable is to set a ______ education level.

5. Friedman defines a country as a collection of ______.

Short Essay Questions

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

2. What is the balance wheel theory?

3. Where does Friedman believe power in government should be located?

4. What reason does Friedman refute for government spending?

5. What is meant when Friedman states "Government as rule-maker and umpire"?

6. What is meant by "paternalistic grounds"?

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

8. Does Friedman believe that most societies have been free or not free?

9. What does Friedman think of the remark, "Ask not what your country can do for you, ask what you can do for your country"?

10. Why does Friedman believe government power should be limited?

(see the answer keys)

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