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 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?
(a) The colleague effect.
(b) The future growth principle.
(c) The common principle.
(d) The neighborhood effect.

2. According to Friedman, the market enables wide diversity, meaning power can be located in ______.
(a) Large pockets with limited interests.
(b) Small pockets of individual actors.
(c) The hands of many.
(d) The hands of a few.

3. What does Friedman claim that governments abuse?
(a) The power to determine taxes.
(b) The trust of the people.
(c) Ability to issue stocks.
(d) Commodity standards.

4. According to Friedman, what cannot exist without a literate and informed population?
(a) A well-armed militia.
(b) Democratic societies.
(c) A progressive political system.
(d) First world countries.

5. Friedman's analysis of government argues that it is not ______.
(a) Reductionary.
(b) Expansionary.
(c) Stagnantary.
(d) Contractionary.

Short Answer Questions

1. In Friedman's eyes, individual activities correspond to game players as the framework of law corresponds to______.

2. What is one example of a negative externality?

3. Friedman makes the distinction between education and ______.

4. In Friedman's opinion, what will check government power?

5. What is the basic problem of social life for Friedman?

Short Essay Questions

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

2. What is Friedman's definition of political freedom? Of economic freedom?

3. What is the neighborhood effect?

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

5. What is the multiplier effect?

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

7. What is meant by "paternalistic grounds"?

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

9. What are Friedman's recommendations in order for stocks to become self-regulating?

10. What is fiscal policy?

(see the answer keys)

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