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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 3, The Control of Money.

Multiple Choice Questions

1. What term refers to the Federal Reserve's ability to produce more money than is deposited?
(a) Fractional reserve banking.
(b) Percent fulfillment banking.
(c) Overdraft protection.
(d) Reserve ability production.

2. Originally, liberalism fought for freedom of thought, free-markets, free trade, constitutionalism, representative government, and ______.
(a) Rights of the poor.
(b) The rule of law.
(c) Fair trade.
(d) A welfare state.

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

4. Friedman points out one idea that is often forgotten is that political and economic institutions have been ______.
(a) Free.
(b) Suppressed.
(c) Unfree.
(d) Autonomic.

5. A major point for Friedman is that politics and economics are not ______.
(a) Together.
(b) Autonomous.
(c) United.
(d) Separate.

Short Answer Questions

1. How are decisions, for Friedman, made where unanimity is a costly way of making decisions?

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

3. Friedman advocates that government should not be a master, but a/an ______.

4. What does Friedman assert is an example of an appropriate task for government?

5. What is one example of a negative externality?

(see the answer key)

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