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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 5, Fiscal Policy.

Multiple Choice Questions

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

2. Friedman states that government should be ______.
(a) Incorporated.
(b) Consolidated.
(c) Streamlined.
(d) Decentralized.

3. What does Friedman assert is an example of an appropriate task for government?
(a) Regulating the job market.
(b) Determining price.
(c) Providing for the social welfare.
(d) Defining property rights.

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

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

Short Answer Questions

1. Who does Friedman think should set exchange rates?

2. According to Friedman, whom does free trade benefit?

3. According to Friedman, what is lost when foreign exchange is controlled by the government?

4. Instead of government spending, what does Friedman advocate the government use to stabilize the economy?

5. According to Friedman, what conflicts with one another for men?

(see the answer key)

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