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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

1. Who does Friedman think should set exchange rates?
(a) The White House.
(b) The Federal Reserve.
(c) The International Monetary Fund.
(d) No one, they should be allowed to fluctuate on their own.

2. What is one way Friedman believes some people criticize markets?
(a) It hurts those in power.
(b) It inequitably distributes wealth.
(c) It gives people what they want.
(d) It limits people's choices.

3. Which of the following can be justified by Friedman for government interventions?
(a) The draft.
(b) Minimum wage.
(c) Subsidizing farm production.
(d) Property rights.

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

5. Who does Friedman state rejects the view that the government is the patron or master of the citizenry?
(a) The rich man.
(b) The free man.
(c) The poor man.
(d) The educated man.

6. Friedman's theory on government intervention is that government is needed to be what regarding disputes?
(a) Announcer.
(b) Fan.
(c) Umpire.
(d) Groundskeeper.

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

8. Friedman believes that all of the following are appropriate for fiscal policy except ______.
(a) Planning for stable tax rates.
(b) Avoiding erratic changes in spending.
(c) Spending based on community priorities.
(d) Fluctuating in spending based on the political climate.

9. For Friedman, what is an all-embracing ethic?
(a) Religion.
(b) Freedom.
(c) Government.
(d) Education.

10. According to Friedman, it can be argued that private schools ______ class distinctions, and therefore need government intervention.
(a) Increase.
(b) Diminish.
(c) Exacerbate.
(d) Maintain.

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

12. What does Friedman believe is an appropriate rate of increase for the Federal Reserve?
(a) 1%-3%.
(b) 5%-7%.
(c) None. That is not a goal of the Federal Reserve.
(d) 3%-5%.

13. Friedman advocates that government should not be a master, but a/an ______.
(a) Philosophy.
(b) Mechanism.
(c) Slave.
(d) Instrument.

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

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

Short Answer Questions

1. For Friedman, what is something that when privately owned can be used if the price is right?

2. Which term describes the purpose of federal spending?

3. Which of the following does Friedman dispute?

4. What term refers to the argument for education that parents will not do best for their children?

5. One of Friedman's claims for government involvement in education asserts that there are ______ to education.

(see the answer keys)

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