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

Multiple Choice Questions

1. Friedman argues against the theory that $100 in government spending will increase income by ______.
(a) $300.
(b) $150.
(c) $50.
(d) $100.

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

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

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

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

6. Friedman hypothesizes that the change from free market societies to economic controlled ones led classical liberals to worry that it would ______ political freedom.
(a) Weaken.
(b) Strengthen.
(c) Undermine.
(d) Bolster.

7. In Friedman's opinion, what should individuals be allowed to do?
(a) Choose their own religion.
(b) Pursue their own ends.
(c) Print their own money.
(d) Elect their own leaders.

8. Friedman's evidence suggests that for every $100 of government spending, a certain amount is added to income. How much?
(a) $150.
(b) $100.
(c) $300.
(d) $50.

9. For Friedman, where is the best place for power to be held?
(a) In the states.
(b) At the federal level.
(c) In the economic system.
(d) In the local community.

10. What does Friedman believe is one drawback of the Federal Reserve having so much power?
(a) The Federal Reserve chairperson is elected and therefore subject to the whims of the public.
(b) When the Federal Reserve makes mistakes, the whole country suffers.
(c) The Federal Reserve has rules that are too strict to follow in order to make any real change.
(d) When the Federal Reserve does well, only a few profit.

11. What does Friedman believe will become self-regulating?
(a) Monetary stocks.
(b) Exchange rates.
(c) The gold standard.
(d) The World Bank.

12. One role of government argued by the New Deal was to ______.
(a) Even out economic cycles.
(b) Provide subsidies for the poor.
(c) Regulate military spending.
(d) Eliminate excessive alcohol drinking.

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

14. What does Friedman prefer when it comes to exchange rates?
(a) Rising exchange rates?
(b) Hovering exchange rates.
(c) Sinking exchange rates.
(d) Floating exchange rates.

15. Friedman believes that one governmental action that is justifiable is to set a ______ education level.
(a) Standard.
(b) Rational.
(c) Maximum.
(d) Minimum.

Short Answer Questions

1. One solution Friedman proposes is to give parents ______ for schooling.

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

3. According to Friedman, what is one problem with government stimulus during a recession?

4. Friedman makes the distinction between education and ______.

5. Who does Friedman think should set exchange rates?

(see the answer keys)

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