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

Multiple Choice Questions

1. According to Friedman, what is the Federal Reserve lacking?
(a) A Rosetta Stone of sorts.
(b) A Declaration of Independence of sorts.
(c) A Constitution of sorts.
(d) A Magna Carta of sorts.

2. What does Friedman say can government not duplicate?
(a) The power of local control.
(b) An international monitoring system.
(c) The creativity of the individual.
(d) The free market economic system.

3. In Friedman's mind, why is centralization attractive to many?
(a) Government can promote the public interest.
(b) Consolidation of power.
(c) Better pool of resources.
(d) Streamlined services.

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

5. According to Friedman, what is one problem with government stimulus during a recession?
(a) The attempts often have a negative effect.
(b) The measures do not take effect until after the recession.
(c) More often than not, inflation skyrockets.
(d) The stimulus is generally too small to jump-start the economy.

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

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

8. Friedman states that the problem with teacher salaries is not that they are too low, but that they are ______.
(a) Computed based on seniority.
(b) Not inclusive of benefits.
(c) Linked to the amount of education the teacher has.
(d) The same regardless of quality.

9. What is the basic problem of social life for Friedman?
(a) How to tax and provide responsively for the people.
(b) How to distribute wealth equitably.
(c) How to provide for entertainment opportunities.
(d) How to coordinate the economic activities of large numbers of individuals.

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

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

12. What does Friedman believe coordinates individuals over vast distances and across all belief systems?
(a) The price system.
(b) The electoral system.
(c) The geographic system.
(d) The educational system.

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

14. What is the term for currency not being traded for any amount of another currency?
(a) Irreversible.
(b) None of the answers is correct.
(c) Unconvertible.
(d) Inconvertible.

15. The original balancing thought is based on whose economic philosophy?
(a) Smith.
(b) Krugman.
(c) Keynes.
(d) Marx.

Short Answer Questions

1. Friedman's evidence suggests that for every $100 of government spending, a certain amount is added to income. How much?

2. What does Friedman use as an example of a use of government where individuals cannot consume individual amounts?

3. By Friedman's account, the market permits unanimity without ______.

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

5. Which of the following can be justified by Friedman for government interventions?

(see the answer keys)

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