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

Multiple Choice Questions

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

2. In Friedman's analysis, what century is the historical exception to most men living in tyranny, servitude, and misery?
(a) 20th.
(b) 17th.
(c) 19th.
(d) 18th.

3. Friedman advocates that individuals should be able to buy and sell ______.
(a) Stocks.
(b) Silver.
(c) Foreign currency.
(d) Gold.

4. According to Friedman, what is liberty's greatest enemy?
(a) Concentration of power.
(b) The Federal government.
(c) The educational system.
(d) Elected leaders.

5. 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.

6. What major event does Friedman strongly believe was a result of the government mishandling the money supply?
(a) World War I.
(b) Prohibition.
(c) None of the answers is correct.
(d) The Great Depression.

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

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

9. According to Friedman, what is a necessary condition for political freedom?
(a) Governmental regulation.
(b) Fair trade.
(c) A high gross domestic product.
(d) Competitive capitalism.

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

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

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

13. Friedman asserts that current liberalism is tied to the state management of ______.
(a) Social welfare.
(b) The economy.
(c) The educational system.
(d) The electoral vote.

14. A key component of the government spending is the ______.
(a) Substitution effect.
(b) Reduction effect.
(c) Externality effect.
(d) Multiplier effect.

15. Friedman makes the distinction between education and ______.
(a) Schooling.
(b) Aging.
(c) Instruction.
(d) Income.

Short Answer Questions

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

2. Friedman asserts that government restriction centralizes ______.

3. In Friedman's opinion, what should individuals be allowed to do?

4. What is the term for currency not being traded for any amount of another currency?

5. 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?

(see the answer keys)

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