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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

1. A common misunderstanding of economic freedom, according to Friedman, is that it emphasizes ______.
(a) Prosperity.
(b) Socialism.
(c) Wealth.
(d) Materialism.

2. Past and current definitions of liberalism are the same with respect to ______.
(a) Paternalism and individualism.
(b) Free markets and the rule of law.
(c) Distribution of wealth and the welfare state.
(d) Civil freedoms and democracy.

3. In the market described by Friedman, exchanges between households are ______.
(a) Coerced.
(b) Unwilling.
(c) Obligatory.
(d) Voluntary.

4. Friedman asserts that government restriction centralizes ______.
(a) Power.
(b) Elitism.
(c) Wealth.
(d) Goods.

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

Short Answer Questions

1. In Friedman's mind, why is centralization attractive to many?

2. A major point for Friedman is that politics and economics are not ______.

3. According to Friedman, what is liberty's greatest enemy?

4. The thought that the best use of government spending would be on useless projects is known as ______.

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

Short Essay Questions

1. What is fiscal policy?

2. What is the balance wheel theory?

3. Explain Friedman's voucher proposal.

4. Friedman explains that the economic activities of large numbers of individuals can be coordinated. In what two ways?

5. What is meant by "paternalistic grounds"?

6. Explain how international currency rates have changed since 1900.

7. What are Friedman's recommendations in order for stocks to become self-regulating?

8. Where does Friedman believe power in government should be located?

9. What is the multiplier effect?

10. Concerning business cycles that Friedman explains, what is one role of government?

(see the answer keys)

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