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

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

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

4. What is the name of the system with the purpose of regulating monetary policy between leading countries?
(a) The Bretton Woods System.
(b) The International Monetary System.
(c) The World Bank System.
(d) The Gold Standard System.

5. 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.

Short Answer Questions

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

2. Originally, liberalism fought for freedom of thought, free-markets, free trade, constitutionalism, representative government, and ______.

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

4. Friedman's theory is that monetary exchange rates will allow trades across countries to ______ in accord with those rates.

5. Friedman believes that vocational and professional schools should be totally ______ run.

Short Essay Questions

1. What does Friedman believe to be the cause of the Great Depression?

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

3. What is meant when Friedman states "Government as rule-maker and umpire"?

4. What is the relationship Friedman describes between economic freedom and political freedom?

5. What does Friedman think of the remark, "Ask not what your country can do for you, ask what you can do for your country"?

6. What is fiscal policy?

7. What is the modern day definition of liberalism?

8. What is the neighborhood effect?

9. What is the balance wheel theory?

10. How does Friedman explain government's role in a free society?

(see the answer keys)

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