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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 3, The Anatomy of Crisis.

Multiple Choice Questions

1. The price system functions in such a way that each individual acting in his own best interests, makes everyone better off. This concept is known as the:
(a) visible hand
(b) voluntary nature
(c) invisible hand
(d) command

2. Free markets lead to:
(a) economic tyrrany
(b) greater individual freedom
(c) bankruptcy
(d) less individual freedom

3. The national security argument for protection states that:
(a) all industries should be protected
(b) protection promotes national welfare
(c) protection is not in the best national interest
(d) industries vital to national defense should be given protection

4. Which of the following is not a function of the price system:
(a) efficient use of resources
(b) distribution of income
(c) transmitting information
(d) government established prices

5. An unfavorable balance of payments situation meant:
(a) a deficit
(b) equality of inflows and outflows
(c) a surplus
(d) nothing

Short Answer Questions

1. What functions as the central bank for the United States?

2. Trade restrictions create:

3. The United States banking system is:

4. What kind of international trade is best?

5. Governments intervene in foreign currency markets:

(see the answer key)

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