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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 Principle of Comparative Advantage states that a nation should specialize in:
(a) all goods
(b) has the most of
(c) can get the highest price for
(d) the production of goods in which it is relatively more efficient than the other nation

2. When the Fed sells bonds:
(a) depositors see a decline in their bank accounts
(b) the economy experiences inflation
(c) the monetary reserves of the banking system decrease
(d) the banks can make more loans

3. The United States banking system is:
(a) a no reserve system
(b) a fractional reserve system
(c) a full reserve system
(d) not dependent on reserves

4. International trade theory is based on:
(a) inflows and outflows
(b) the principle of absolute advantage
(c) the principle of comparative advantage
(d) geography

5. Open Market Operations refers to:
(a) flooding the market with junk bonds
(b) stock market operations
(c) the purchase and sale of government bonds
(d) a department store sale

Short Answer Questions

1. The economist that changed the way of economic thinking regarding depressions was:

2. What kind of international trade is best?

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

4. Black Thursday, October 24, 1929, refers to the:

5. The term human capital refers to the:

(see the answer key)

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