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

2. Restrictions of payments refers to:
(a) government's inability to pay its bills
(b) government's refusal to pay benefits
(c) depositors inability to write checks
(d) banks' refusal to give currency on demand to depositors who tried to make withdrawals

3. A market failure occurs when:
(a) the production of a good is discontinued
(b) a producer goes bankrupt
(c) a producer finds there is no demand for his good
(d) an action or transaction affects third parties

4. Which of the following is not one of Adam Smith's duties of government?
(a) protect members from coercion
(b) protection of members of society who are not responsible, such as children
(c) correct for third party effects
(d) administration of justice

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

Short Answer Questions

1. Free international trade results in better relations between individuals who differ in all but:

2. An exchange rate is the:

3. When the Fed sells bonds:

4. Governments intervene in foreign currency markets:

5. According to Friedman, the former Soviet economy was based on:

(see the answer key)

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