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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 9, The Cure for Inflation.

Multiple Choice Questions

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

2. Equality is discussed in all but the following ways:
(a) outcomes
(b) opportunity
(c) before God
(d) in every way

3. According to Friedman, the way to cure inflation is to:
(a) promote spending policies
(b) reduce the rate of monetary growth
(c) limit the amount of goods and services available for sale
(d) force consumers to increase their savings

4. An exchange rate is the:
(a) interest rate in the foreign country
(b) bill of lading
(c) the way trade barriers are established
(d) price of one currency in terms of another currency

5. A run on a bank occurs when depositors:
(a) depositors refuse to deposit money
(b) the bank refuses to make loans
(c) try to withdraw their money in cash at the same time
(d) depositors refuse loans

Short Answer Questions

1. The Principle of Comparative Advantage states that a nation should specialize in:

2. The United States banking system is:

3. Horace Mann is known as all but the following:

4. The equality of outcomes approach is based on:

5. Equality of outcomes is related to:

(see the answer key)

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