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

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

3. The infant industry argument for protection says a:
(a) all new industries should be given protection
(b) only certain industries should receive protection
(c) no industries should receive protection
(d) new industry should be given protection until it matures and can compete on its own

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

5. Free trade takes place when:
(a) all parties feel they can benefit
(b) when producers want to see a good
(c) when consumers want a good
(d) when one party can benefit

Short Answer Questions

1. Government interferes with the price system by:

2. The higher price of pencils results in all but the following:

3. What kind of international trade is best?

4. An exchange rate is the:

5. Which bank failure precipitated the banking crisis of 1930?

(see the answer key)

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