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This quiz consists of 5 multiple choice and 5 short answer questions through Chapter 4, Cradle to Grave.

Multiple Choice Questions

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

2. Trade restrictions create:
(a) increase levels of trade
(b) a more competitive environment
(c) a good political situation
(d) friction between nations

3. What action did the Fed take after England abandoned the gold standard?
(a) began hoarding gold
(b) lowered the discount rate
(c) suspended open market operations
(d) raised the discount rate

4. An economic contraction means all but the following:
(a) decreased output
(b) unemployment
(c) increased output
(d) lower levels of income

5. The command elements of every economy include things like:
(a) prices
(b) military conscription
(c) court orders
(d) forbidding the purchase and sales of heroin

Short Answer Questions

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

2. Prices function to transmit information to all but:

3. The national security argument for protection states that:

4. The economy functions on the basis of:

5. What is the cause of the failure of many welfare programs?

(see the answer key)

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