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This test consists of 15 multiple choice questions and 5 short answer questions.

Multiple Choice Questions

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

2. Which of the following is not a function of the price system:
(a) distribution of income
(b) government established prices
(c) transmitting information
(d) efficient use of resources

3. The first head of the Federal Reserve System was:
(a) Alan Greenspan
(b) Benjamin Strong
(c) Alexander Hamilton
(d) J.P. organ

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

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

6. Enforced equality is a part of life in:
(a) communes
(b) schools
(c) apartment buildings
(d) government

7. Policies based on fair shares or 'to each according to his needs' have resulted in severe lack of liberties in all but the following:
(a) Cambodia
(b) Russia
(c) China
(d) United States

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

9. The distribution of income is determined by all but the following:
(a) reputation
(b) the quality of the resource
(c) the price that resource receives in the market
(d) the productive resource supplied

10. The term human capital refers to the:
(a) personal productive capacity of an individual
(b) output produced by a fasting
(c) machinery in the factory
(d) kinds of inputs the worker uses

11. The programs of the Roosevelt administration designed to deal with the Depression are called the:
(a) balanced budget programs
(b) New Deal programs
(c) financial assistance programs
(d) laissez-faire programs

12. When did the concepts of equality before God and the law begin to come closer together?
(a) after the Revolutionary War
(b) after the Civil War
(c) after the signing of the Declaration of Independence
(d) after the ratification of the Constitution

13. The New Deal programs were not carried to their completion because of:
(a) the government ran out of money
(b) World War I
(c) the end of the Depression
(d) World War II

14. Equality before God means:
(a) total freedom
(b) the right to an equal income
(c) the right to do whatever one wants
(d) personal equality

15. Which of the following is not a problem experienced by the British National Health Service?
(a) lack of citizen interest
(b) rising costs
(c) long waiting lists of patients
(d) strikes

Short Answer Questions

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

2. Equality before the law refers to all but:

3. Which of the following is not one of Adam Smith's duties of government?

4. Trade restrictions create:

5. Regarding the depression, Roosevelt's adviser's believed in:

(see the answer keys)

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