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

Multiple Choice Questions

1. An egalitarian supports:
(a) programs resulting in greater liberty
(b) total freedom for all
(c) get rich quick schemes
(d) equality of outcomes

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

3. Economic freedom refers to all but which of the following:
(a) forced savings
(b) ability to choose how much to spend
(c) ability to select what investments to make
(d) ability to decide what goods to purchase

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

5. According to Friedman, the former Soviet economy was based on:
(a) voluntary cooperation
(b) free markets
(c) command
(d) none of the above

6. The purpose of urban renewal projects is to:
(a) finance the building of offices
(b) eliminate slums
(c) provide low cost housing
(d) build housing projects

7. What kind of international trade is best?
(a) trade with restrictions
(b) no trade
(c) partically free trade
(d) free trade

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

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

10. What is the cause of the failure of many welfare programs?
(a) lack of interest by the public
(b) lack of recipients
(c) lack of interest by the government
(d) design and implementation flaws

11. The United States banking system is:
(a) a full reserve system
(b) a no reserve system
(c) a fractional reserve system
(d) not dependent on reserves

12. A tariff implemented to raise employment in the domestic nation:
(a) lowers employment in the foreign nation
(b) benefits all workers
(c) benefits all consumers
(d) has no effect on employment

13. Black Thursday, October 24, 1929, refers to the:
(a) collapse of the banking system
(b) end of the gold standard
(c) end of government payments
(d) collapse of the stock market

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

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

Short Answer Questions

1. International trade theory is based on:

2. Restrictions of payments refers to:

3. Adam Smith says that voluntary exchange will not take place unless:

4. The economy functions on the basis of:

5. An unfavorable balance of payments situation meant:

(see the answer keys)

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