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

Multiple Choice Questions

1. Governments intervene in foreign currency markets:
(a) by refusing to release currency to the market
(b) by increasing exports
(c) by buying and selling domenstic and foreign currency
(d) by increasing imports

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

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

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

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

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

7. Which of the following is not a New Deal program?
(a) public assistance
(b) Great Society
(c) social security
(d) unemployment insurance

8. What is a good source of information on prices and markets?
(a) word of mouth
(b) a weekly magazine
(c) The Wall Street Journal
(d) the Sunday paper

9. Interested sophistry refers to:
(a) a new marketing tool
(b) a new production technique
(c) buy cheap and selling high
(d) the knowledge of consumers

10. The country whose post-World War II domestic policy was aimed at promoting equality of outcomes is:
(a) Japan
(b) Germany
(c) China
(d) Great Britain

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

12. The price system functions in such a way that each individual acting in his own best interests, makes everyone better off. This concept is known as the:
(a) invisible hand
(b) visible hand
(c) voluntary nature
(d) command

13. Adam Smith wrote:
(a) Das Kapital
(b) The Price System
(c) The Wealth of Nations
(d) Economic Made Simple

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

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

Short Answer Questions

1. A tariff implemented to raise employment in the domestic nation:

2. The New Deal programs were not carried to their completion because of:

3. The equality of outcomes approach is based on:

4. The purpose of urban renewal projects is to:

5. The only kind of capital:

(see the answer keys)

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