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

Multiple Choice Questions

1. The program that is proposed as a replacement for all welfare programs is the:
(a) free enterprise
(b) negative income tax program
(c) cradle to grave program
(d) welfare benefits program

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

3. What words did Thomas Jefferson write?
(a) there is no such thing as equality
(b) equality is not a part of freedom
(c) all men are created equal
(d) equality is not important

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

5. 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) command
(b) visible hand
(c) invisible hand
(d) voluntary nature

6. Free markets lead to:
(a) greater individual freedom
(b) less individual freedom
(c) economic tyrrany
(d) bankruptcy

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

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

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

10. The economy functions on the basis of:
(a) voluntary cooperation
(b) orders
(c) command
(d) government direction

11. Which of the following was not a part of the 1964 War on Poverty program?
(a) Medicaid
(b) Social Security
(c) Medicare
(d) food stamps

12. The legislation for the Federal Reserve System came into being as a result of:
(a) public works programs
(b) the collapse of the stock market
(c) the Great Depression of 1909
(d) runs on banks

13. The Great Depression began in:
(a) 1934
(b) 1929
(c) 1940
(d) 1931

14. Government measures to promote fair shares for all:
(a) create harmony
(b) reduce liberty
(c) enhance liberty
(d) have no affefct on liberty

15. 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

Short Answer Questions

1. Government expands through all but:

2. Fair shares programs penalize the:

3. What interferes with the transmittal of information by prices?

4. Which of the following is not a problem experienced by the British National Health Service?

5. Open Market Operations refers to:

(see the answer keys)

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