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This test consists of 5 multiple choice questions, 5 short answer questions, and 10 short essay questions.

Multiple Choice Questions

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

2. Government subsidies to industry are viewed as:
(a) good economic policy
(b) unfair competition
(c) a necessity
(d) a way to increase efficiency

3. A change in prices affects all but the following:
(a) procedures income
(b) nothing
(c) wages
(d) incentrive to act on information

4. The Principle of Comparative Advantage states that a nation should specialize in:
(a) the production of goods in which it is relatively more efficient than the other nation
(b) all goods
(c) has the most of
(d) can get the highest price for

5. The Federal Reserve Act was legislated in:
(a) 1908
(b) 1909
(c) 1929
(d) 1913

Short Answer Questions

1. When did the concepts of equality before God and the law begin to come closer together?

2. Fair shares programs penalize the:

3. What words did Thomas Jefferson write?

4. What did Alexis de Tocqueville say was the outstanding characteristic of America?

5. A deposit represents:

Short Essay Questions

1. What is meant by equality of outcome?

2. What did Thomas Jefferson mean when he wrote of equality?

3. What were the New Deal programs?

4. What is a restriction of payments?

5. What is an exchange rate?

6. What are the three functions of prices?

7. What is meant by equality of opportunity?

8. How has the concept of equality changed over time?

9. What are the results of trade barriers?

10. What good does Friedman use as an example of voluntary exchange?

(see the answer keys)

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