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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. Free trade takes place when:
(a) all parties feel they can benefit
(b) when producers want to see a good
(c) when consumers want a good
(d) when one party can benefit

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

3. Restrictions of payments refers to:
(a) depositors inability to write checks
(b) banks' refusal to give currency on demand to depositors who tried to make withdrawals
(c) government's refusal to pay benefits
(d) government's inability to pay its bills

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

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

Short Answer Questions

1. The national security argument for protection states that:

2. The only kind of capital:

3. Interested sophistry refers to:

4. Prices function to transmit information to all but:

5. The higher price of pencils results in all but the following:

Short Essay Questions

1. What are the characteristics of the Great Depression of 1929?

2. England has a successful National Health Service that many people think the United States should have. What are the problems with the British program?

3. What is meant by equality of opportunity?

4. In what way did Roosevelt and his advisers break with traditional economies?

5. What is the concept of the invisible hand?

6. What is the Principle of Comparative Advantage?

7. What are the basics for the production and consumption of goods and services?

8. What are the results of trade barriers?

9. Which two New Deal programs were declared unconstitutional?

10. What is an exchange rate?

(see the answer keys)

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