ECON 515: Quiz Questions

Which of the following "quotations," according to Chapter 23, best summarizes Keynes conclusions about the lessons of the Depression for the nature of capitalism. a. "It is in determining the volume, not the direction, of actual employment that the existing system has broken down." b. "An economic system that forgets to find work for millions of men and women, cannot be trusted to perform any task in an intelligent fashion." c. "The depression is essentially a problem of reliance on a private banking system for the provision of an inherently public good, money." d. "The rules of sound finance, namely stable prices and balanced budgets, apply as much to the present crisis, as they do in more pleasant times."

a. "It is in determining the volume, not the direction, of actual employment that the existing system has broken down."

Which of the following best describes trends in unionization and immigration in the 1920s? a. Both decreased. b. Both increased. c. The number of new immigrants increased while the number of union members decreased. d. The number of new immigrants decreased while the number of union members increased.

a. Both decreased

What most accurately describes what happened to earnings in the United States between 1914 and 1920? a. Both nominal and real earnings increased substantially. b. Nominal and real earnings dropped significantly as World War I triggered a recession. c. Nominal earnings increased slightly, but real wages decreased because of the large inflation. d. A period of deflation led real earnings to increase even though nominal earnings had decreased slightly.

a. Both nominal and real earnings increased substantially.

Robert Higgs argued that which of the following best explained the growth of "Leviathan" (Big Government)? a. crises changed fundamental ideologies b. urbanization c. the decline in organized religion as a provider of aid and relief for the poor d. expansion of the right to vote

a. Crises changed fundamental ideologies.

Which statement most accurately describes the U.S. balance of payments? a. From 1850-1873 the United States had an unfavorable balance of payments, but exports exceeded imports from 1873-1919. b. The United States had an unfavorable balance of payments from 1850-1919. c. Exports exceeded imports from 1850-1919. d. The United States had a favorable balance of payments from 1874 until World War I. During the war, U.S. imports exceeded imports.

a. From 1850-1873, the United States had an unfavorable balance of payments, but exports exceeded imports from 1873-1919.

Which of the following is most accurate about women's involvement in the labor force? a. Over half of the women who entered the labor force between 1940 and 1944 had dropped out by 1950. b. Between 1940 and 1950 the number of women employed in the labor force dropped. c. After World War II, the supply of young married women available to work increased. d. Women made their largest gains in employment in the service and agricultural sectors.

a. Over half of the women who entered the labor force between 1940 and 1944 had dropped out by 1950

The best description of the economic ideology during World War I was. a. The belief that the economy could be strengthened by centralized coordination. b. The economy would work best with a strong commitment to the free market. c. The United States should eliminate many federal agencies during World War I to make the government more efficient.

a. The belief that the economy could be strengthen by centralized coordination.

What is the most accurate statement about the fraction of the U.S. population that lived in urban areas between 1800 and 1910? a. The fraction of the U.S. population that lived in urban areas grew steadily throughout the period. b. The fraction of the U.S. population that lived in urban areas decreased steadily throughout the period. c. In 1910, about 85 percent of the U.S. population lived in cities over 100,000 people. d. In 1800, more than half of the U.S. population lived in towns over 2,500 people.

a. The fraction of the U.S. population that lived in urban areas grew steadily throughout the period.

Federal support for road building into publicly owned commercial forests has caused a. an increase in the supply of timber. b. an increase in the demand for timber. c. higher timber prices. d. a shortage of timber. e. all of the above.

a. an increase in the supply of timber

Economists such as James Tobin and Paul Samuelson claimed that _________ provided solid evidence of the effectiveness of Keynesian policies. a. increases in deficit spending accompanied by extremely low unemployment during WWII b. increases in taxes accompanied by rising federal budget surpluses c. increases in the money supply accompanied by falling interest rates d. price controls accompanied by inflation

a. increases in deficit spending accompanied by extremely low unemployment during WWII

What was not one of the government's strategies to pull the nation out of the Great Depression? a. large subsidies for manufacturing companies b. sizable increases in employment of emergency workers c. development of the Federal Deposit Insurance Corporation (FDIC) d. institute price controls for farmers

a. large subsidies for manufacturing companies

According to Arthur Schlesinger, Jr., government spending a. may grow more slowly during conservative periods, but will never contract. b. follows a natural cycle of increases during liberal periods and decreases during conservative periods. c. grows at the same rate under both liberal and conservative leadership; only the distribution (defense v. civilian) of the spending changes. d. reflects attempts by political leaders to reject the dominant political ideology of their youth.

a. may grow more slowly during conservative periods, but will never contract

In the 1960s and 1970s the United States passed several major consumer safety laws, including the Flammable Fabrics Act and the Child Protection Act. The economic impact of such legislation may include all of the following except a. reducing the price of the regulated product. b. increasing the cost of producing the regulated product. c. reducing the supply of the regulated product. d. reducing competition within the regulated industry.

a. reducing the price of the regulated product

The quantity theory of money relates the amount of money in the economy to which three variables? a. the proportion of income held as money, the price level, and real output b. the proportion of income held as money, the price level, and the velocity of money (number of times during the year that a dollar is changed from one person to the other) c. the wages of all individuals, profits for all businesses, and amount of money held by government agencies d. the wages of all individuals, the velocity of money, and gross domestic product

a. the proportion of income held as money, the price level, and real output

If the government-imposed price of corn is greater than the market price, then the a. quantity of corn supplied will exceed the quantity of corn demanded. b. quantity of corn supplied will be less than the quantity of corn demanded. c. demand curve for corn will increase. d. supply curve for corn will increase.

a. the quantity of corn supplied will exceed the quantity of corn demanded

Stagflation is defined as a. the simultaneous occurrence of high inflation and high unemployment. b. high inflation accompanied by falling interest rates. c. declining GDP accompanied by a stable price level. d. a persistent decline in the price level that is unresponsive to monetary and fiscal policies.

a. the simultaneous occurrence of high inflation and high unemployment

In 1940, federal government purchases of goods and services equaled roughly _____ of GDP; by 1943, this figure had risen to ________. a. 20 percent; 30 percent b. 8 percent; 50 percent c. 15 percent; 20 percent d. 1 percent; 25 percent

b. 8 percent; 50 percent

What is not one of the reasons why farmers prefer price supports over direct income supplements? a. Direct income supplements tend to remain fixed over time. b. Direct income supplements tend to provide lower benefits. c. Direct income supplements tend to go predominantly to poor farmers. d. Direct income supplements tend to be viewed as demeaning.

b. Direct income supplements tend to provide lower benefits.

Which of the following is most accurate about the economic conditions in the 1920s? a. The large increases in demand for products generated significant cyclical unemployment. b. There was a significant decrease in the number of hours worked per week. c. Agriculture was the leading growth sector of the economy. d. The net migration pattern was from urban to rural.

b. There was a significant decrease in the number of hours worked per week.

According to Robert Higgs, a. World War II was a period of unique prosperity. b. World War II was a period of continued depression that did not end until after the war. c. measures of GDP during World War II are understated. d. civilian consumption of most items actually rose during World War II.

b. World War II was a period of continued depression that did not end until after the war.

What is the most compelling evidence for the Keynesian interpretation of the Great Depression? a. increases in both the interest rate and the quantity of money b. decreases in both the interest rate and the quantity of money c. an increase in the interest rate and a decrease in the quantity of money d. a decrease in the interest rate and an increase in the quantity of money

b. decreases in both the interest rate and the quantity of money

Fiscal policy aims to influence the overall health of the economy through changes in a. the money supply. b. government spending and tax rates. c. interest rates. d. international exchange rates. e. all of the above.

b. government spending and tax rates

The income elasticity of demand for agricultural products is typically a. less than zero. b. greater than zero, but less than one. c. greater than one. d. infinity

b. greater than zero, but less than one

The existence of external costs means that the a. producer's marginal cost is greater than the marginal social cost of production. b. producer's marginal cost is less than the marginal social cost of production. c. consumer's marginal benefit is greater than the marginal social benefit of the good. d. consumer's marginal benefit is less than the marginal social benefit of the good.

b. producer's marginal cost is less than the marginal social cost of production

Most of the increase in total money supply between 1860 and 1920 was due to: a. an increase in national bank notes. b. the growth of bank deposits. c. an increase in greenbacks. d. new discoveries of gold and silver.

b. the growth of bank deposits.

During the three decades immediately following World War II, a. conservative forces successfully blocked any expansion of New Deal-type programs. b. the prevailing liberal ideology led to the passage of legislation that increased Social Security benefits, created Medicare, and increased the minimum wage. c. disillusionment with government led to deregulation of airlines and other industries. d. most policy makers and the general public rejected Keynesian policies.

b. the prevailing liberal ideology led to the passage of legislation that increased Social Security benefits, created Medicare, and increased the minimum wage.

According to Walton and Rockoff, which of the following was the most important in bringing the banking crises of the 1930s to an end? a. the elimination of many weak banks through bankruptcy (survival of the fittest). b. the promise of federal bank deposit insurance. c. New Deal spending programs. d. World War II.

b. the promise of federal bank deposit insurance

Which of the following statements most accurately describes the role of banks in the United States between the Civil War and WWI? a. The United States, which had the largest economy in the world, also had the largest banks in the world. b. Banking reforms increased the ability of state banks to issue their own notes. c. Compared to state banks, national banks generally had higher reserve requirements and more restrictions on how they could handle their assets. d. Those who borrowed money at fixed interest rates gained significantly during deflationary periods.

c. Compared to state banks, national banks generally had higher reserve requirements and more restrictions on how they could handle their assets.

What most accurately describes Albert B. Fall's plan to lease the Teapot Dome Oil Reserve? a. He leased it to a large number of competing firms, which was a good idea because it maximized the rate of oil production. b. He leased it to a large number of competing firms, which was a bad idea because it led to an excessively high rate of oil production in the short run. c. He leased it to a single firm, which was a good idea because that firm would have an incentive to take long-run costs into consideration when deciding its rate of production. d. He leased it to a single firm, which was a bad idea because it would not pay the government the fair market value for the lease.

c. He leased it to a single firm, which was a good idea because that firm would have an incentive to take long-run costs into consideration when deciding its rate of production.

What best describes the impact of a price ceiling in a competitive market? a. This benefits all consumers because they are able to obtain the good for a lower price. b. The quantity supplied will be in excess of the quantity demanded. c. It will likely lead to consumers waiting in line for longer periods of time to buy the good. d. It will benefit both consumers and producers of the good.

c. It will likely lead to consumers waiting in line for longer periods of time to buy the good.

Which of the following is least accurate in characterizing changes in retailing in the second half of the 19th century? a. large growth in the number of department stores b. large growth in the number of chain stores c. large growth in the number of "general stores" d. large growth in the number of mail-order houses

c. Large growth in the number of "general stores"

The Commodity Credit Corporation (CCC) instituted several policies to improve the welfare of farmers. Which of the following best describes the programs' effects? a. The CCC price supports mandated a one-price policy on all agricultural goods. b. The CCC made loans to farmers, using the farmers' future crops as collateral with recourse. c. The CCC price supports inefficiently allocated resources, which decreased welfare. d. If the commodity price increased, according to the free market, then the CCC would command and collect "excess" profits, i.e., revenues in excess of the one-price policy, for use as loanable funds.

c. The CCC price supports inefficiently allocated resources, which decreased welfare

During the Great Depression, one reason the Federal Reserve did not respond forcefully was the "free gold problem," which refers to the idea that a. gold was fleeing Nazi Germany, thus undermining the Fed's attempt to control the money supply. b. gold was essentially free because people had excess supplies of currency that could be converted into gold. c. the Fed claimed that almost all its gold was tied up by reserve requirements (there was little free so it could not increase the money supply). d. gold was essentially free because silver, which existed in abundance, could be converted into gold at the fixed rate of 16:1.

c. The Fed. claimed that almost all its gold was tied up by reserve requirements (there was little free so it could not increase the money supply)

Which of the following is not accurate about the 1920s? a. There was a significant increase in mass production and mass marketing. b. There was a significant increase in urbanization. c. The ability of many Americans to afford consumer goods dropped sharply. d. Consumer credit policies were developed and instituted on a large scale for the first time.

c. The ability of many Americans to afford consumer goods dropped sharply.

The Reagan administration's experiment with supply-side economics produced a historic period of economic expansion that was accompanied by a. falling real interest rates. b. high unemployment rates. c. a dramatic increase in the federal government's budget deficit. d. a reduction in the U.S. trade deficit. e. all of the above.

c. a dramatic increase in the federal government's budget deficit

Comparisons between industrialized nations and less-developed countries indicates that as income rises, the demand for a clean and well-preserved environment a. increases by a proportional amount. b. decreases by a proportional amount. c. increases by a more than proportional amount. d. decreases by a less than proportional amount.

c. increases by a more than proportional amount

According to Walton and Rockoff, the recession of 1937 and 1938 could be attributed to what? a. the decline in world trade fostered by German and Japanese policies of self sufficiency and open market gold sales by the Federal Reserve b. increases in taxes and open market gold sales by the Federal Reserve c. increases in taxes and increases in bank required reserve ratios d. the decline in world trade fostered by German and Japanese policies of self sufficiency and increases in bank required reserve ratios

c. increases in taxes and increases in bank required reserve ratios

The draft is analogous to a tax, where the amount of the tax equals the a. discounted present value of the soldier's lost private sector income. b. estimated value of a human life. c. difference between what a soldier would need to be paid to serve voluntarily and his actual pay. d. soldier's earnings while enlisted.

c. the difference between what a soldier would need to be paid to serve voluntary and his actual pay.

Between 1940 and 1990, total government spending as a percentage of GDP doubled. The primary source of this growth in spending was increases in a. military expenditures. b. government purchases of goods and services. c. transfer payments. d. the number of federal employees relative to the total labor force.

c. transfer payments

Americans who supported William Jennings Bryan and the "Free Silver" movement a. advocated a reduction in the U.S. money supply. b. included the U.S. Secretary of the Treasury. c. wanted to increase the U.S. price level. d. wanted free railroad transport of silver from western mines to the east.

c. wanted to increase the U.S. price level.

Which of the following is least accurate about labor and employment during the Great Depression? a. New social security programs were established. b. Eligibility requirements for receiving Civil War pensions were loosened. c. The price level decreased. d. Average real wages decreased.

d. Average real wages decreased

What best describes the reason for the large migration of African-Americans from the south to the north during the 1920s? a. This movement was just a continuation of the same trend that had been occurring in large scale since the end of the Civil War. b. African-Americans moved north to reunite families that had been divided during the many years of slavery. c. The African-Americans who had worked in the South had mostly been employed in the manufacturing sector, which suffered a downturn in the 1920s. d. Employers in the North who had traditionally hired many immigrants had to search elsewhere when immigration restrictions were imposed.

d. Employers in the North who had traditionally hired many immigrants had to search elsewhere when immigration restrictions were imposed.

The War Industries Board, headed by Bernard Baruch, performed all of the following functions except a. negotiating prices of key industrial products. b. developing and implementing the bulkline pricing system to determine industrial prices that maximized output. c. establishing a ratings system for government contracts. d. establishing and enforcing minimum wages for manufacturing workers.

d. Establishing and enforcing minimum wage for manufacturing workers.

Which statement is most accurate regarding U.S. trading patterns between 1850 and 1900? a. The United States exported more finished manufacturers in 1850 than it did in 1900. b. Raw materials accounted for a greater share of U.S. imports in 1850 than they did in 1900. c. Manufactured and raw foodstuffs accounted for about 75 percent of exports in both 1850 and 1900. d. In 1850, the largest U.S. export was raw materials and its largest import was finished manufacturers.

d. In 1850, the largest U.S. export was raw materials and its largest import was finished manufacturers.

Which statement is least accurate about the U.S. experience with the income tax? a. The federal income tax was not used for an extended period until after 1910. b. In the late 1800s and early 1900s, people from the South and West were most likely to support an income tax. c. Increases in the income tax were justified by using the money for more generous army pensions and increased military spending, especially for the U.S. Navy. d. Provisions for the income tax were stated in the U.S. Constitution.

d. Provisions for the income tax were stated in the U.S. Constitution.

The U.S. economy of the 1960s a. was continuously plagued by low output and high unemployment. b. is notable because the inflation rate reached double-digit levels. c. presents a rare example of deflation in a developed economy. d. enjoyed the longest expansion that the country had experienced since before WWII.

d. enjoyed the longest expansion that the country had experienced since before WWII

What was not a significant cause of the Great Depression? a. bank failures b. stock market crash c. government fiscal and monetary policy d. large increase in imports that took jobs away from American workers

d. large increase in imports that took jobs away from American workers

Features of "Reagonomics" include all of the following except a. reduction in marginal tax rates. b. increased government expenditures for defense. c. deregulation of business. d. regular increases in the minimum wage.

d. regular increases in the minimum wage

Provisions of the National Bank Act of 1863 included all of the following except a. mandated legal reserve requirements for banks chartered under the Act. b. the requirement that banks chartered under the Act purchase a certain amount of U.S. government bonds. c. the creation of a currency with a standard design. d. the creation of a central bank responsible for serving as a lender of last resort and an overseer of the money supply.

d. the creation of a central bank responsible for serving as a lender of last resort and an overseer of the money supply.

Following the lifting of price controls that had been implemented in the early 1970s, inflation skyrocketed. Economists' explanations for this acceleration in the price level include a. the increase in the money supply that also occurred during the early 1970s. b. increases in the federal government deficit, especially in 1971 and 1972. c. supply-side shocks in oil and food. d. the release of inflationary pressures that built up during the period of price controls. e. all of the above.

e. all of the above