Economics Quiz

At the height of the Great Depression in 1933, the unemployment rate reached a high of ________. 15.6% 10.0% 13.3% 24.9%

24.9%

In the United States, the most common way to measure the effect of inflation is the CPI, which stands for _____________. Capital Price Index Consumer Price Index Current Price Index Consumption Price Index

Consumer Price Index

The supervising body of the Federal Reserve that is responsible for providing general guidance to the Fed and supervising the regional banks is called the Board of ________. Regents Directors Supervisors Governors

Governors

The worst period of inflation in history occurred in 1946, when prices doubled every 15.6 hours in the nation of ___________. Germany Zimbabwe Yugoslavia Hungary

Hungary

According to Hazlitt, which of the following are effects of keeping interest rates artificially low? (choose all that apply) It increases the demand for capital. It encourages highly speculative ventures. It encourages people to save more money. It decreases the supply of real capital.

It increases the demand for capital. It encourages highly speculative ventures. It decreases the supply of real capital.

Which of the following would happen if the Federal Reserve raised the reserve requirement? (choose all that apply) It would reduce the amount of money banks could lead. It would lead to higher interest rates. It would lead to lower interest rates. It would increase the total money supply.

It would reduce the amount of money banks could lead. It would lead to higher interest rates.

Classical economists like Adam Smith believed the economy was self-correcting in the long run. Which economist argued that waiting for the economy to self-correct was foolish, saying, "In the long run we're all dead," and instead recommended strong action by the government to jump-start the economy? Milton Friedman John Maynard Keynes Ludvig von Mises Henry Hazlitt

John Maynard Keynes

The largest stock market in the world is the _______________. New York Stock Exchange Shanghai Stock Exchange Tokyo Stock Exchange NASDAQ Stock Exchange

New York Stock Exchange

Short Answer: In one sentence, explain the two primary downsides of supply-side policies.

The downsides are that the changes made to supply-side policies can take years for a difference to be seen and it's hard to know what their overall effect will be even if they're changed.

What does Hazlitt say about the rate of tax imposed by inflation? The rate is not a fixed one and cannot be determined in advance. The government can fix whatever rate it desires with impunity. The rate is determined by the interplay of supply and demand between consumers and producers. The rate is not fixed, but we know ahead of time what it will be in the future.

The rate is not a fixed one and cannot be determined in advance.

Which of the following scenarios would likely result in cost-push inflation? a decrease in the minimum wage an increase in the minimum wage lower production costs a decrease in the nation's money supply

an increase in minimum wage

Hazlitt argues that "nothing is easier to achieve than full employment" when it's "taken as an end to itself" instead of being tied to the goal of _______________. maximum income full production minimum taxation free trade

full production

Inflation occurring at an extremely high rate is called __________. super inflation scarce inflation stagflation hyperinflation

hyperinflation

Hazlitt admits that inflation might sometimes be able to correct the causes of an economic depression, but that it is a "dangerous method" because ____________. it leads to increased real wages that will bankrupt producers it risks creating a surplus of goods that will lead to cost-push inflation it gives the government too much control over the value of money it makes its corrections not openly and honestly, but by the use of illusion

it makes its corrections not openly and honestly, but by the use of illusion

Which of the following are services provided by the Federal Reserve? (choose all that apply) providing checking and savings accounts for individuals processing checks and electronic payments protecting consumers through regulation and education supplying banks with paper money and coins

processing checks and electronic payments protecting consumers through regulation and education supplying banks with paper money and coins

According to Hazlitt, saving is merely a different form of ___________. hoarding contracting spending wasting

spending

In the United States, the highest level of inflation since the Great Depression occurred in 1979. What was the percentage of inflation in 1979? 13% 7% 10% 16%

13%

Why do consumers reduce their buying after an economic downturn has started? (choose all that apply) Because they fear their money will decrease in value due to inflation. Because they believe it will improve total production in the economy. Because prices of goods have already fallen, and they fear a further fall. Because they fear they may lose their jobs.

Because prices of goods have already fallen, and they fear a further fall. Because they fear they may lose their jobs.

Which presidential candidate issued a universal jobs guarantee during the 2020 Democratic primary? Hillary Clinton Joe Biden Elizabeth Warren Bernie Sanders

Bernie Sanders

What committee is responsible for conducting monetary policy? Federal Reserve System Committee Federal Central Bank Committee Federal Monetary Policy Committee Federal Open Market Committee

Federal Open Market Committee

One of the American government's ongoing economic policies is assisting research through grants and programs. Which of the following agencies is an example of such programs? International Monetary Fund Federal Reserve System National Institutes of Health National Research Foundation

National Institutes of Health

Which of the following Congressional acts established the Securities and Exchange Commission? (choose all that apply) Securities Exchange Act of 1934 Securities Act of 1933 Revenue Act of 1932 Economy Act of 1933

Securities Exchange Act of 1934 Securities Act of 1933

Short Answer: List the three economic goals that the United States federal government seeks to achieve.

Stable prices, economic growth, and full employment

Hazlitt writes, "The most obvious . . . error on which the appeal of inflation rests" is _________________. focusing on production instead of wages encouraging a reduction of the money supply helping consumers at the expense of producers confusing money with wealth

confusing money with wealth

Hazlitt argues that saving is not a cause of depressions but is instead a(n) __________ of depressions. opportunity consequence benefit contributor

consequence

The period of the business cycle where growth slows down and unemployment increases is called the ____________ phase. contractionary recession slowing declination

contractionary

Short Answer: In one sentence, define the term deflation.

deflation is a decrease in the general level of prices.

One potential cause of unemployment is seasonal fluctuations in _________. demand supply resources scarcity

demand

Nearly all market economies experience long-term growth because of ___________. government intervention financial policy economic incentives scarcity

economic incentives

In the discussion of maximizing employment versus maximizing production, Hazlitt writes that "production is the ___ , employment merely the ____ ."

end means

The period of the business cycle where economic growth increases and unemployment decreases is called the _____________ phase. growth boom recovery expansionary

expansionary

Traders can exchange different currencies on the __________. stock market money market bond market foreign exchange market

foreign exchange market

According to Hazlitt, the whole economic progress of mankind has consisted in ______________. creating enough jobs for everyone getting more production with the same labor hoarding as much wealth as possible ensuring everyone receives the same income

getting more production with the same labor

According to Hazlitt, the whole economic progress of mankind has consisted in ______________. ensuring everyone receives the same income getting more production with the same labor hoarding as much wealth as possible creating enough jobs for everyone

getting more production with the same labor

What is usually a downside of lowering taxes and increasing government spending? decreased total production increased government borrowing increased consumer spending decreased employment

increased government borrowing

Which of the following scenarios would likely result in demand-pull inflation? fewer consumers in the market decreased government spending higher production costs increased government spending

increased government spending

If someone trades a stock based on confidential, nonpublic knowledge about that stock, they have committed _________. insider trading confidential trading exchange fraud accounting fraud

insider trading

Hazlitt writes that "savings" can be defined as the available supply of new capital, and "investment" can be defined as the demand for new capital. Just like supply and demand determines the price for anything else, supply and demand determines the price that savers are paid for loaning out their money. What does Hazlitt say is "the special name for the price of [this] loaned capital"? dividend yield interest rate stipend ratio capital fee

interest rate

Which of the following are examples of supply-side policies the government can use to encourage economic growth and lower unemployment? (choose all that apply) job training programs deregulation increasing government spending raising interest rates

job training programs deregulation

One argument made against reducing the bureaucracy is that it would hurt the economy by reducing the purchasing power of the dismissed officeholders. Those who make this argument are committing what fallacy? looking only at the effects on the whole economy instead of the effects on the dismissed officeholders looking only at the long-term effects of reducing the bureaucracy instead of the short-term effects looking only at the effects on the taxpayers instead of the effects on the federal government looking only at the effects on one group, the dismissed officeholders, instead of the effects on everyone

looking only at the effects on one group, the dismissed officeholders, instead of the effects on everyone

Which of the following are examples of monetary policy strategies the government can use to encourage economic growth and lower unemployment? (choose all that apply) lowering interest rates copyright and patent laws increasing the money supply lowering taxes

lowering interest rates increasing the money supply

The top of the business cycle is known as the __________. pinnacle crest peak ceiling

peak

Which of the following are possible causes of a higher unemployment rate? (choose all that apply) people changing jobs changes in the skills needed by employers cyclical fluctuations in the level of national spending fewer people actively seeking work

people changing jobs changes in the skills needed by employers cyclical fluctuations in the level of national spending

A long economic contraction, defined by some economists as a contraction lasting more than six months, is called a(n) ____________. recession anchor depression contraction

recession

In the story about Milton Friedman visiting an overseas construction site, Friedman suggests that more jobs could be created by taking away the workers' shovels and giving them _______. forks bulldozers trowels spoons

spoons

Of the following investments, which has historically had the best performance over the long term but suffers from more volatility? bonds stocks money market accounts certificates of deposit

stocks

The justification for public jobs like police officers, firefighters, judges, and legislators does not consist in the "purchasing power" they possess by virtue of being on the public payroll, but instead consists in the _______ of their services. scarcity utility danger cost

utility

What does Hazlitt say "real wealth" consists of? what is earned and paid as wages what is scarce and beneficial what is produced and consumed what is loaned and borrowed

what is produced and consumed