ECON TEST #3
John Maynard Keynes disputed the Classical Theory in support of his General Theory, stating
Both A and C are correct.
Refer to Figure 14.4 above. In the market for soldiers above, the government's demand for soldiers is D', and it chooses to pay a wage of WB, drafting the remaining solders. The all-voluntary force equals
LA
Which of the following best explains the cause of the Great Depression, as supported by economic data?
Monetarist explanation
Adolf Hitler came to power as Chancellor of Germany directly after which event?
The U.S. stock market crash
Which of the following is an example of adverse selection in the market for health insurance?
The unhealthiest people are the most likely to apply for insurance
To curb late-1920s speculation in the stock market, the Federal Reserve pursued contractionary monetary policy. Before interest rates adjusted in the short run,
a shortage of saving existed, and interest rates then rose.
Refer to Figure 14.1 Above. In the market above, the government imposes a subsidy of PS minus PB. Producer surplus after the subsidy equals
area "b + c + e + i"
A clothing manufacturer during WWII offers a low-end line of clothing (inferior good) and a high-end line of clothing (normal good). Price ceilings exist in both markets. As incomes rise, shortages for the low-end line of clothing
decrease
As people lost confidence in banks early during the Great Depression, they withdrew currency from bank vaults. This would have caused the money supply, all else equal, to
decrease
The Agricultural Adjustment Act of 1933 caused total surplus in agricultural markets to
decrease
The Hawley-Smoot Tariff Act of 1930 led to other nations increasing their tariffs on U.S. goods. In U.S. exporting industries, these higher foreign tariffs caused producer surplus to
decrease, and consumer surplus increase.
FDR's "hold the line" order in 1943 caused producer surplus in regulated markets
decrease, and consumer surplus to change uncertainly.
The Fair Labor Standards Act of 1938 caused consumer surplus in labor markets to
decrease, and long-run output to decrease
In its entirety, the National Industrial Recovery Act of 1933 caused long-run employment to
decrease, and long-run unemployment to increase
To stop gold from flowing out of the U.S. during the early 1930s, the Federal Reserve increased interest rates on government bonds. This policy caused investment to
decrease, and national saving to decrease.
All else equal, large budget deficits run during World War II caused public saving
decrease, and private saving to increase.
During the late 1920s, the Federal Reserve increased the discount rate. All else equal, this caused the money supply to
decrease, and the long-run real interest rate to not change.
Suppose that before the Stock Market Crash of 1929, the government taxed optimally. The stock market crash caused the optimal tax rate along the Laffer curve to
decrease. Hoover increased tax rates during the Great Depression.
The Gold Reserve Act of 1934 made it illegal for Americans to privately own gold (minus rare coins, jewelry, etc.). This act
decreased the severity of the Great Depression
During Hoover's administration, the economy experienced __________. For workers whose salaries were fixed by contract, real wages __________.
deflation / rose
During Hoover's administration, the economy experienced __________. For workers whose salaries were fixed by contract, real wages __________.
deflation/rose.
After World War II, Sam the Soldier returns home and takes his job back from Rosie the Riveter. She continues to be available for and looking for work. The labor force for women
does not change.
As farmers in Boise City used the new technology of gasoline powered tractors to plow up Buffalo grass, the marginal social cost of doing so was
greater than the marginal private cost
Optimal tax rates during war are generally __________ than during times of peace.
higher
In the short-run, the Agricultural Marketing Act of 1929 caused consumer expenditure on food to
increase
The Second Agricultural Adjustment Act of 1938 caused total surplus in agricultural markets to
increase, and economic efficiency to decrease
The Social Security Act of 1935 created unemployment insurance. All else equal, the creation of unemployment insurance alone caused the long-run price level to
increase, and long-run employment to increase
Outlawing yellow-dog contracts during Herbert Hoover's administration, in the long run, caused the equilibrium price level to
increase, and output to decrease
Outlawing yellow-dog contracts during Herbert Hoover's administration, in the long run, caused the equilibrium price level to
increase, and output to decrease.
The Glass-Steagall Act of 1933 caused the short-run price level to
increase, and short run real GDP to increase
The Housing and Urban Development Act of 1965 __________ the supply of public housing. This caused the demand for private housing to __________.
increased / decrease
The Elementary and Secondary Education Act of 1965 __________ economic efficiency, since the marginal social benefit for education __________ the marginal private benefit
increased / was greater than
Suppose that Lyndon B. Johnson's advisors estimated that the marginal propensity to consume was 50%. If this was true, then an increase of $10 billion on Great Society programs would have
increased real GDP by $20 billion
Suppose that during the Great Depression, the government paid workers to plant trees, but all these trees died in the same year. GDP
increases
When the federal government issued more War Bonds during WWII, the Federal Reserve conducted open market
purchases, lowering short-run nominal interest rates.
The Federal Emergency Relief Administration provided large amounts of funding toward
small-scale local projects, such as sewers, sidewalks, and city halls.
