Question 1

Which of the following perspectives exerted the most impact on fiscal policy during the Great Depression?

Accepted Answer

A) the Keynesian view 
B) the supply-side view 
C) the view that the federal government should maintain a balanced budget 
D) the new classical view that fiscal policy exerts little impact on demand and output 
A) the Keynesian view 
B) the supply-side view 
C) the view that the federal government should maintain a balanced budget 
D) the new classical view that fiscal policy exerts little impact on demand and output C

Question 2

Which of the following factors contributed to a breakdown of the economy during the Great Depression?

Accepted Answer

A) a sharp increase in tax rates in 1932 
B) a sharp decline in the money supply during 1929 through 1933 
C) a sharp increase in tariff rates during 1930 
D) all of the above 
A) a sharp increase in tax rates in 1932 
B) a sharp decline in the money supply during 1929 through 1933 
C) a sharp increase in tariff rates during 1930 
D) all of the above D

Question 3

The National Industrial Recovery Act,passed in 1933,was a New Deal effort to

Accepted Answer

A) remove trade barriers so that U.S.corporations could be more competitive. 
B) fix prices,wages,and quotas in an effort to keep prices high. 
C) lower corporate taxes in order to stimulate real output. 
D) stimulate demand for agricultural products through tax incentives. 
A) remove trade barriers so that U.S.corporations could be more competitive. 
B) fix prices,wages,and quotas in an effort to keep prices high. 
C) lower corporate taxes in order to stimulate real output. 
D) stimulate demand for agricultural products through tax incentives. B

Question 4

Which of the following statements about the Great Depression is correct?

Accepted Answer

A) The 1929 stock market crash explains the lengthy duration of the Great Depression. 
B) The severity of the economic downturn,if not its onset,was the result of perverse monetary,fiscal,and regulatory policies. 
C) The sharp decreases in tariff rates and tax rates cushioned the downturn and limited it to three years. 
D) The Great Depression indicates that monetary policy affects prices but exerts little impact on output. 
A) The 1929 stock market crash explains the lengthy duration of the Great Depression. 
B) The severity of the economic downturn,if not its onset,was the result of perverse monetary,fiscal,and regulatory policies. 
C) The sharp decreases in tariff rates and tax rates cushioned the downturn and limited it to three years. 
D) The Great Depression indicates that monetary policy affects prices but exerts little impact on output.

Question 5

Which of the following is true?

Accepted Answer

A) The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea. 
B) The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability. 
C) The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs. 
D) The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes. 
A) The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea. 
B) The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability. 
C) The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs. 
D) The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes.

Question 6

The National Industrial Recovery Act,passed in 1933,was an attempt to

Accepted Answer

A) break monopolies and cartels,and introduce competition into several different industries. 
B) fix prices,wages,and quotas for several industries in an effort to keep prices high. 
C) lower corporate taxes and remove collusive behavior in an effort to keep U.S.firms competitive with foreign manufacturers. 
D) create a stable economic environment that would encourage investment and expansion in the industrial sector of the economy. 
A) break monopolies and cartels,and introduce competition into several different industries. 
B) fix prices,wages,and quotas for several industries in an effort to keep prices high. 
C) lower corporate taxes and remove collusive behavior in an effort to keep U.S.firms competitive with foreign manufacturers. 
D) create a stable economic environment that would encourage investment and expansion in the industrial sector of the economy.

Question 7

An analysis of large declines in the stock market since the Great Depression indicates that

Accepted Answer

A) the stock market crash in October 1929 was more severe than subsequent crashes. 
B) a prolonged recession will always follow a large decline in the stock market. 
C) almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months,and in some cases,no recession at all. 
D) the only way to recover from a stock market crash is through government spending,increased regulation,and tax-increases. 
A) the stock market crash in October 1929 was more severe than subsequent crashes. 
B) a prolonged recession will always follow a large decline in the stock market. 
C) almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months,and in some cases,no recession at all. 
D) the only way to recover from a stock market crash is through government spending,increased regulation,and tax-increases.

Question 8

Prolonged periods of monetary contraction,as was the case during the Great Depression,will likely result in

Accepted Answer

A) an increase in real output and employment. 
B) an increase in loanable funds and upward pressure on the rate of inflation. 
C) a decrease in output and downward pressure on prices. 
D) a decrease in unemployment and upward pressure on prices. 
A) an increase in real output and employment. 
B) an increase in loanable funds and upward pressure on the rate of inflation. 
C) a decrease in output and downward pressure on prices. 
D) a decrease in unemployment and upward pressure on prices.

Question 9

The Great Depression illustrates that monetary policy is

Accepted Answer

A) effective against inflation but incapable of dealing with a decline in output. 
B) a source of economic instability if utilized inappropriately. 
C) incapable of reversing an economic downturn when the money supply is increasing at a constant rate. 
D) incapable of reversing a major downturn unless the recession stems from inflation. 
A) effective against inflation but incapable of dealing with a decline in output. 
B) a source of economic instability if utilized inappropriately. 
C) incapable of reversing an economic downturn when the money supply is increasing at a constant rate. 
D) incapable of reversing a major downturn unless the recession stems from inflation.

Question 10

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Accepted Answer

A) concern that inflation would rise due to increases in real output and aggregate demand 
B) expansionary fiscal policy designed to stimulate aggregate demand 
C) the Keynesian view that taxes should be increased during a recession 
D) the view that the federal government should maintain a balanced budget 
A) concern that inflation would rise due to increases in real output and aggregate demand 
B) expansionary fiscal policy designed to stimulate aggregate demand 
C) the Keynesian view that taxes should be increased during a recession 
D) the view that the federal government should maintain a balanced budget

Question 11

"The Great Depression was caused by the 1929 stock market crash." Which of the following is an indication that this statement is false?

Accepted Answer

A) The stock market had regained most of its losses from the October 1929 crash by April 1930. 
B) The recessionary conditions actually began in the mid-1920s before the stock market crash. 
C) The Great Depression was a result of government failure to intervene in market activity. 
D) Economic theory indicates that a reduction in stock prices would reduce the consumer price index and thereby stimulate output and employment. 
A) The stock market had regained most of its losses from the October 1929 crash by April 1930. 
B) The recessionary conditions actually began in the mid-1920s before the stock market crash. 
C) The Great Depression was a result of government failure to intervene in market activity. 
D) Economic theory indicates that a reduction in stock prices would reduce the consumer price index and thereby stimulate output and employment.

Question 12

Which one of the following factors contributed to the decline in real output during the Great Depression?

Accepted Answer

A) deflation,which changed the terms of long-term contracts and discouraged long-term exchange 
B) inflation,which reduced the value of the dollar and eroded the savings of the elderly 
C) stable monetary policy,which caused business decision makers to lose confidence in the Fed's ability to fine-tune the economy 
D) establishment of the Federal Deposit Insurance Corporation 
A) deflation,which changed the terms of long-term contracts and discouraged long-term exchange 
B) inflation,which reduced the value of the dollar and eroded the savings of the elderly 
C) stable monetary policy,which caused business decision makers to lose confidence in the Fed's ability to fine-tune the economy 
D) establishment of the Federal Deposit Insurance Corporation

Question 13

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

Accepted Answer

A) real output increased. 
B) the general level of prices increased. 
C) the velocity of money increased by a proportional amount. 
D) unemployment increased. 
A) real output increased. 
B) the general level of prices increased. 
C) the velocity of money increased by a proportional amount. 
D) unemployment increased.

Question 14

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

Accepted Answer

A) increasing the money supply from year to year at a constant rate. 
B) decreasing the money supply through a policy of monetary contraction. 
C) increasing demand through lower taxes and budget deficits. 
D) reducing supply through the planned destruction of agricultural crops and livestock. 
A) increasing the money supply from year to year at a constant rate. 
B) decreasing the money supply through a policy of monetary contraction. 
C) increasing demand through lower taxes and budget deficits. 
D) reducing supply through the planned destruction of agricultural crops and livestock.

Question 15

How do high tariffs and other restraints on international trade affect a nation's prosperity?

Accepted Answer

A) They increase employment and thereby promote the growth of GDP. 
B) They prevent a nation from fully realizing the potential gains from specialization,exchange,and competition. 
C) They protect domestic producers and thereby promote economic growth. 
D) Both a and c are correct. 
A) They increase employment and thereby promote the growth of GDP. 
B) They prevent a nation from fully realizing the potential gains from specialization,exchange,and competition. 
C) They protect domestic producers and thereby promote economic growth. 
D) Both a and c are correct.

Question 16

Economic analysis indicates that the monetary policy of the 1930s,which shifted back and forth between restrictive monetary policy and expansionary monetary policy,would likely result in

Accepted Answer

A) economic stability and growth in real levels of output. 
B) keeping the general level of prices relatively stable because the periods of restrictive policy would just offset the periods of expansion. 
C) an environment of uncertainty,which would lead to economic instability. 
D) economic stability,because changes in monetary policy can be counted on to exert a predictable impact on the economy quickly. 
A) economic stability and growth in real levels of output. 
B) keeping the general level of prices relatively stable because the periods of restrictive policy would just offset the periods of expansion. 
C) an environment of uncertainty,which would lead to economic instability. 
D) economic stability,because changes in monetary policy can be counted on to exert a predictable impact on the economy quickly.

Question 17

When overall production is taken into account,trade restrictions,such as those enacted by the Smoot-Hawley trade bill,

Accepted Answer

A) save good paying jobs. 
B) neither create nor destroy jobs;they reallocate them. 
C) increase employment in the domestic industries that are most productive. 
D) reduce imports,without affecting the volume of exports. 
A) save good paying jobs. 
B) neither create nor destroy jobs;they reallocate them. 
C) increase employment in the domestic industries that are most productive. 
D) reduce imports,without affecting the volume of exports.

Question 18

During the Great Depression fiscal and monetary policy was characterized by

Accepted Answer

A) an increase in tax rates and a contraction in the money supply. 
B) a decrease in tax rates and a contraction in the money supply. 
C) a decrease in tax rates and an expansion in the money supply. 
D) an increase in tax rates and an expansion in the money supply. 
A) an increase in tax rates and a contraction in the money supply. 
B) a decrease in tax rates and a contraction in the money supply. 
C) a decrease in tax rates and an expansion in the money supply. 
D) an increase in tax rates and an expansion in the money supply.

Question 19

The New Deal policies of the Great Depression resulted in

Accepted Answer

A) a reduction in unemployment and an increase in real output. 
B) a stable economic environment and an increase in investment. 
C) economic uncertainty and prolonged unemployment. 
D) a quick end to the depression once the policies had taken effect. 
A) a reduction in unemployment and an increase in real output. 
B) a stable economic environment and an increase in investment. 
C) economic uncertainty and prolonged unemployment. 
D) a quick end to the depression once the policies had taken effect.

Question 20

The Great Depression was an era marked by

Accepted Answer

A) steady growth in GDP and a decline in the rate of unemployment. 
B) a prolonged period of high unemployment and output substantially below its potential. 
C) a large decline in the stock market followed by a steady recovery. 
D) a failure of expansionary monetary policy to stimulate output and employment. 
A) steady growth in GDP and a decline in the rate of unemployment. 
B) a prolonged period of high unemployment and output substantially below its potential. 
C) a large decline in the stock market followed by a steady recovery. 
D) a failure of expansionary monetary policy to stimulate output and employment.

Exam 34: Lessons From the Great Depression

Which of the following perspectives exerted the most impact on fiscal policy during the Great Depression?

Which of the following factors contributed to a breakdown of the economy during the Great Depression?

The National Industrial Recovery Act,passed in 1933,was a New Deal effort to

Which of the following statements about the Great Depression is correct?

Which of the following is true?

The National Industrial Recovery Act,passed in 1933,was an attempt to

An analysis of large declines in the stock market since the Great Depression indicates that

Prolonged periods of monetary contraction,as was the case during the Great Depression,will likely result in

The Great Depression illustrates that monetary policy is

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

"The Great Depression was caused by the 1929 stock market crash." Which of the following is an indication that this statement is false?

Which one of the following factors contributed to the decline in real output during the Great Depression?

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

How do high tariffs and other restraints on international trade affect a nation's prosperity?

Economic analysis indicates that the monetary policy of the 1930s,which shifted back and forth between restrictive monetary policy and expansionary monetary policy,would likely result in

When overall production is taken into account,trade restrictions,such as those enacted by the Smoot-Hawley trade bill,

During the Great Depression fiscal and monetary policy was characterized by

The New Deal policies of the Great Depression resulted in

The Great Depression was an era marked by

The Economic Approach

Asome Tools of the Economist

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Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

Aprice-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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