Question 1

Which of the following contributed to the severity of the Great Depression in the 1930s?

Accepted Answer

A) large increases in tax rates in 1932 and again in 1936 
B) large increases in the money supply during the early 1930s 
C) a reduction in tariffs protecting many U.S.industries 
D) a substantial tax rate reduction,which led to large deficits and high interest rates during the early 1930s 
A) large increases in tax rates in 1932 and again in 1936 
B) large increases in the money supply during the early 1930s 
C) a reduction in tariffs protecting many U.S.industries 
D) a substantial tax rate reduction,which led to large deficits and high interest rates during the early 1930s

Question 2

The rapid growth in stock prices during the 1920s was due in large part to

Accepted Answer

A) the expansionary monetary policy of the Federal Reserve. 
B) the wartime demand for military equipment and supplies. 
C) the artificially high value of the dollar,which eventually led to the stock market crash of 1929. 
D) the technological innovations of the decade,which spurred economic growth. 
A) the expansionary monetary policy of the Federal Reserve. 
B) the wartime demand for military equipment and supplies. 
C) the artificially high value of the dollar,which eventually led to the stock market crash of 1929. 
D) the technological innovations of the decade,which spurred economic growth.

Question 3

During the Great Depression of 1929-1933,

Accepted Answer

A) the Fed allowed the money supply to contract substantially. 
B) the Fed increased the money supply sharply. 
C) Congress cut tax rates sharply. 
D) Congress cut tariffs substantially. 
A) the Fed allowed the money supply to contract substantially. 
B) the Fed increased the money supply sharply. 
C) Congress cut tax rates sharply. 
D) Congress cut tariffs substantially.

Question 4

Which of the following was true of fiscal policy during the Great Depression?

Accepted Answer

A) The federal government generally ran a budget surplus and this reduced aggregate demand. 
B) The federal government persistently balanced its budget during the 1930s. 
C) Government spending was reduced as a share of GDP and budget deficits were small. 
D) Government spending increased as a share of GDP but budget deficits were relatively small (generally less than 4 percent of GDP). 
A) The federal government generally ran a budget surplus and this reduced aggregate demand. 
B) The federal government persistently balanced its budget during the 1930s. 
C) Government spending was reduced as a share of GDP and budget deficits were small. 
D) Government spending increased as a share of GDP but budget deficits were relatively small (generally less than 4 percent of GDP).

Question 5

Did the fiscal policy of the 1930s bring an end to the Great Depression?

Accepted Answer

A) No,government spending and budget deficits as a share of GDP were relatively small during the 1930s,and there is little evidence that fiscal policy did much to stimulate output. 
B) No,even though budget deficits steadily rose from 2 percent of GDP in the early 1930s to more than 10 percent of GDP in 1939,this expansionary fiscal policy had little effect on output. 
C) Yes,even though the spending programs of the New Deal led to budget deficits,they also led to a steady reduction in the rate of unemployment during the latter half of the 1930s. 
D) Yes,the fiscal policy that kept the federal budget balanced throughout the 1930s created a stable business climate and eventually stimulated investment. 
A) No,government spending and budget deficits as a share of GDP were relatively small during the 1930s,and there is little evidence that fiscal policy did much to stimulate output. 
B) No,even though budget deficits steadily rose from 2 percent of GDP in the early 1930s to more than 10 percent of GDP in 1939,this expansionary fiscal policy had little effect on output. 
C) Yes,even though the spending programs of the New Deal led to budget deficits,they also led to a steady reduction in the rate of unemployment during the latter half of the 1930s. 
D) Yes,the fiscal policy that kept the federal budget balanced throughout the 1930s created a stable business climate and eventually stimulated investment.

Question 6

Which of the following is a lesson that can be learned from monetary policy during the Great Depression?

Accepted Answer

A) Monetary policy should be changed frequently in response to economic fluctuations. 
B) Prolonged periods of monetary contraction will retard economic growth. 
C) Low interest rates will direct an economy toward recovery. 
D) Monetary policy should focus on variables such as output and employment. 
A) Monetary policy should be changed frequently in response to economic fluctuations. 
B) Prolonged periods of monetary contraction will retard economic growth. 
C) Low interest rates will direct an economy toward recovery. 
D) Monetary policy should focus on variables such as output and employment.

Question 7

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression,policy makers

Accepted Answer

A) reduced tax rates and increased the money supply. 
B) increased tax rates and reduced the money supply. 
C) increased both tax rates and the money supply. 
D) reduced both the tax rates and the money supply. 
A) reduced tax rates and increased the money supply. 
B) increased tax rates and reduced the money supply. 
C) increased both tax rates and the money supply. 
D) reduced both the tax rates and the money supply.

Question 8

The Agricultural Adjustment Act,passed in 1933,was an effort to

Accepted Answer

A) keep agricultural prices high by increasing supply. 
B) keep agricultural prices low by increasing supply. 
C) keep agricultural prices high by decreasing supply. 
D) keep agricultural prices low by decreasing supply. 
A) keep agricultural prices high by increasing supply. 
B) keep agricultural prices low by increasing supply. 
C) keep agricultural prices high by decreasing supply. 
D) keep agricultural prices low by decreasing supply.

Question 9

Which of the following best describes the impact of fiscal policy during the Great Depression?

Accepted Answer

A) Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated,the expansionary fiscal policy failed to stimulate demand. 
B) Fiscal policy was focused on monetary expansion,when it should have focused on maintaining a balanced budget. 
C) It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II. 
D) There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment. 
A) Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated,the expansionary fiscal policy failed to stimulate demand. 
B) Fiscal policy was focused on monetary expansion,when it should have focused on maintaining a balanced budget. 
C) It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II. 
D) There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.

Question 10

Which of the following was a result of the many programs introduced as part of the New Deal?

Accepted Answer

A) a business environment of uncertainty that reduced output and investment 
B) a speeding up of the economic recovery process once these programs were enacted 
C) an increase in trade,investment,and output within the business sector 
D) a steady decline in the unemployment rate 
A) a business environment of uncertainty that reduced output and investment 
B) a speeding up of the economic recovery process once these programs were enacted 
C) an increase in trade,investment,and output within the business sector 
D) a steady decline in the unemployment rate

Question 11

During the Great Depression,fiscal policy focused primarily on

Accepted Answer

A) keeping taxes low. 
B) raising taxes during an economic expansion and lowering taxes during a recession. 
C) trying to balance the federal budget. 
D) running budget deficits in order to stimulate real output and GDP. 
A) keeping taxes low. 
B) raising taxes during an economic expansion and lowering taxes during a recession. 
C) trying to balance the federal budget. 
D) running budget deficits in order to stimulate real output and GDP.

Question 12

Which of the following contributed to the severity of the Great Depression in the 1930s?

Accepted Answer

A) constant structural changes that created uncertainty and undermined markets 
B) the Fed's policy of rapid monetary expansion during the early 1930s 
C) a reduction in tariffs protecting many U.S.industries 
D) a substantial tax rate reduction,which led to large deficits and high interest rates during the early 1930s 
A) constant structural changes that created uncertainty and undermined markets 
B) the Fed's policy of rapid monetary expansion during the early 1930s 
C) a reduction in tariffs protecting many U.S.industries 
D) a substantial tax rate reduction,which led to large deficits and high interest rates during the early 1930s

Question 13

If fiscal policy were able to exert a significant impact on the economy during the Great Depression,we would expect

Accepted Answer

A) an increase in government expenditures and a reduction in budget deficits. 
B) an increase in government expenditures and an increase in budget deficits. 
C) a decrease in government expenditures and a reduction in budget deficits. 
D) a decrease in government expenditures and an increase in budget deficits. 
A) an increase in government expenditures and a reduction in budget deficits. 
B) an increase in government expenditures and an increase in budget deficits. 
C) a decrease in government expenditures and a reduction in budget deficits. 
D) a decrease in government expenditures and an increase in budget deficits.

Question 14

Analysis of the Great Depression indicates that

Accepted Answer

A) even though monetary and fiscal policies were highly expansionary,they were unable to offset the economic plunge. 
B) even though monetary policy was expansionary,restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the severity of the economic decline,if not its onset,was the result of perverse monetary,fiscal and regulatory policies. 
A) even though monetary and fiscal policies were highly expansionary,they were unable to offset the economic plunge. 
B) even though monetary policy was expansionary,restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the severity of the economic decline,if not its onset,was the result of perverse monetary,fiscal and regulatory policies.

Question 15

Analysis of the Great Depression indicates that

Accepted Answer

A) even though monetary and fiscal policies were highly expansionary,they were unable to offset the economic downturn. 
B) even though monetary policy was expansionary,restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the depth of the economic plunge,if not its onset,was the result of monetary,fiscal,and regulatory policies. 
A) even though monetary and fiscal policies were highly expansionary,they were unable to offset the economic downturn. 
B) even though monetary policy was expansionary,restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the depth of the economic plunge,if not its onset,was the result of monetary,fiscal,and regulatory policies.

Question 16

Which of the following did not contribute to the severity of the Great Depression?

Accepted Answer

A) a sharp reduction in the money supply during the early 1930s 
B) a large tax increase (to balance the budget)in the early 1930s 
C) substantial increases in the tariff rates on imported goods 
D) a reduction in government expenditures and a substantial cut in personal income tax rates during 1932 and again in 1936 
A) a sharp reduction in the money supply during the early 1930s 
B) a large tax increase (to balance the budget)in the early 1930s 
C) substantial increases in the tariff rates on imported goods 
D) a reduction in government expenditures and a substantial cut in personal income tax rates during 1932 and again in 1936

Question 17

As a result of the Smoot-Hawley trade bill of 1930,

Accepted Answer

A) both the volume of U.S.trade and the tariff revenues derived from trade increased substantially. 
B) the volume of U.S.trade decreased,but the tariff revenues derived from trade increased. 
C) the volume of U.S.trade increased,but the tariff revenues derived from trade decreased. 
D) both the volume of U.S.trade and the tariff revenues derived from trade decreased substantially. 
A) both the volume of U.S.trade and the tariff revenues derived from trade increased substantially. 
B) the volume of U.S.trade decreased,but the tariff revenues derived from trade increased. 
C) the volume of U.S.trade increased,but the tariff revenues derived from trade decreased. 
D) both the volume of U.S.trade and the tariff revenues derived from trade decreased substantially.

Question 18

If higher tariffs,such as those enacted by the Smoot-Hawley trade bill,reduce the imports of the United States,which of the following will be most likely to occur?

Accepted Answer

A) U.S.employment will increase. 
B) The unemployment rate of the United States will decline. 
C) U.S.exports will increase because foreigners will want to buy more from U.S.producers. 
D) U.S.exports will decline because foreigners will be earning fewer of the dollars needed to purchase goods and services from Americans. 
A) U.S.employment will increase. 
B) The unemployment rate of the United States will decline. 
C) U.S.exports will increase because foreigners will want to buy more from U.S.producers. 
D) U.S.exports will decline because foreigners will be earning fewer of the dollars needed to purchase goods and services from Americans.

Question 19

Which of the following was true with regard to the Great Depression?

Accepted Answer

A) The policies of the New Deal brought the Great Depression to an end well before World War II. 
B) Sound economic policy was followed during this era,which makes the length and severity of the Great Depression puzzling to economists. 
C) The length and severity of the Great Depression was the result of unsound economic policies followed by both the Hoover and Roosevelt Administrations. 
D) The Great Depression was largely the result of the highly expansionary monetary policy of the Fed during the 1930s. 
A) The policies of the New Deal brought the Great Depression to an end well before World War II. 
B) Sound economic policy was followed during this era,which makes the length and severity of the Great Depression puzzling to economists. 
C) The length and severity of the Great Depression was the result of unsound economic policies followed by both the Hoover and Roosevelt Administrations. 
D) The Great Depression was largely the result of the highly expansionary monetary policy of the Fed during the 1930s.

Question 20

An analysis of stock market prices during 1929 to 1930 indicates that

Accepted Answer

A) the stock market crash of October 1929 was the cause of the Great Depression of the 1930s. 
B) stock market prices rose steadily throughout the entire year of 1930. 
C) after recovering most of its value from the crash of October 1929,stock prices again declined steadily during the debate and passage of the Smoot-Hawley trade bill. 
D) after the crash of October 1929,the Smoot-Hawley trade bill marked the beginning of a steady recovery of the stock market. 
A) the stock market crash of October 1929 was the cause of the Great Depression of the 1930s. 
B) stock market prices rose steadily throughout the entire year of 1930. 
C) after recovering most of its value from the crash of October 1929,stock prices again declined steadily during the debate and passage of the Smoot-Hawley trade bill. 
D) after the crash of October 1929,the Smoot-Hawley trade bill marked the beginning of a steady recovery of the stock market.

Exam 34: Lessons From the Great Depression

Which of the following contributed to the severity of the Great Depression in the 1930s?

The rapid growth in stock prices during the 1920s was due in large part to

During the Great Depression of 1929-1933,

Which of the following was true of fiscal policy during the Great Depression?

Did the fiscal policy of the 1930s bring an end to the Great Depression?

Which of the following is a lesson that can be learned from monetary policy during the Great Depression?

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression,policy makers

The Agricultural Adjustment Act,passed in 1933,was an effort to

Which of the following best describes the impact of fiscal policy during the Great Depression?

Which of the following was a result of the many programs introduced as part of the New Deal?

During the Great Depression,fiscal policy focused primarily on

Which of the following contributed to the severity of the Great Depression in the 1930s?

If fiscal policy were able to exert a significant impact on the economy during the Great Depression,we would expect

Analysis of the Great Depression indicates that

Analysis of the Great Depression indicates that

Which of the following did not contribute to the severity of the Great Depression?

As a result of the Smoot-Hawley trade bill of 1930,

If higher tariffs,such as those enacted by the Smoot-Hawley trade bill,reduce the imports of the United States,which of the following will be most likely to occur?

Which of the following was true with regard to the Great Depression?

An analysis of stock market prices during 1929 to 1930 indicates that

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

Fiscal Policy: the Keynesian View and Historical Perspective

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Modern Macroeconomics and Monetary Policy

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