Deck 8: Macroeconomic Instability: Are We Depression-Proof

Question 1

Which of the following was not an outcome of the Great Depression?

A) The growth of government involvement in the economy.
B) The rise of laissez-faire economic theories.
C) The rise of the economic view that stagnation was a "natural" tendency in capitalism.
D) Keynesian economics.

Answer 1

B

Question 2

Which of the following events do Conservatives see as contributing to the severity of the Great Depression?

A) Poor policy decisions by the Federal Reserve System.
B) The Smoot-Hawley Tariff.
C) Franklin D. Roosevelt's antibusiness political posturing.
D) All of the above.
E) None of the above.

Answer 2

D

Question 3

Which of the following is not an argument offered by Keynesians in their critique of classical economists?

A) Says Law is invalid.
B) Prices and wages are flexible.
C) Lower interest rates might not always induce new investment spending.
D) Falling demand will produce rising unemployment.

Answer 3

B

Question 4

According to Conservatives, one consequence of increased government spending is

A) price stability.
B) lower interest rates.
C) inflation.
D) a low unemployment rate.

Question 5

The proposition that overproduction and underconsumption is a chronic malaise of capitalism is supported by

A) Conservatives.
B) Liberals.
C) Radicals.
D) None of the above.
E) All of the above.

Question 6

Conservatives maintain that expansionary Keynesian fiscal policies

A) initially lower consumer's purchasing power.
B) tend to increase the supply of goods over time.
C) initially increase, but then lower inflation-adjusted aggregate demand.
D) "crowd out" government spending.

Question 7

Keynesians generally answer Conservative charges that government spending is inflationary by

A) arguing for greater than proportionate tax increases.
B) pointing out that inflation is very unlikely when there is excess productive capacity and a high unemployment rate.
C) proposing high interest rates.
D) urging attention to the supply-side of the economy.

Question 8

The Balanced-Budget Amendment to the U.S. Constitution is supported by most

A) Conservatives.
B) Liberals.
C) Radicals.
D) All of the above.
E) None of the above.

Question 9

According to the Radical argument, what was the method used by capitalists to expand their markets in order to dispose of surplus production?

A) Protectionism
B) Consumerism
C) Cronyism
D) Marxism
E) Imperialism
F) None of the above.

Question 10

Stagflation refers to an economy with

A) higher output and higher interest rates.
B) lower output and lower prices.
C) lower output and higher prices.
D) higher output and lower prices.

Question 11

The major objective of countercyclical policy is

A) raising the level of business investment.
B) holding down the inflation rate.
C) increasing demand until "full employment" is attained.
D) guiding to and maintaining the economy at its trend rate of growth.

Question 12

Liberals believe that the Depression of the 1930s was a problem of chronic stagnation because of

A) inadequate business investment.
B) a lazy workforce.
C) high taxes.
D) low margin requirements on financial brokerage accounts.
E) None of the above.
F) All of the above.

Question 13

Conservatives argue that the Depression of the 1930s would have been a "normal" business cycle if

A) people had a higher propensity to save.
B) the Federal Reserve Board had not raised interest rates.
C) aggregate demand had fallen.
D) Americans had a stronger work ethic.
E) None of the above.
F) All of the above.

Question 14

Emerging from the 1990-91 recession, the American economy commenced the longest economic expansion in its history.

Question 15

Unemployment and inflation rates were lower during the 1980s compared to the 1960s.

Question 16

The Great Depression commenced after the decline of the NASDAQ system index.

Question 17

Historically, unemployment and inflation rates have generally moved in opposite directions.

Question 18

The Great Depression of the 1930s was the first significant downturn in aggregate output in U.S. history.

Question 19

According to Say's Law, there should be no unemployment.

Question 20

Laissez-faire conduct refers to government intervention only to correct a depression.

Question 21

According to Keynes, insufficient aggregate demand could be offset by an increase in government spending.

Question 22

A key element of the Conservative analysis is that prices and wages should be flexible.

Question 23

Radicals believe that overproduction stemmed from the adoption of Keynesian policies by most capitalist nations.

Question 24

Conservatives claim that the expansion of government spending in the economy generates inflation.

Question 25

Stagflation exists when prices rise and unemployment declines.

Question 26

The Smoot-Hawley Tariff of 1930 dramatically increased America's imports and was a productive action in bringing the economy out of the Great Depression.

Question 27

The fact that there has not been an economic depression since the adaptation of Keynesian economic policies is proof that his philosophies promote economic growth and stability.

Question 28

Employment growth since 2001 has been one of the strongest on record.