Question 1

The Smoot-Hawley trade bill of 1930, designed to save jobs and increase revenue for the federal government, resulted in
A) an increase in both employment and federal tax revenue.
B) a sharp reduction in trade and a decline in federal tax revenue.
C) the protection of jobs while maintaining the level of trade, but it did not increase federal tax revenue.
D) a decline in the volume of trade, but an increase in revenue from tariffs, which made it possible for the federal government to balance its budget.

Accepted Answer

The Smoot-Hawley trade bill of 1930 resulted in a sharp reduction in trade, as countries retaliated with their own tariffs and trade barriers. This led to a decline in federal tax revenue as well.

Question 2

The Great Depression was an era marked by
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.

Accepted Answer

The Great Depression was marked by a prolonged period of high unemployment and output substantially below its potential. This was due to various factors such as a decline in consumer spending, agricultural overproduction, and a decrease in international trade. The Depression lasted from 1929 until the late 1930s and had a significant impact on the global economy.

Question 3

The National Industrial Recovery Act essentially legalized
A) labor unions.
B) business cartels.
C) minimum wage laws.
D) import tariffs.

Accepted Answer

The answer of The National Industrial Recovery Act essentially legalized
A)...

Question 4

Fiscal policy analysis indicates that large tax increases during a severe recession will result in
A) an increase in the incentive to earn and the maintenance of a balanced federal budget.
B) higher tax revenues and an expansion in government spending.
C) smaller budget deficits, which will speed an economic recovery.
D) a reduction in aggregate demand and a worsening of the recession.

Accepted Answer

Large tax increases during a severe recession will reduce disposable income and therefore decrease consumer spending. This reduction in aggregate demand will worsen the recession, making it more difficult for the economy to recover.

Question 5

High marginal tax rates, such as those instituted during the Great Depression, will
A) increase the incentive of people to earn.
B) lead to a proportional increase in tax revenue and a reduction in the size of the budget deficit.
C) cause people to work, earn, and invest less than would be the case if marginal tax rates were lower.
D) attract workers from other countries where tax rates are lower.

Accepted Answer

High marginal tax rates can create a disincentive for people to work harder, earn more, or invest because a large portion of their earnings will be taxed at a high rate. This can lead to a decrease in economic activity and growth.

Question 6

Which one of the following was a secondary effect of the stock market crash of 1929?
A) an increase in the money supply in the early 1930s
B) a decline in consumption expenditures because of the reduction in the wealth of stockholders
C) an increase in the supply of loanable funds as people transferred funds from the stock market into savings accounts
D) an increase in tax revenues as the sellers of stocks paid the capital gains tax on stocks that had appreciated during the 1920s

Accepted Answer

The stock market crash of 1929 led to a decline in consumption expenditures because many stockholders lost a significant portion of their wealth. This, in turn, led to a decrease in overall economic activity and contributed to the onset of the Great Depression. Choices A, C, and D are not accurate secondary effects of the stock market crash.

Question 7

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?
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.

Accepted Answer

Higher tariffs can lead to a decrease in imports, but also a decrease in exports because it makes foreign goods more expensive for other countries to purchase. This reduces the amount of foreign currency that the US can earn and thus decreases the amount of US exports. Ultimately, this can lead to a decrease in employment and an increase in the unemployment rate.

Question 8

Which of the following was most responsible for bringing the Great Depression to an end?
A) the increase in industrial demand due to the military build-up prior to World War II
B) the expansionary monetary policy of the Fed during the 1930s
C) the New Deal policies that expanded government spending, stimulated demand, and increased output
D) the increase in import tariffs that saved jobs and expanded total employment

Accepted Answer

The increase in industrial demand due to the military build-up prior to World War II is credited as being the primary factor that brought the Great Depression to an end. The large scale of war production led to increased demand for goods, which in turn led to increased employment and economic activity. The expansionary monetary policy of the Fed and the New Deal policies may have helped to mitigate the severity of the Depression, but it was the demand generated by the war that ultimately ended it. The increase in import tariffs, on the other hand, is generally seen as having worsened the Depression by reducing international trade and increasing protectionism.

Question 9

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

Accepted Answer

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by reducing supply through the planned destruction of agricultural crops and livestock. This policy aimed to decrease the oversupply of agricultural products and thus raise prices.

Question 10

Which of the following contributed to the severity of the Great Depression?
A) the substantial budget surpluses run during the Hoover administration
B) a sharp increase in tariff rates in 1930
C) the large reduction in tax rates under the Hoover administration
D) a highly expansionary monetary policy followed by the Fed in the late 1920s and early 1930s

Accepted Answer

The Smoot-Hawley Tariff Act of 1930 significantly raised tariff rates, leading to a decrease in international trade and worsening the economic situation during the Great Depression.

Question 11

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,
A) real output increased.
B) the general level of prices increased.
C) the velocity of money increased by a proportional amount.
D) unemployment increased.

Accepted Answer

When the money supply declines, it typically leads to a decrease in economic activity and an increase in unemployment, as businesses have less money to invest and hire workers. Therefore, the correct choice is D. Real output, general prices, and velocity of money are all unlikely to increase in this scenario.

Question 12

During the Great Depression of 1929-1933,
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.

Accepted Answer

During the Great Depression, the Fed allowed the money supply to contract substantially, which worsened the economic downturn by reducing the availability of credit and limiting the ability of individuals and businesses to spend and invest.

Question 13

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

Accepted Answer

The answer of The rapid growth in stock prices during...

Question 14

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

Accepted Answer

The National Industrial Recovery Act (NIRA) aimed to stimulate economic recovery by instituting price controls, quotas, and minimum wages across a range of industries. The goal was to protect workers and businesses from the effects of the Great Depression by ensuring that prices for goods remained high, while wages remained stable. The act also established the National Recovery Administration (NRA) to oversee implementation of these policies. While the NIRA was ultimately struck down by the Supreme Court, it was an important early attempt at using government intervention to address economic crisis.

Question 15

During 1929-1933, monetary policy was
A) highly expansionary and this led to an increase in the general level of prices.
B) characterized by steady monetary growth, which resulted in price stability.
C) characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output.
D) highly expansionary and this led to a reduction in the general level of prices.

Accepted Answer

During 1929-1933, monetary policy was characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output. This period is known as the Great Contraction, where the Federal Reserve implemented a tight monetary policy, which worsened the recession and led to deflation.

Question 16

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

Accepted Answer

Analysis indicates that 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. Option A is incorrect as subsequent crashes could also be severe, as we have seen in recent times. Option B is incorrect as it's not necessary that a prolonged recession will always follow a large decline in the stock market. Option D is incorrect as there are different ways to recover from a stock market crash, and government spending, increased regulation, and tax-increases are just some of the ways.

Question 17

Which of the following contributed to the severity of the Great Depression in the 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

Accepted Answer

The Great Depression was exacerbated by structural changes and uncertainties, such as bank failures and market instability, which undermined confidence and economic activity.

Question 18

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

Accepted Answer

Deflation caused a decrease in the price level, which in turn made it more expensive for businesses to produce goods and discouraged consumption. This led to a decrease in real output during the Great Depression. Inflation (B) and stable monetary policy (C) were not factors contributing to the decline in real output, and the establishment of the Federal Deposit Insurance Corporation (D) was a response to the Great Depression, not a cause of the decline in real output.

Question 19

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
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.

Accepted Answer

The shifting back and forth between restrictive and expansionary monetary policies during the 1930s would create an environment of uncertainty, which would lead to economic instability. The economy would not be able to grow and stabilize without a more predictable and consistent monetary policy.

Question 20

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

Accepted Answer

The Agricultural Adjustment Act aimed to increase farm prices by decreasing agricultural supply. The act paid farmers to reduce crop and livestock production, thus decreasing supply and driving prices up. This was part of a larger New Deal effort to stabilize prices and promote economic recovery during the Great Depression.

Quiz 16: Applying the Basics: Special Topics in Economics

The Smoot-Hawley trade bill of 1930, designed to save jobs and increase revenue for the federal government, resulted in

The Great Depression was an era marked by

The National Industrial Recovery Act essentially legalized

Fiscal policy analysis indicates that large tax increases during a severe recession will result in

High marginal tax rates, such as those instituted during the Great Depression, will

Which one of the following was a secondary effect of the stock market crash of 1929?

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 most responsible for bringing the Great Depression to an end?

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

Which of the following contributed to the severity of the Great Depression?

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

During the Great Depression of 1929-1933,

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

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

During 1929-1933, monetary policy was

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

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

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

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

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