A Quiz On America's Great Depression

The name of the controversial import tax passed by Congress in 1930 was the _________________ Tariff.

What did many politicians and economists find surprising about 1931?

• They expected a Communist revolution.

• They expected a deeper contraction.

• They expected an economic recovery.

• They expected a stock market crash.

What does Rothbard describe as the only valid course if the government wishes to alleviate economic depression?

• Stabilize prices

• Increase government spending

• Leave things alone

• Support wage rates

What principle was widely accepted by economists as a means of effectively reducing unemployment in 1930?

• Tax cuts.

• Public works.

• Interest-free home loans.

• Subsidy payments.

What is the essence of recession according to the Austrian theory of economics?

• A decline in the rate of GDP growth.

• A reduction in the size of the national economy.

• A readjustment of the economy to eliminate the distortions created during the preceding expansion.

• A reduction in the velocity of money.

What is the Austrian explanation for the perpetual recurrence of business cycles?

• Banks and governments inflate credit when they can.

• Seasonal fluctuations systematically introduce instability into the system.

• More gold is always being mined and altering the global money supply.

• The decreasing marginal utility of investment goods.

Why does Rothbard reject the notion that consumer confidence is a cause of business cycles?

• Consumption is only one part of GDP.

• Business confidence is the primary culprit.

• Consumer confidence is derivative, not causal.

• Rothbard does not believe in psychology.

What is the great similarity between the initial actions of Hoover's RFC and Bush's TARP?

• Both organizations were required to in end the economic crisis.

• Both organizations refused to disclose their loan actitivies.

• Both organizations used the money to acquire auto manufacturers.

• Both organizations refused to make loans to banks.

What U.S. president launched the first antidepression programmarked by extensive governmental economic planning andintervention?

• Franklin Delano Roosevelt

• Herbert Hoover

• Woodrow Wilson

• Calvin Coolidge

What was Herbert Hoover's primary goal in using federal power to fight economic depression?

• Reducing the TED spread.

• Fighting inflation.

• Protecting corporate profits.

• Sustaining wage rates

What was the result of the depression on commodity prices?

• There wasn't one, prices fluctuated normally.

• Prices increased dramatically.

• Prices decreased dramatically.

• Commodities couldn't be obtained at any price.

In the Introductions, what does Paul Johnson say was the orthodox explanation for the worldwide economic contraction of the 1930s?

• The Monetarist theory that the Federal Reserve failed to sufficiently inflate the money supply.

• The Keynesian theory that government did too little to rescue the market system from the consequences of its own folly.

• The Austrian theory that the Federal Reserve over-inflated the money supply.

• The Marxian theory that capitalism had collapsed as a result of its inherent contradictions.

What basic economic concept did Hoover most notably fail to grasp?

• The Labor Theory of Value

• The Laffer Curve

• Marginal Utility

• The Law of Supply and Demand

How much did Federal spending increase in 1931?  (Government enterprises excluded.)

• It didn't increase.

• 8 percent.

• 17 percent.

• 42 percent.

What two factors kept inflation in check in 1930?

• Interest rate increases and gold sales.

• Increased federal spending and exports.

• Equity price collapse and bank failures.

• Housing price declines and reduced mortgage lending.

What was the immediate response of the Federal Reserve to the October 1929 stock crash?

• Lowering interest rates by 150 basis points.

• Increasing government spending on infrastructure.

• Reducing its holdings of government securities.

• Taking over the operations of its member banks.

What is the main problem that a theory of depression must explain?

• Why is the gross domestic product contracting instead of expanding?

• Why is there a sudden general cluster of business errors?

• Why is unemployment increasing?

• Why is inflation increasing at the same time as unemployment?

What is the basis for the Keynesian criticism of Misean cycle theory's approach to savings and investment?

• The Keynesians argue that savings and investment are two entirely separate processes.

• The Keynesians argue that savings and investment are identical.

• The Keynesians argue that investment should increase as savings decline.

• The Keynesians argue that a savings rate in excess of the rate of inflation increases investment in consumer goods.

What was the average annual rate of increase in the money supply from 1921 to 1929?

• 2.5 percent

• 5.3 percent

• 7.7 percent

• 224 percent

What is acceptance?

• A contract to pay when an equity price falls to a previously agreed level.

• A mortgage bank's agreement to a loan restructure to avoid foreclosure.

• A leveraged life insurance investment.

• A bill sold by borrowers to dealers or banks who in turn sell the bills to the Federal Reserve System.

What was considered the most important part of Herbert Hoover's 9-point plan for economic recovery?

• Establishing the Public Works Administration to coordinate and expand Federal public works

• Establishing the Reconstruction Finance Corporation to lend to banks, industries, and credit agencies.

• Federal loans of $300 million to the States.

• Bankruptcy law reform.

Regarding what specific commodity do Keynesians reject the application of the Law of Supply and Demand?

• Gold

• Money

• Labor

• Wheat

Why does Rothbard consider consumer loans to be less problematic than other forms of credit?

• They are smaller in the aggregate than business financing.

• They do not create a boom-bust cycle.

• They will evaporate when consumers go bankrupt.

• They increase consumer spending and therefore economic growth.

How many recessions took place in America during the 1920s?

• Zero

• One

• Two

• Three