America's Great Depression - Chapter 1

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Great Depression Quizzes & Trivia

This is a 10-question quiz on Chapter 1: Positive Theory of the Cycle from America's Great Depression by Murray Rothbard.


Questions and Answers
  • 1. 
    Cycle theory has been integrated into the general economics theories of which two economists?
    • A. 

      Mises and Hayek

    • B. 

      Marx and Keynes

    • C. 

      Mises and Schumpeter

    • D. 

      Samuelson and Ricardo

  • 2. 
    Business _________ are simply the results of changes in economic data and are fully explained by economic theory.
  • 3. 
    What is the main problem that a theory of depression must explain?
    • A. 

      Why is the gross domestic product contracting instead of expanding?

    • B. 

      Why is there a sudden general cluster of business errors?

    • C. 

      Why is unemployment increasing?

    • D. 

      Why is inflation increasing at the same time as unemployment?

  • 4. 
    This determines the individual's proportion of consumption to saving or investment.
    • A. 

      Time preferences

    • B. 

      Debt-to-income ratio

    • C. 

      Interest rates

    • D. 

      Income level

  • 5. 
    What causes otherwise rational businessmen to invest too much in higher-order capital goods?
    • A. 

      Inexpensive consumer goods

    • B. 

      Government subsidies

    • C. 

      Expropriated labor

    • D. 

      Bank credit inflation

  • 6. 
    Which is not a phase of the business cycle set into motion by bank credit expansion, according to Rothbard?
    • A. 

      The inflationary boom

    • B. 

      The crisis

    • C. 

      The deflationary bust

    • D. 

      The depression recovery

  • 7. 
    What is the benefit of credit contraction when it follows a period of credit expansion?
    • A. 

      It causes the government to increase spending.

    • B. 

      It speeds the market’s adjustment process.

    • C. 

      It reduces the amount of unemployment caused by inflation.

    • D. 

      It causes housing prices to decline.

  • 8. 
    What is one positive thing the government can do to effectively respond to a depression?
    • A. 

      Drastically lower its relative role in the economy.

    • B. 

      Prevent liquidations and bankruptcies.

    • C. 

      Keep wage rates up.

    • D. 

      Stimulate consumption and discourage saving.

  • 9. 
    What are the two common misconceptions of the Austrian theory of the trade cycle?
    • A. 

      Gold reserve money and inflation.

    • B. 

      Malinvestment and bank credit expansion.

    • C. 

      Overinvestment and the assumption of full employment.

    • D. 

      Interest rates and underemployment.

  • 10. 
    What is the Austrian explanation for the perpetual recurrence of business cycles?
    • A. 

      Seasonal fluctuations systematically introduce instability into the system.

    • B. 

      More gold is always being mined and added to the global money supply.

    • C. 

      Banks and governments inflate credit when they can.

    • D. 

      The decreasing marginal utility of investment goods.

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