America's Great Depression - Chapter 1

10 Questions | By Voxday | Updated: Mar 19, 2022 | Attempts: 354

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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.