America's Great Depression - Chapter 1
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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.
- 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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