America's Great Depression - Chapter 2

9 Questions | Total Attempts: 240

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America

This is a 10-question quiz on Chapter 2: Keynesian Criticisms of the Theory from America's Great Depression by Murray Rothbard.


Questions and Answers
  • 1. 
    According to Rothbard, which of the following is NOT a man’s possible allocation of his monetary assets?
    • A. 

      Spend money on consumption

    • B. 

      Spend money on investment

    • C. 

      Increase his money hoard

    • D. 

      Add to cash balance

  • 2. 
    What is a Keynesian "Liquidity Trap"?
    • A. 

      When demand for money is so high that interest rates cannot fall low enough to sufficiently increase investment.

    • B. 

      When inflation and unemployment both increase at the same time.

    • C. 

      When the total supply of money in the economy is trapped within a certain range above or below which the central bank cannot increase or decrease it.

    • D. 

      When the amount owed on a mortgage is greater than the value of the property to which the mortgage is applied.

  • 3. 
    Keynesians believe that people expect a rise in the rate of interest in a financial crisis and will therefore hoard money instead of purchasing bonds and contributing toward lower rates. This ______  _____ constitutes the “liquidity trap,” and is supposed to indicate the relation between liquidity preference and the interest rate.
  • 4. 
    According to the Keynesians, what does hoarding reduce?
    • A. 

      Savings

    • B. 

      Consumption

    • C. 

      Investment

    • D. 

      Consumption and Investment

  • 5. 
    Upon what does the Keynesian concept of the contrary link between inflation and unemployment rest?
    • A. 

      The Law of Supply and Demand

    • B. 

      The Labor Theory of Value

    • C. 

      The Theory of Wage Cycle

    • D. 

      The Money Illusion of Labor.

  • 6. 
    Regarding what specific commodity do Keyensians reject the application of the Law of Supply and Demand?
    • A. 

      Gold

    • B. 

      Money

    • C. 

      Labor

    • D. 

      Capital

  • 7. 
    If the supply for labor is the SL-SL line and the demand for labor is DL-DL, what will be the consequence of artificially raising the wage rate from the equilibrium point to A?
    • A. 

      BC workers will lose their jobs.

    • B. 

      The SD curve will shift from DL to DS.

    • C. 

      BE workers will receive higher wages.

    • D. 

      Workers in the EGH triangle will be unemployed.

  • 8. 
    What do the Keynesians believe is the primary problem of falling wage rates as it relates to economic growth?
    • A. 

      Falling wage rates will reduce income tax revenues, thus reducing government spending.

    • B. 

      Falling wage rates will raise interest rates, thus inhibiting the important housing market.

    • C. 

      Falling wage rates will reduce consumption in favor of savings.

    • D. 

      Falling wage rates will increase debt.

  • 9. 
    How does reducing the hours worked and "spreading the work" tend to prolong unemployment?
    • A. 

      It reduces the amount of money workers can spend, thus reducing consumption.

    • B. 

      It reduces the pressure on the price of wages.

    • C. 

      It makes workers less productive.

    • D. 

      It reduces inflation, which inherently increases unemployment.