America's Great Depression - Chapter 2

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About This Quiz

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

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2. What is a Keynesian "Liquidity Trap"?

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

When inflation and unemployment both increase at the same time.

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

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

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

Falling wage rates will reduce consumption in favor of savings.

Falling wage rates will increase debt.

4. According to Rothbard, which of the following is NOT a man’s possible allocation of his monetary assets?

Spend money on consumption

Spend money on investment

Increase his money hoard

Add to cash balance

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?

BC workers will lose their jobs.

The SD curve will shift from DL to DS.

BE workers will receive higher wages.

Workers in the EGH triangle will be unemployed.

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

Gold

Money

Labor

Capital

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

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

It reduces the pressure on the price of wages.

It makes workers less productive.

It reduces inflation, which inherently increases unemployment.

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

The Law of Supply and Demand

The Labor Theory of Value

The Theory of Wage Cycle

The Money Illusion of Labor.

9. According to the Keynesians, what does hoarding reduce?

Savings

Consumption

Investment

Consumption and Investment