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