America's Great Depression Chapter 3

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2. What essential determinant of savings and investment does Hansen's stagnation theory omit?

Interest rates

Money supply

Time preferences

Wage rates

3. Why does Rothbard reject the notion that consumer confidence is a cause of business cycles?

It is derivative, not causal.

Consumption is only one part of GDP.

Business confidence is the actual cause.

He does not believe in psychology.

4. What is the fundamental flaw in blaming the current crisis on the housing market?

The housing crisis was caused by the Democrats.

Overproduction is caused by the construction industry.

It confuses a business fluctuation with the business cycle.

Housing is an investment good, not a consumer good.

5. How many separate but interacting economic cycles does Schumpeter postulate?

Zero

One

Two

Three

6. Which of the following are not a common explanation of depression as set forth by Rothbard.

Overproduction

Underproduction

Underconsumption

Dearth of Investment opportunities

7. What is the contraction-causing factor that logic dictates lies beneath overproduction theory and which the theory cannot explain?

Aggregate demand

Variable interest rates

Cost-price differentials

Consumer good inflation

8. Which of the following is not a potential explanation for an underconsumption scenario?

Too high a proportion of income going to lower income groups

Too much investment

Too much production

Too high a proportion of income going to upper income groups

9. Why does Rothbard consider consumer loans to be less problematic than other forms of loans?

They are smaller in the aggregate than business financing.

They do not create a boom-bust cycle.

They will evaporate when consumers go bankrupt.

They increase consumer spending and therefore economic growth.