Economics 1740VERSION A - MARK ON YOUR SCANTRON ANSWER SHEET
Fall, 2002
Dr. Alston , Quiz #12, Walton and Rockoff, Chapters 23& 24
1.During the Great Depression, one reason the Federal Reserve did not respond forcefully was the “free gold problem,” which refers to the idea that
a.gold was fleeing Nazi Germany, thus undermining the Fed's attempt to control the money supply.
b.gold was essentially free because people had excess supplies of currency that could be converted into gold.
c.the Fed claimed that almost all its gold was tied up by reserve requirements (there was little free so it could not increase the money supply).
d.gold was essentially free because silver, which existed in abundance, could be converted into gold at the fixed rate of 16:1.
2.According to Walton and Rockoff, which of the following was the most important in bringing the banking crises of the 1930s to an end?
a.the elimination of many weak banks through bankruptcy (survival of the fittest).
b.the promise of federal bank deposit insurance.
c.New Deal spending programs.
d.World War II.
3.According to Walton and Rockoff, the recession of 1937 and 1938 could be attributed to what?
a.the decline in world trade fostered by German and Japanese policies of self sufficiency and open market gold sales by the Federal Reserve
b.increases in taxes and open market gold sales by the Federal Reserve
c.increases in taxes and increases in bank required reserve ratios
d.the decline in world trade fostered by German and Japanese policies of self sufficiency and increases in bank required reserve ratios
4.Which of the following “quotations,” according to Chapter 23, best summarizes Keynes conclusions about the lessons of the Depression for the nature of capitalism.
a.“It is in determining the volume, not the direction, of actual employment that the existing system has broken down.”
b.“An economic system that forgets to find work for millions of men and women, cannot be trusted to perform any task in an intelligent fashion.”
c.“The depression is essentially a problem of reliance on a private banking system for the provision of an inherently public good, money.”
d.“The rules of sound finance, namely stable prices and balanced budgets, apply as much to the present crisis, as they do in more pleasant times.”
5.What is the most compelling evidence for the Keynesian interpretation of the Great Depression?
a.increases in both the interest rate and the quantity of money
b.decreases in both the interest rate and the quantity of money
c.an increase in the interest rate and a decrease in the quantity of money
d.a decrease in the interest rate and an increase in the quantity of money
6.What was not a significant cause of the Great Depression?
a.bank failures
b.stock market crash
c.government fiscal and monetary policy
d.large increase in imports that took jobs away from American workers
7.What was not one of the government’s strategies to pull the nation out of the Great Depression?
a.large subsidies for manufacturing companies
b.sizable increases in employment of emergency workers
c.development of the Federal Deposit Insurance Corporation (FDIC)
d.institute price controls for farmers
8.The Commodity Credit Corporation (CCC) instituted several policies to improve the welfare of farmers. Which of the following best describes the programs’ effects?
a.The CCC price supports mandated a one-price policy on all agricultural goods.
b.The CCC made loans to farmers, using the farmers’ future crops as collateral with recourse.
c.The CCC price supports inefficiently allocated resources, which decreased welfare.
d.If the commodity price increased, according to the free market, then the CCC would command and collect “excess” profits, i.e., revenues in excess of the one-price policy, for use as loanable funds.
9.Which of the following is least accurate about labor and employment during the Great Depression?
a.New social security programs were established.
b.Eligibility requirements for receiving Civil War pensions were loosened.
c.The price level decreased.
d.Average real wages decreased.
10.What is not one of the reasons why farmers prefer price supports over direct income supplements?
a.Direct income supplements tend to remain fixed over time.
b.Direct income supplements tend to provide lower benefits.
c.Direct income supplements tend to go predominantly to poor farmers.
d.Direct income supplements tend to be viewed as demeaning.
ANSWERS: Quiz No. 12, Econ 1740 Fall, 2002, Walton and Rockoff, Chapters 23 & 24, Version A
1. ANSWER: c. the Fed claimed that almost all its gold was tied up by reserve requirements (there was little free so it could not increase the money supply).
2. ANSWER: b. the promise of federal bank deposit insurance.
3. ANSWER: c. increases in taxes and increases in bank required reserve ratios
4. ANSWER: a. “It is in determining the volume, not the direction, of actual employment that the existing system has broken down.”
5. ANSWER: b. decreases in both the interest rate and the quantity of money
6. ANSWER: d. large increase in imports that took jobs away from American workers
7. ANSWER: a. large subsidies for manufacturing companies
8. Answer c. The CCC price supports inefficiently allocated resources, which decreased welfare.
9. ANSWER: d. Average real wages decreased.
10. ANSWER: b. Direct income supplements tend to provide lower benefits.
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