Question 1

"The Great Depression was caused by the 1929 stock market crash." Which of the following is an indication that this statement is false?

Accepted Answer

A) The stock market had regained most of its losses from the October 1929 crash by April 1930. 
B) The recessionary conditions actually began in the mid-1920s before the stock market crash. 
C) The Great Depression was a result of government failure to intervene in market activity. 
D) Economic theory indicates that a reduction in stock prices would reduce the consumer price index and thereby stimulate output and employment. 
A) The stock market had regained most of its losses from the October 1929 crash by April 1930. 
B) The recessionary conditions actually began in the mid-1920s before the stock market crash. 
C) The Great Depression was a result of government failure to intervene in market activity. 
D) Economic theory indicates that a reduction in stock prices would reduce the consumer price index and thereby stimulate output and employment.

Question 2

Which of the following contributed to the severity of the Great Depression in the 1930s?

Accepted Answer

A) constant structural changes that created uncertainty and undermined markets 
B) the Fed's policy of rapid monetary expansion during the early 1930s 
C) a reduction in tariffs protecting many U.S. industries 
D) a substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s 
A) constant structural changes that created uncertainty and undermined markets 
B) the Fed's policy of rapid monetary expansion during the early 1930s 
C) a reduction in tariffs protecting many U.S. industries 
D) a substantial tax rate reduction, which led to large deficits and high interest rates during the early 1930s

Question 3

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression, policy makers

Accepted Answer

A) reduced tax rates and increased the money supply. 
B) increased tax rates and reduced the money supply. 
C) increased both tax rates and the money supply. 
D) reduced both the tax rates and the money supply. 
A) reduced tax rates and increased the money supply. 
B) increased tax rates and reduced the money supply. 
C) increased both tax rates and the money supply. 
D) reduced both the tax rates and the money supply.

Question 4

Analysis of the Great Depression indicates that

Accepted Answer

A) even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn. 
B) even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies. 
A) even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic downturn. 
B) even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the depth of the economic plunge, if not its onset, was the result of monetary, fiscal, and regulatory policies.

Question 5

The Agricultural Adjustment Act, passed in 1933, was an effort to

Accepted Answer

A) keep agricultural prices high by increasing supply. 
B) keep agricultural prices low by increasing supply. 
C) keep agricultural prices high by decreasing supply. 
D) keep agricultural prices low by decreasing supply. 
A) keep agricultural prices high by increasing supply. 
B) keep agricultural prices low by increasing supply. 
C) keep agricultural prices high by decreasing supply. 
D) keep agricultural prices low by decreasing supply.

Question 6

The Great Depression demonstrates that the appropriate fiscal and monetary policy to combat a recession would be

Accepted Answer

A) an increase in taxes and a contraction in the money supply. 
B) a decrease in taxes and a contraction in the money supply. 
C) a decrease in taxes and an expansion in the money supply. 
D) an increase in taxes and an expansion in the money supply. 
A) an increase in taxes and a contraction in the money supply. 
B) a decrease in taxes and a contraction in the money supply. 
C) a decrease in taxes and an expansion in the money supply. 
D) an increase in taxes and an expansion in the money supply.

Question 7

The rapid growth in stock prices during the 1920s was due in large part to

Accepted Answer

A) the expansionary monetary policy of the Federal Reserve. 
B) the wartime demand for military equipment and supplies. 
C) the artificially high value of the dollar, which eventually led to the stock market crash of 1929. 
D) the technological innovations of the decade, which spurred economic growth. 
A) the expansionary monetary policy of the Federal Reserve. 
B) the wartime demand for military equipment and supplies. 
C) the artificially high value of the dollar, which eventually led to the stock market crash of 1929. 
D) the technological innovations of the decade, which spurred economic growth.

Question 8

Which of the following is an important lesson that can be drawn from the experience of the Great Depression?

Accepted Answer

A) Frequent shifts in monetary policy can help smooth out unstable economic conditions during a recession. 
B) Trade restrictions can "save jobs" and expand total employment during an economic downturn. 
C) The good intentions of political decision-makers are no substitute for sound policy. 
D) The federal government should always balance its budget during a recession. 
A) Frequent shifts in monetary policy can help smooth out unstable economic conditions during a recession. 
B) Trade restrictions can "save jobs" and expand total employment during an economic downturn. 
C) The good intentions of political decision-makers are no substitute for sound policy. 
D) The federal government should always balance its budget during a recession.

Question 9

Sound economic policy is policy that is consistent with

Accepted Answer

A) good intentions. 
B) quick action and frequent policy changes until positive results are achieved. 
C) monetary stability, free trade, and low tax rates. 
D) saving jobs, protecting domestic industry, and increasing tax revenue. 
A) good intentions. 
B) quick action and frequent policy changes until positive results are achieved. 
C) monetary stability, free trade, and low tax rates. 
D) saving jobs, protecting domestic industry, and increasing tax revenue.

Question 10

Prolonged periods of monetary contraction, as was the case during the Great Depression, will likely result in

Accepted Answer

A) an increase in real output and employment. 
B) an increase in loanable funds and upward pressure on the rate of inflation. 
C) a decrease in output and downward pressure on prices. 
D) a decrease in unemployment and upward pressure on prices. 
A) an increase in real output and employment. 
B) an increase in loanable funds and upward pressure on the rate of inflation. 
C) a decrease in output and downward pressure on prices. 
D) a decrease in unemployment and upward pressure on prices.

Question 11

If higher tariffs, such as those enacted by the Smoot-Hawley trade bill, reduce the imports of the United States, which of the following will be most likely to occur?

Accepted Answer

A) U.S. employment will increase. 
B) The unemployment rate of the United States will decline. 
C) U.S. exports will increase because foreigners will want to buy more from U.S. producers. 
D) U.S. exports will decline because foreigners will be earning fewer of the dollars needed to purchase goods and services from Americans. 
A) U.S. employment will increase. 
B) The unemployment rate of the United States will decline. 
C) U.S. exports will increase because foreigners will want to buy more from U.S. producers. 
D) U.S. exports will decline because foreigners will be earning fewer of the dollars needed to purchase goods and services from Americans.

Question 12

The National Industrial Recovery Act, passed in 1933, was a New Deal effort to

Accepted Answer

A) remove trade barriers so that U.S. corporations could be more competitive. 
B) fix prices, wages, and quotas in an effort to keep prices high. 
C) lower corporate taxes in order to stimulate real output. 
D) stimulate demand for agricultural products through tax incentives. 
A) remove trade barriers so that U.S. corporations could be more competitive. 
B) fix prices, wages, and quotas in an effort to keep prices high. 
C) lower corporate taxes in order to stimulate real output. 
D) stimulate demand for agricultural products through tax incentives.

Question 13

Which one of the following was a secondary effect of the stock market crash of 1929?

Accepted Answer

A) an increase in the money supply in the early 1930s 
B) a decline in consumption expenditures because of the reduction in the wealth of stockholders 
C) an increase in the supply of loanable funds as people transferred funds from the stock market into savings accounts 
D) an increase in tax revenues as the sellers of stocks paid the capital gains tax on stocks that had appreciated during the 1920s 
A) an increase in the money supply in the early 1930s 
B) a decline in consumption expenditures because of the reduction in the wealth of stockholders 
C) an increase in the supply of loanable funds as people transferred funds from the stock market into savings accounts 
D) an increase in tax revenues as the sellers of stocks paid the capital gains tax on stocks that had appreciated during the 1920s

Question 14

As a result of the Smoot-Hawley trade bill of 1930,

Accepted Answer

A) both the volume of U.S. trade and the tariff revenues derived from trade increased substantially. 
B) the volume of U.S. trade decreased, but the tariff revenues derived from trade increased. 
C) the volume of U.S. trade increased, but the tariff revenues derived from trade decreased. 
D) both the volume of U.S. trade and the tariff revenues derived from trade decreased substantially. 
A) both the volume of U.S. trade and the tariff revenues derived from trade increased substantially. 
B) the volume of U.S. trade decreased, but the tariff revenues derived from trade increased. 
C) the volume of U.S. trade increased, but the tariff revenues derived from trade decreased. 
D) both the volume of U.S. trade and the tariff revenues derived from trade decreased substantially.

Question 15

Which of the following contributed to the severity of the Great Depression?

Accepted Answer

A) the substantial budget surpluses run during the Hoover administration 
B) a sharp increase in tariff rates in 1930 
C) the large reduction in tax rates under the Hoover administration 
D) a highly expansionary monetary policy followed by the Fed in the late 1920s and early 1930s 
A) the substantial budget surpluses run during the Hoover administration 
B) a sharp increase in tariff rates in 1930 
C) the large reduction in tax rates under the Hoover administration 
D) a highly expansionary monetary policy followed by the Fed in the late 1920s and early 1930s

Question 16

Analysis of the Great Depression indicates that

Accepted Answer

A) even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic plunge. 
B) even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the severity of the economic decline, if not its onset, was the result of perverse monetary, fiscal and regulatory policies. 
A) even though monetary and fiscal policies were highly expansionary, they were unable to offset the economic plunge. 
B) even though monetary policy was expansionary, restrictive fiscal policy dominated during the 1930s. 
C) a reduction in tax rates could not prevent the economic downturn from spiraling into a depression. 
D) the severity of the economic decline, if not its onset, was the result of perverse monetary, fiscal and regulatory policies.

Question 17

Fiscal policy analysis indicates that large tax increases during a severe recession will result in

Accepted Answer

A) an increase in the incentive to earn and the maintenance of a balanced federal budget. 
B) higher tax revenues and an expansion in government spending. 
C) smaller budget deficits, which will speed an economic recovery. 
D) a reduction in aggregate demand and a worsening of the recession. 
A) an increase in the incentive to earn and the maintenance of a balanced federal budget. 
B) higher tax revenues and an expansion in government spending. 
C) smaller budget deficits, which will speed an economic recovery. 
D) a reduction in aggregate demand and a worsening of the recession.

Question 18

Did the fiscal policy of the 1930s bring an end to the Great Depression?

Accepted Answer

A) No, government spending and budget deficits as a share of GDP were relatively small during the 1930s, and there is little evidence that fiscal policy did much to stimulate output. 
B) No, even though budget deficits steadily rose from 2 percent of GDP in the early 1930s to more than 10 percent of GDP in 1939, this expansionary fiscal policy had little effect on output. 
C) Yes, even though the spending programs of the New Deal led to budget deficits, they also led to a steady reduction in the rate of unemployment during the latter half of the 1930s. 
D) Yes, the fiscal policy that kept the federal budget balanced throughout the 1930s created a stable business climate and eventually stimulated investment. 
A) No, government spending and budget deficits as a share of GDP were relatively small during the 1930s, and there is little evidence that fiscal policy did much to stimulate output. 
B) No, even though budget deficits steadily rose from 2 percent of GDP in the early 1930s to more than 10 percent of GDP in 1939, this expansionary fiscal policy had little effect on output. 
C) Yes, even though the spending programs of the New Deal led to budget deficits, they also led to a steady reduction in the rate of unemployment during the latter half of the 1930s. 
D) Yes, the fiscal policy that kept the federal budget balanced throughout the 1930s created a stable business climate and eventually stimulated investment.

Question 19

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Accepted Answer

A) concern that inflation would rise due to increases in real output and aggregate demand 
B) expansionary fiscal policy designed to stimulate aggregate demand 
C) the Keynesian view that taxes should be increased during a recession 
D) the view that the federal government should maintain a balanced budget 
A) concern that inflation would rise due to increases in real output and aggregate demand 
B) expansionary fiscal policy designed to stimulate aggregate demand 
C) the Keynesian view that taxes should be increased during a recession 
D) the view that the federal government should maintain a balanced budget

Question 20

Which of the following did not contribute to the severity of the Great Depression?

Accepted Answer

A) a sharp reduction in the money supply during the early 1930s 
B) a large tax increase (to balance the budget) in the early 1930s 
C) substantial increases in the tariff rates on imported goods 
D) a reduction in government expenditures and a substantial cut in personal income tax rates during 1932 and again in 1936 
A) a sharp reduction in the money supply during the early 1930s 
B) a large tax increase (to balance the budget) in the early 1930s 
C) substantial increases in the tariff rates on imported goods 
D) a reduction in government expenditures and a substantial cut in personal income tax rates during 1932 and again in 1936

Exam 21: Appendix: Lessons From the Great Depression

"The Great Depression was caused by the 1929 stock market crash." Which of the following is an indication that this statement is false?

Which of the following contributed to the severity of the Great Depression in the 1930s?

As unemployment rose during 1930 through 1932 and the economy plunged into the Great Depression, policy makers

Analysis of the Great Depression indicates that

The Agricultural Adjustment Act, passed in 1933, was an effort to

The Great Depression demonstrates that the appropriate fiscal and monetary policy to combat a recession would be

The rapid growth in stock prices during the 1920s was due in large part to

Which of the following is an important lesson that can be drawn from the experience of the Great Depression?

Sound economic policy is policy that is consistent with

Prolonged periods of monetary contraction, as was the case during the Great Depression, will likely result in

If higher tariffs, such as those enacted by the Smoot-Hawley trade bill, reduce the imports of the United States, which of the following will be most likely to occur?

The National Industrial Recovery Act, passed in 1933, was a New Deal effort to

Which one of the following was a secondary effect of the stock market crash of 1929?

As a result of the Smoot-Hawley trade bill of 1930,

Which of the following contributed to the severity of the Great Depression?

Analysis of the Great Depression indicates that

Fiscal policy analysis indicates that large tax increases during a severe recession will result in

Did the fiscal policy of the 1930s bring an end to the Great Depression?

What prompted the large increase in tax rates in 1932 in the midst of an economic recession?

Which of the following did not contribute to the severity of the Great Depression?

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

Price-Searcher Markets With Low Entry Barriers

A: Price-Searcher Markets With High Entry Barriers

B: Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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