Deck 24: The Great Depression

Question 1

Keynesian economics endorsed the idea of

A) increased government spending as a counterforce against slumps or recessions.
B) reduced taxation as a counterforce against rising prices.
C) increased government spending as a counterforce against inflation.
D) decreased government spending as a counterforce against slumps or recessions.

Answer 1

increased government spending as a counterforce against slumps or recessions.

Question 2

If private investment had held up as well as consumption did,the economic contraction from 1929 to 1933 would have been less severe than it was.

Answer 2

False

Question 3

Under the gold standard of the Great Depression,any country experiencing a balance of payment deficit was expected to finance those deficits by exporting gold.The loss of gold should be followed by contractionary monetary policy,reducing demand and causing prices to fall.All countries operating under the gold standard followed these rules of the game throughout the Great Depression.

Answer 3

False

Question 4

During the worst year of the Great Depression,according to the official statistics,about what percentage of the labor force was unemployed?

A) 10%
B) 15%
C) 25%
D) 35%

Question 5

Efforts to balance the federal government's budget by raising taxes provided a buffer to the economic downturn of the Great Depression.

Question 6

The Smoot-Hawley Tariff Act of 1930 is thought to have contributed to the severity of the 1930s depression because of the rise in tariff rates and the consequential drop in private consumption,savings and investment.

Question 7

The nominal money supply fell faster in 1929-32 than did prices.

Question 8

Keynesian economists link the start of the Great Depression to the drop in construction spending and the downturn in consumption following the stock market crashes of 1929.

Question 9

Which view of the causes of the Great Depression emphasizes factors largely external to the domestic economy,particularly the Gold Standard?

A) The Monetarists'
B) The Keynesians'
C) The Austrians'
D) The International View

Question 10

Unemployment in 1939,after a decade of recession and depression,still exceeded 10 percent.

Question 11

The Smoot-Hawley Tariff Act of 1930,like any tariff act,increased the price of the taxed imported goods as well as the domestic price of U.S.goods and services produced in the industries favored by the tariff.Consequently,any tariff negatively impacts U.S.consumers by forcing them to pay higher prices.

Question 12

The Darby (1976)revisions of the 1930s unemployment data show that if you count public employment,then the 1930s were not especially severe by historical standards.

Question 13

During the Great Depression,the U.S.was not firmly tied to the world economy.

Question 14

The federal spending policies of the Great Depression were clearly expansionary and helped return the U.S.economy to the low levels of unemployment experienced during the 1920s.

Question 15

Hughes and Cain (2011)talk about falling levels of investment during the Great Depression.What does the "investment" that they are talking about refer to?

A) Engineering ideas behind the industry of the era
B) Money loaned by banks to consumers
C) Land, labor, and equipment used in production
D) Tools, equipment, machines, and buildings used in production

Question 16

The depression of the 1930s was

A) the first depression in the nation's history.
B) not the first but the most serious depression in the nation's history.
C) not the first depression in the nation's history and no more serious than some of the others.
D) not as serious as the depressions of the 1840s and 1870s.

Question 17

The New Deal succeeded in ending the Great Depression.

Question 18

Classical economists argue that all workers could have been employed during the Great Depression if they had been willing to accept falling wages.But President Hoover and his supporters recommended that hours be cut before wages which increased unemployment.

Question 19

There was a silver lining during the Great Depression.Compared to other periods in U.S.history,this period was one of the most technologically advanced.

Question 20

As indicated by real GDP,real GDP per capita and nominal GDP figures,the Great Depression was unmoved by the social reconstruction efforts of President Franklin D.Roosevelt and his supporters.

Question 21

Why did the Fed do little to help the U.S.economy recover from its depression during the early thirties?

Question 22

Why was Keynes' view considered heretical to classical or free market economists? What exactly did he propose that classical economists opposed?

Question 23

The Great Depression and the New Deal transformed the U.S.into which type of economy?

A) Laissez-faire
B) Socialist
C) Mixed
D) Communist

Question 24

What was the Smoot-Hawley Tariff Act of 1930? What were its goals? Did it achieve these goals? Explain why or why not.

Question 25

Could the Federal Reserve have prevented the increased downturn from 1930 to 1932? What are the viewpoints of Friedman and Schwartz (1963),Temin (1989)and Bernanke (1995)on this?

Question 26

Explain how the Federal Reserve System and the overall banking system changed after the Great Depression.

Question 27

The International View of the Great Depression blames the contraction in the U.S.economy on

A) the failure of the U.S. markets to permit a fall in aggregate prices under the ?gold standard or to devalue its exchange rate.
B) exports' and imports' large proportion of total GDP in the U.S.
C) Great Britain abandoning the gold standard.
D) all of the above.

Question 28

The Great Depression is still the subject of controversy,including the question(s)of

A) what caused the initial downturn.
B) why the economy contracted for so long (1929 to 1932) and why it contracted so much?(real GNP fell about 30%).
C) whether government policy helped or hindered the recovery attempt.
D) all of the above.

Question 29

Regarding business conditions during the 1930s,which of the following events did not occur?

A) The number of patents applied for declined.
B) The number of mergers between companies increased in an attempt to increase ?their consolidated strength.
C) Some interest rates, such as the prime rate, fell to less than 1%.
D) In the early years of the Depression, business investment spending on plants and ?equipment was not enough to increase or maintain the country's capital stock.

Question 30

Which view of the causes of the Great Depression emphasizes that there is little evidence that the economy was suffering from any real shortage of money; the problems,instead,stemmed from a fall of private consumption and investment spending?

A) The Monetarists'
B) The Keynesians'
C) The Austrians'
D) The International View

Question 31

Which of the following did not occur during the early years of the Great Depression?

A) Marriage rates fell.
B) Birth rates fell.
C) Divorce rates increased.
D) Actually, all of the above occurred.

Question 32

Field (2003)claims that the period from 1929 to 1941 was the strongest period of what in ?U.S.history?

A) Technological advancements
B) Monetary policy
C) Government action
D) Internationalization

Question 33

Federal taxes increased in 1932,1935 and 1937,and Social Security taxes were imposed in 1937.Which group is credited for these tax increases during the Great Depression?

A) Classical economists
B) Keynesian economists
C) Monetarists
D) Government officials and special interest groups

Question 34

Today,the Federal Reserve System can contract the money supply by

A) increasing the discount rate.
B) increasing reserve requirements.
C) selling U.S. Treasury and federal agency securities.
D) engaging in all of the above.

Question 35

Identify the successes and failures of the Federal Reserve System during the Great Depression.Describe the different views on the net success of the Fed.

Question 36

In 1933 the unemployment rate was about 25%.This percentage

A) is probably quite accurate because the data on unemployment collected by the federal government was quite good at the time.
B) is probably too high because some people with jobs claimed to be unemployed so ?that they could collect unemployment compensation payments.
C) is probably too low because there were discouraged and underemployed workers.
D) is probably meaningless because the data on unemployment was either very poor ?or nonexistent.

Question 37

Which view of the causes of the Great Depression emphasizes the decline in the money supply which caused aggregate demand for goods and services to shrink,leading businesses to cut production and employment?

A) The Monetarists'
B) The Keynesians'
C) The Austrians'
D) The International View

Question 38

How do Friedman and Schwartz (1963),Temin (1989),Bernanke (1995)and Kindleberger (1973)differ in the factors they consider important in causing the severity of the Great Depression? Which consider the bank failures of 1930 to 1932 important,and why?

Question 39

Which group of economists argues that the stock market crash of 1929 significantly reduced wealth,causing consumption to fall and resulting in a significant downturn in residential construction and investments?

A) Classical economists.
B) Keynesian economists.
C) Monetarists.
D) Austrians.

Question 40

What do the Monetarist and Keynesian economists claim was the main cause of the Great Depression?

A) A contraction in supply
B) A downturn in demand
C) The falling federal deficit
D) All of the above

Question 41

Discuss the changes in federal tax policies during the Great Depression.Explain their impacts on private spending.

Question 42

How serious was the Great Depression? Explain by making reference to the various data that measure economic performance.Contrast the "Monetarist" view of the cause of the Depression with the "Keynesian" view.

Question 43

Present the international views on the forces behind the Great Depression.

Question 44

Discuss the debate over whether expansionary monetary or fiscal policy would have successfully pulled the U.S.economy out of the Great Depression.

Question 45

Describe the economic conditions of the Great Depression.Present the spending and money hypotheses about what caused the Great Depression.Explain the economic arguments behind each.