Question 1

Which of the following perspectives exerted the most impact on fiscal policy during the Great Depression?

Accepted Answer

A)   the Keynesian view
B)   the supply-side view
C)   the view that the federal government should maintain a balanced budget
D)   the new classical view that fiscal policy exerts little impact on demand and outputE) All of the above
F) A) and B)

Question 2

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.E) A) and B)
F) B) and C)

Question 3

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.E) A) and D)
F) B) and D)

Question 4

Which of the following was a result of the many programs introduced as part of the New Deal?

Accepted Answer

A)   a business environment of uncertainty that reduced output and investment
B)   a speeding up of the economic recovery process once these programs were enacted
C)   an increase in trade, investment, and output within the business sector
D)   a steady decline in the unemployment rateE) B) and C)
F) B) and D)

Question 5

Which of the following statements about the Great Depression is correct?

Accepted Answer

A)   The 1929 stock market crash explains the lengthy duration of the Great Depression.
B)   The severity of the economic downturn, if not its onset, was the result of perverse monetary, fiscal, and regulatory policies.
C)   The sharp decreases in tariff rates and tax rates cushioned the downturn and limited it to three years.
D)   The Great Depression indicates that monetary policy affects prices but exerts little impact on output.E) None of the above
F) All of the above

Question 6

How do high tariffs and other restraints on international trade affect a nation's prosperity?

Accepted Answer

A)   They increase employment and thereby promote the growth of GDP.
B)   They prevent a nation from fully realizing the potential gains from specialization, exchange, and competition.
C)   They protect domestic producers and thereby promote economic growth.
D)   Both a and c are correct.E) A) and B)
F) All of the above B

Question 7

An analysis of large declines in the stock market since the Great Depression indicates that

Accepted Answer

A)   the stock market crash in October 1929 was more severe than subsequent crashes.
B)   a prolonged recession will always follow a large decline in the stock market.
C)   almost all stock market crashes since the Great Depression were followed by short recessions of 12 to 18 months, and in some cases, no recession at all.
D)   the only way to recover from a stock market crash is through government spending, increased regulation, and tax-increases.E) B) and C)
F) A) and C)

Question 8

During a recession, the political incentive structure will encourage politicians to

Accepted Answer

A)   undertake sound economic policies that are consistent with stability and growth.
B)   adopt any policies, even bad ones, that give the appearance of taking action.
C)   undertake policies that promote long-term economic growth rather than short-term benefits.
D)   do nothing and let the recession run its course.E) C) and D)
F) A) and D)

Question 9

Which of the following was true of fiscal policy during the Great Depression?

Accepted Answer

A)   The federal government generally ran a budget surplus and this reduced aggregate demand.
B)   The federal government persistently balanced its budget during the 1930s.
C)   Government spending was reduced as a share of GDP and budget deficits were small.
D)   Government spending increased as a share of GDP but budget deficits were relatively small (generally less than 4 percent of GDP) .E) B) and C)
F) All of the above D

Question 10

During 1929-1933, monetary policy was

Accepted Answer

A)   highly expansionary and this led to an increase in the general level of prices.
B)   characterized by steady monetary growth, which resulted in price stability.
C)   characterized by a sharp reduction in the supply of money, which led to downward pressure on prices and a decline in output.
D)   highly expansionary and this led to a reduction in the general level of prices.E) All of the above
F) C) and D)

Question 11

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.E) A) and D)
F) C) and D)

Question 12

Which of the following factors contributed to a breakdown of the economy during the Great Depression?

Accepted Answer

A)   a sharp increase in tax rates in 1932
B)   a sharp decline in the money supply during 1929 through 1933
C)   a sharp increase in tariff rates during 1930
D)   all of the aboveE) All of the above
F) A) and C)

Question 13

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.E) B) and D)
F) B) and C)

Question 14

During the Great Depression of 1929-1933,

Accepted Answer

A)   the Fed allowed the money supply to contract substantially.
B)   the Fed increased the money supply sharply.
C)   Congress cut tax rates sharply.
D)   Congress cut tariffs substantially.E) A) and C)
F) B) and D)

Question 15

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.E) A) and B)
F) B) and D)

Question 16

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.E) B) and C)
F) A) and D)

Question 17

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.E) A) and B)
F) A) and C)

Question 18

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Accepted Answer

A)   Trade restrictions are a good way for a country to increase the total employment and income level of its citizens.
B)   As the experience during the 1930s illustrates, trade restrictions are an effective way to increase exports and tax revenues.
C)   Trade restrictions provide gains to domestic residents at the expense of foreigners.
D)   Trade restrictions often provide benefits to highly visible special interest groups while imposing a less visible cost on the general populace.E) B) and C)
F) C) and D) D

Question 19

According to the data, was the stock-market crash of 1929 the primary cause of the Great Depression?

Accepted Answer

A)   No, the Great Depression actually began two years before the stock market crash of 1929.
B)   Yes, after the stock market crash of October 1929 the market never recovered until the depression came to an end a decade later.
C)   Yes, sharp reductions in stock prices like that of 1929 always result in prolonged depressions.
D)   No, the stock market actually recovered to the level of October 1929 during the five months following the crash.E) None of the above
F) A) and C)

Question 20

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.E) None of the above
F) A) and B)

Special Topic 6 : Lessons from the Great Depression

Which of the following perspectives exerted the most impact on fiscal policy during the Great Depression?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following was a result of the many programs introduced as part of the New Deal?

Correct AnswerverifiedShow Answer

Which of the following statements about the Great Depression is correct?

Correct AnswerverifiedShow Answer

How do high tariffs and other restraints on international trade affect a nation's prosperity?

Correct AnswerverifiedB

An analysis of large declines in the stock market since the Great Depression indicates that

Correct AnswerverifiedShow Answer

During a recession, the political incentive structure will encourage politicians to

Correct AnswerverifiedShow Answer

Which of the following was true of fiscal policy during the Great Depression?

Correct AnswerverifiedD

During 1929-1933, monetary policy was

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following factors contributed to a breakdown of the economy during the Great Depression?

Correct AnswerverifiedShow Answer

Analysis of the Great Depression indicates that

Correct AnswerverifiedShow Answer

During the Great Depression of 1929-1933,

Correct AnswerverifiedShow Answer

Sound economic policy is policy that is consistent with

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why do nations impose trade barriers, such as those instituted during the Great Depression, that make it difficult for their own citizens to trade with people in other countries?

Correct AnswerverifiedD

According to the data, was the stock-market crash of 1929 the primary cause of the Great Depression?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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B

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D

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