Question 1

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

Question 2

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.

Question 3

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

Question 4

Based on the experience of the Great Depression and the New Deal,which one of the following strategies would be most likely to stimulate recovery from a serious economic recession?

Accepted Answer

A)  increase trade restrictions and tariffs to save jobs and enhance tax revenue
B)  a reduction in the money supply in order to strengthen the dollar and combat inflation
C)  keep taxes low in order to stimulate production and minimize the decline in personal and business income
D)  institute frequent policy changes in order to search for and find the policy combination that would be most effective

Question 5

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.

Question 6

Most economists believe the severity and duration of the Great Depression was primarily the result of

Accepted Answer

A)  the large budget deficits of the federal government.
B)  the reduction in tariffs and the influx of foreign imports during the early 1930s.
C)  the excessive use of credit cards.
D)  a sharp contraction in the money supply.

Question 7

High marginal tax rates,such as those instituted during the Great Depression,will

Accepted Answer

A)  increase the incentive of people to earn.
B)  lead to a proportional increase in tax revenue and a reduction in the size of the budget deficit.
C)  cause people to work,earn,and invest less than would be the case if marginal tax rates were lower.
D)  attract workers from other countries where tax rates are lower.

Question 8

Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?

Accepted Answer

A)  record-high unemployment rates for a period of many years
B)  a sharp and prolonged contraction in the money supply
C)  significant increases in taxes and trade restrictions in order to counter budget deficits
D)  frequent policy changes that generated an unstable and unpredictable economic climate

Question 9

What impact did the National Industrial Recovery Act (NIRA) of 1933 have on industrial output?

Accepted Answer

A)  Industrial output had been declining,but it stabilized during the months following passage of the NIRA.
B)  Industrial output increased sharply after the passage of the NIRA.
C)  Industrial output had begun to increase,but it fell sharply following the passage of the NIRA.
D)  Industrial output and employment declined during the months prior to passage of the NIRA,and the legislation was unable to stop the decline.

Question 10

Which of the following was most responsible for bringing the Great Depression to an end?

Accepted Answer

A)  the increase in industrial demand due to the military build-up prior to World War II
B)  the expansionary monetary policy of the Fed during the 1930s
C)  the New Deal policies that expanded government spending,stimulated demand,and increased output
D)  the increase in import tariffs that saved jobs and expanded total employment

Question 11

Which of the following resulted from the Smoot-Hawley trade bill of 1930?

Accepted Answer

A)  The stock market began a steady recovery from the crash of October 1929.
B)  Many countries responded by imposing higher tariffs on American products,and the volume of international trade fell sharply.
C)  Imports decreased,while exports increased,resulting in an overall increase in GDP and tariff revenues.
D)  The unemployment rate,which had been rising,began to steadily decline as jobs were protected by the trade restrictions.

Question 12

The Smoot-Hawley trade bill of 1930,designed to save jobs and increase revenue for the federal government,resulted in

Accepted Answer

A)  an increase in both employment and federal tax revenue.
B)  a sharp reduction in trade and a decline in federal tax revenue.
C)  the protection of jobs while maintaining the level of trade,but it did not increase federal tax revenue.
D)  a decline in the volume of trade,but an increase in revenue from tariffs,which made it possible for the federal government to balance its budget.

Question 13

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.

Question 14

The National Industrial Recovery Act essentially legalized

Accepted Answer

A)  labor unions.
B)  business cartels.
C)  minimum wage laws.
D)  import tariffs.

Question 15

Monetary policy from 1929 to 1933,and again in 1937 to 1938,was characterized by

Accepted Answer

A)  monetary expansion,which led to deflation.
B)  monetary contraction,which led to deflation.
C)  monetary expansion,which led to inflation.
D)  monetary contraction,which led to inflation.

Question 16

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.

Question 17

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.

Question 18

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.

Question 19

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.

Question 20

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.

Exam 34: Lessons From the Great Depression

During 1929-1933,monetary policy was

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

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

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

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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?

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What impact did the National Industrial Recovery Act (NIRA) of 1933 have on industrial output?

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Based on the experience of the Great Depression and the New Deal,which one of the following strategies would be most likely to stimulate recovery from a serious economic recession?

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The National Industrial Recovery Act essentially legalized

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Which of the following conditions during 2008-2009 most closely paralleled the economic conditions of the Great Depression?

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

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

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Monetary policy from 1929 to 1933,and again in 1937 to 1938,was characterized by

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Most economists believe the severity and duration of the Great Depression was primarily the result of

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The Smoot-Hawley trade bill of 1930,designed to save jobs and increase revenue for the federal government,resulted in

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Which of the following resulted from the Smoot-Hawley trade bill of 1930?

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

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Sound economic policy is policy that is consistent with

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

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Which of the following was most responsible for bringing the Great Depression to an end?

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High marginal tax rates,such as those instituted during the Great Depression,will

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