Question 1

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 2

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 3

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

Accepted Answer

A)  increasing the money supply from year to year at a constant rate.
B)  decreasing the money supply through a policy of monetary contraction.
C)  increasing demand through lower taxes and budget deficits.
D)  reducing supply through the planned destruction of agricultural crops and livestock.

Question 4

During the Great Depression, fiscal policy focused primarily on

Accepted Answer

A)  keeping taxes low.
B)  raising taxes during an economic expansion and lowering taxes during a recession.
C)  trying to balance the federal budget.
D)  running budget deficits in order to stimulate real output and GDP.

Question 5

When overall production is taken into account, trade restrictions, such as those enacted by the Smoot-Hawley trade bill,

Accepted Answer

A)  save good paying jobs.
B)  neither create nor destroy jobs; they reallocate them.
C)  increase employment in the domestic industries that are most productive.
D)  reduce imports, without affecting the volume of exports.

Question 6

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 7

Which of the following is a lesson that can be learned from monetary policy during the Great Depression?

Accepted Answer

A)  Monetary policy should be changed frequently in response to economic fluctuations.
B)  Prolonged periods of monetary contraction will retard economic growth.
C)  Low interest rates will direct an economy toward recovery.
D)  Monetary policy should focus on variables such as output and employment.

Question 8

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.

Question 9

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 rate

Question 10

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 above

Question 11

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

Accepted Answer

A)  real output increased.
B)  the general level of prices increased.
C)  the velocity of money increased by a proportional amount.
D)  unemployment increased.

Question 12

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.

Question 13

Which of the following is true?

Accepted Answer

A)  The Great Depression re-enforces the view that raising taxes in the midst of a severe recession is a bad idea.
B)  The Great Depression clearly indicates that a prolonged period of monetary contraction will keep inflation low and promote monetary stability.
C)  The Great Depression illustrates that trade restrictions will protect domestic industry and save jobs.
D)  The Great Depression demonstrates that the political incentive structure during a severe downturn will encourage politicians to avoid frequent policy changes.

Question 14

Which of the following best describes the impact of fiscal policy during the Great Depression?

Accepted Answer

A)  Despite the large increases in government spending as a share of GDP when the New Deal policies were initiated, the expansionary fiscal policy failed to stimulate demand.
B)  Fiscal policy was focused on monetary expansion, when it should have focused on maintaining a balanced budget.
C)  It is difficult to link expansionary fiscal policy with economic recovery because government spending and budget deficits were a relatively small portion of GDP prior to the beginning of World War II.
D)  There is a direct correlation between increases in government spending as a share of GDP and increases in output and employment.

Question 15

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 16

Economic analysis indicates that the monetary policy of the 1930s, which shifted back and forth between restrictive monetary policy and expansionary monetary policy, would likely result in

Accepted Answer

A)  economic stability and growth in real levels of output.
B)  keeping the general level of prices relatively stable because the periods of restrictive policy would just offset the periods of expansion.
C)  an environment of uncertainty, which would lead to economic instability.
D)  economic stability, because changes in monetary policy can be counted on to exert a predictable impact on the economy quickly.

Question 17

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 18

Which one of the following factors contributed to the decline in real output during the Great Depression?

Accepted Answer

A)  deflation, which changed the terms of long-term contracts and discouraged long-term exchange
B)  inflation, which reduced the value of the dollar and eroded the savings of the elderly
C)  stable monetary policy, which caused business decision makers to lose confidence in the Fed's ability to fine-tune the economy
D)  establishment of the Federal Deposit Insurance Corporation

Question 19

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) .

Question 20

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

Exam 21: Appendix: Lessons From the Great Depression

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

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

Correct AnswerverifiedShow Answer

Economic analysis indicates that the monetary policy of the 1930s, which shifted back and forth between restrictive monetary policy and expansionary monetary policy, would likely result in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Agriculture Adjustment Act of the Roosevelt Administration attempted to boost prices of agriculture products by

Correct AnswerverifiedShow Answer

Which one of the following factors contributed to the decline in real output during the Great Depression?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a lesson that can be learned from monetary policy during the Great Depression?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true?

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

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 best describes the impact of fiscal policy during the Great Depression?

Correct AnswerverifiedShow Answer

When the money supply declined by approximately 30 percent during the 1929 through 1933 period,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

During 1929-1933, monetary policy was

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When overall production is taken into account, trade restrictions, such as those enacted by the Smoot-Hawley trade bill,

Correct AnswerverifiedShow Answer

During the Great Depression, fiscal policy focused primarily on

Correct AnswerverifiedShow Answer

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