Question 1

If fiscal policy were able to exert a significant impact on the economy during the Great Depression, we would expect

Accepted Answer

A)   an increase in government expenditures and a reduction in budget deficits.
B)   an increase in government expenditures and an increase in budget deficits.
C)   a decrease in government expenditures and a reduction in budget deficits.
D)   a decrease in government expenditures and an increase in budget deficits.

Question 2

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 3

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 4

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

Question 5

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 6

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.

Question 7

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 8

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 9

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 10

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

Accepted Answer

A)   large increases in tax rates in 1932 and again in 1936
B)   large increases in the money supply 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 11

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 12

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

Question 13

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 14

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 15

The National Industrial Recovery Act, passed in 1933, was an attempt to

Accepted Answer

A)   break monopolies and cartels, and introduce competition into several different industries.
B)   fix prices, wages, and quotas for several industries in an effort to keep prices high.
C)   lower corporate taxes and remove collusive behavior in an effort to keep U.S. firms competitive with foreign manufacturers.
D)   create a stable economic environment that would encourage investment and expansion in the industrial sector of the economy.

Question 16

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.

Question 17

The New Deal policies of the Great Depression resulted in

Accepted Answer

A)   a reduction in unemployment and an increase in real output.
B)   a stable economic environment and an increase in investment.
C)   economic uncertainty and prolonged unemployment.
D)   a quick end to the depression once the policies had taken effect.

Question 18

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 19

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.

Question 20

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.

Special Topic 6 : Lessons from the Great Depression

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?

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If fiscal policy were able to exert a significant impact on the economy during the Great Depression, we would expect

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

Correct AnswerverifiedShow Answer

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

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Analysis of the Great Depression indicates that

Correct AnswerverifiedShow Answer

Which of the following is true?

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

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

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The New Deal policies of the Great Depression resulted in

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

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

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The National Industrial Recovery Act, passed in 1933, was an attempt to

Correct AnswerverifiedShow Answer

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

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

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

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