Module 19 & 20 - Current Issues

1.As Rothbard explains, with the Bretton Woods system in place:

a.Europe and the U.S. were restored to a gold standard.

b.foreign countries were allowed to maintain dollar reserves to back their currencies.

c.the U.S. refused to sell gold on the market even if the price rose.

d.the U.S. redeemed gold for dollars only to foreign central banks at $100 per ounce.

e.All of the above.

2.To restore "sound money" Rothbard argues that:

a.we need a combination of gold and silver to back up our currency.

b.the job of printing currency should be transferred to the U.S. Mint.

c.the Federal Reserve should be abolished.

d.FDIC premiums should be increased by between 50% and 100%.

e.All of the above.

3.The widespread failure of the financial system is known as:

a.systemic failure.

b.wholesale failure.

c.financial mania.

d.the "dollar doldrums."

e.the Fisher Folly.

4.An asset bubble can occur:

a.only in financial assets, like bonds.

b.only in real assets, like cotton.

c.only in money assets, like gold.

d.only in land and other natural resources.

e.None of the above.

5.The TV personality that questioned Bernanke's statement that the Fed wasn't printing money was:

a.Johnny Carson.

b.Bill Maher.

c.Conan O'Brien.

d.Jon Stewart.

e.Jay Leno.

6.According to Salerno, the government of Greece will be able to impose negative interest rates on people's deposits by:

a.requiring that old currency be exchanged for new currency at a discount.

b.imposing a fee on cash withdrawal from bank accounts.

c.hiding it in the income tax.

d.automatically shrinking these deposits by 0.25% per month.

e.eliminating all cash transactions.

7.Salerno maintains that the so-called "war on cash" in the United States began with the passage of:

a.the National Banking Act of 1863.

b.the Federal Reserve Act of 1913.

c.the Smoot-Hawley tariff of 1930.

d.the Glass-Steagall Act of 1933.

e.the Bank Secrecy Act of 1970.

8.According to Rickards, the collapse of the dollar:

a.may lead to inflation reminiscent of the 1970s.

b.may lead to deflation.

c.will likely have no price effects on the U.S.

d.All of the above.

e.Only A and B of the above.

9.Rickards maintains that the U.S. dollar nearly ceased being the world's reserve currency in:

a.1952.

b.1965.

c.1978.

d.1984.

e.1999.

10. Why does the Fed want to stimulate spending by decreasing interest rates?

a.Because they are Keynesians.

b.Because they are Monetarists.

c.Because they are Austrians.

d.Because they are gold bugs.

e.None of the above.

11. 7As a response to the 2001 recession, the Fed lowered the federal funds rate down to a low of about:

a.3%

b.2.5%

c.2%

d.1%

e.0.25%

12. Which of the following financial intermediaries had the highest valued amount of assets when they failed?

a.Washington Mutual

b.Lehman Brothers

c.IndyMac

d.WaMu

e.Jos. A. Bank

13. Prior to the recession Fed chairman Ben Bernanke argued that:

a.there was no housing bubble.

b.housing prices would stabilize.

c.housing problems were local in nature and wouldn't affect the national economy.

d.All of the above.

e.None of the above.

14. Which of the following is true about Bear Stearns?

a.The Fed brokered a deal that allowed Goldman Sachs to buy out Bear.

b.The Fed lend Bear $13 billion for three days while a sale was being arranged.

c.In the year prior to its collapse, its stock price peaked at about $65.

d.The final sale of Bear was made at $6.50 per share.

e.All of the above.

15. To say that the Fed is run by Keynesians means that they:

a.believe in using tax cuts to stimulate the economy.

b.believe in using government spending to stimulate the economy.

c.believe that economic recovery is driven by the demand side.

d.believe that economic recovery is driven by the supply side.

e.Both A and B of the above.

16. Which of the following is not true about Bear Stearns?

a.In their last year in business their stock price peaked at about $65.

b.The Federal Reserve lent them $13 billion for a three day period.

c.J. P. Morgan ended up taking over Bear Stearns.

d.Existing stockholders in Bear would only get $10 per share from J. P. Morgan.

e.In their last year in business, Bear lost billions on subprime mortgages.

17. As a response to the 2008 recession, the Fed lowered the federal funds rate down to a low of about:

a.3%

b.2.5%

c.2%

d.1%

e.0.25%

18. From 2008 to 2019, the Fed's holding of mortgage-backed securities went from zero to about:

a.$1.57 trillion.

b.$2.5 trillion.

c.$2.7 trillion.

d.$4 trillion.

e.None of the above.

19. To deal with a problem of rapidly rising inflation the Fed is likely to have to act in a way that Dr. Foster likened to the:

a.Hunger games.

b.Ender's gambit.

c.Joker policy.

d.Texas Hold 'em strategy.

e.Armageddon option.

20. Under which president(s) did our economic recovery enjoy the highest average annual growth in real GDP?

a.Reagan.

b.Obama.

c.Bush/Clinton.

d.Bush.

e.Trump.

21. When we look at new home sales we can note that they ___ through the recession of 2001 and ___ through the recession of 2008-2009.

a.rose;rose

b.rose;fell

c.fell;fell

d.fell; rose

e.remained unchanged;remained unchanged

22. Prior to the recessions of 2001 and 2008-2009, the Fed had been:

a.keeping interest rates constant.

b.lowering interest rates steadily for years.

c.raising interest rates steadily for years.

d.had raised interest rates and then leveled them off.

e.to allow markets to determine interest rates.

23. Which of the following is true about median home prices in the United States?

a.They fell sharply during both of the last two recessions (2001 and 2008).

b.They rose sharply during both of the last two recessions.

c.They rose by about $50,000 between 1999 and 2006.

d.Following the recession of 2008 they fell dramatically, but have since risen.

e.From 2009 to 2017 they have been stagnant.

24. From March of 2019 to April of 2020, the Fed has lowered the federal funds rate of interest to a low of:

a.2%.

b.1.5%.

c.1.25%.

d.0.62%.

e.0.04%.

25. While the Fed's balance sheet had been trending downward from a high of over $4 trillion to about $3.9 trillion in 2019, it has since risen to ____ at the end of April 2020.

a.$4.5 trillion

b.$5.0 trillion

c.$5.7 trillion

d.$6.15 trillion

e.$6.6 trillion

26. According to Dr. Foster, it seems odd that the best scenario that we can hope for in terms of our economy is for banks to _____ their excess reserves.

a.increase

b.decrease

c.retain

d.short

e.option

27. From their lows after the recession of 2008-2009, housing sales, as of February 2020:

a.had continued to fall to under 3.0 million (on an annual basis).

b.had risen to almost 5.8 million (on an annual basis).

c.had remained flat at about 4.5 million (on an annual basis).

d.had more than doubled to about 7 million (on an annual basis).

e.None of the above.

28. From their lows after the recession of 2008-2009, housing prices peaked in June of 2019 and then ___ until January of 2020 and ___ to June of 2020.

a.continued to rise;then to fall

b.fell;then rose

c.remained flat;then fell

d.fell;then remained flat

e.continued flat;then rose

Smiley & Woods - Chapter 5; Chapters 6 & 7

Smiley Chapter 5

29. According to Smiley, which of the following is false?

a.FDR's second New Deal policies were so popular that Democrats made major gains in the 1938 elections.

b.The idea behind using fiscal policy to combat a depression is that low interest rates are insufficient to boost investment by enough to restore full employment.

c.From data reconstructions after the fact, it is clear that the Fed had a very strong "tightmoney" policy throughout the 1930s.

d.During World War II, increases in investment were insufficient to offset depreciation, so America's capital stock declined.

e.All of the above are false.

30. When did the U.S. go totally off the gold standard?

a.1913.

b.1929.

c.1933.

d.1973.

e.2001.

31. According to Smiley, which of the following is false?

a.FDR believed that businesses would be hurt by the loss of the NRA and would exert pressure for a new version of the NRA.

b.FDR's acceptance speech for his party's nomination for a second term was characterized as an attack on free enterprise.

c.FDR claimed that inefficient government programs were the main cause of the 1937-1938 depression.

d.The Fed raised the required reserve ratio on banks in 1936 and 1937 that led to a severe decrease in the money supply.

e.All of the above are false.

32. According to Smiley, which of the following is true?

a.Before the Great Depression, federal budget deficits were normal.

b.Prior to the Great Depression, the states received most of their revenue from the federal government.

c.Old Age Assistance was a larger program than Social Security until the late 1980s.

d.According to Smiley, the lesson of the Great Depression is that "governments failed, not markets."

e.All of the above are true.

33. According to Smiley, which of the following are important lessons to learn from the Great Depression?

a.FDR's able handling of the economy saved capitalism.

b.World War II finally brought an end to the Great Depression.

c.The Great Depression led to a decline in the regulatory state.

d.The Great Depression was quite severe because of regime uncertainty.

e.All of the above.

34. According to Smiley, which of the following is true about U.S. economic performance during World War II?

a.Unemployment fell and leveled off at about 5%.

b.Measured inflation was low, in part because of price controls and rationing.

c.The money supply grew by about 1% per year, keeping inflation low.

d.While the official data shows that consumption fell, Smiley calls that "suspect" and argues that in fact it rose significantly.

e.All of the above.

35. What does Smiley argue about World War II that helped the U.S. become prosperous in the 1940s?

a.More women entered, and stayed, in the labor force.

b.Military spending helped spur technological change.

c.Americans shifted from being pessimistic about the future to being optimistic.

d.The war helped promote increased world trade.

e.All of the above.

36. Which of the following does Smiley argue was not an outgrowth of the Great Depression?

a.The rise in the welfare state.

b.The growth in the regulatory state.

c.Increased federalism.

d.An end to the gold standard.

e.Increased power to individual states rather than the federal government.

Woods - Chapters 6 & 7

37. Since the Fed was created, the value of a dollar has:

a.fallen by 95%.

b.fallen by 50%.

c.fallen by 18%.

d.risen by 25%.

e.risen by 40%.

38. To illustrate the problems with barter, Woods asks how someone who only owns a castle can buy:

a.a pint of ale.

b.new clothes.

c.chickens and cattle.

d.bows and arrows.

e.a loaf of bread.

39.Among the anti-gold fallacies cited by Woods is/are:

a.that the gold supply is inflexible.

b.that gold is too bulky to carry around.

c.it is more costly to use gold than to use fiat paper.

d.there isn't enough gold to facilitate all business transactions.

e.All of the above.

40.The free market route to economic recovery following a recession is to:

a.allow asset prices to fall.

b.allow consumption to fall.

c.allow saving to rise.

d.All of the above.

e.None of the above.

41.Woods argues that consumption is:

a.the act of using things up.

b.the dominant driving force in our economy.

c.the key to economic growth and progress.

d.the foundation of what makes us a wealthy nation.

e.All of the above.

42.In the example that Woods cites from Adam Smith, it is the consumption of food and clothing by the _____ that benefits us, not the consumption by the _____.

a.merchant;soldier

b.blacksmith;merchant

c.ploughman;soldier

d.soldier;bureaucrat

e.merchant;ploughman

43.Among Woods' suggestions for what we can do to improve our situation is/are:

a.allow big firms (like Enron) to fail.

b.strengthen regulations on Fannie Mae and Freddie Mac.

c.cut government spending.

d.Both A and B are correct.

e.Both A and C are correct.

44.Among Woods' suggestions for what we can do to improve our situation is/are:

a.improve oversight of government management of money.

b.increase reliance on the Fed to steer the economy along a sustainable path.

c.lower the requirements for how big a firm has to be to fall under the "Too Big To Fail" policy.

d.All of the above.

e.None of the above.

45.With regard to money, which of the following accurately characterizes Woods' view?

a.We need a gold standard.

b.The history of money is the history of government efforts to destroy it.

c.The purpose of government control of money is to support and maintain "good" money.

d.Legal tender laws are crucial to our continued use of money.

e.Government control of money confers enormous social benefit to us.

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wood

http://www.riosmauricio.com/wp-content/uploads/2013/05/Woods-Meltdown.pdf