Chap019 - Chapter 19 - Big Events: The Economics of...

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Chapter 19 - Big Events: The Economics of Depression, Hyperinflation, and Deficits Chapter 19 Big Events: The Economics of Depression, Hyperinflation, and Deficits Multiple Choice Questions 1. Which of the following occurred in the U.S. during the period from 1929 to 1933? a. The CPI increased nearly 35% b. The stock market fell nearly 50% c. The unemployment rate rose from 3% to 12% D . Output fell nearly 30% e. All of the above Difficulty: Easy 2. During the Great Depression in the U.S., a. Stock values fell about 85% from 1929 - 1932 b. GNP fell about 30% from 1929 - 1933 c. Unemployment reached a record level of almost 25% in 1933 d. Unemployment averaged about 18.8% from 1931 - 1940 E . All of the above Difficulty: Easy 3. One of the assertions that Keynesians make when explaining the severity of the Great Depression in the U.S. is that a. The economic collapse originated from the negative effect that the stock market crash had on individuals' wealth b. Investment spending responded negatively to huge increases in the real interest rate C . Vigorous use of expansionary fiscal policy early on could have reduced the severity of the economic downturn d. In response to the stock market crash, the U.S. Fed imposed credit controls that were much too restrictive e. None of the above Difficulty: Medium 19-1
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Chapter 19 - Big Events: The Economics of Depression, Hyperinflation, and Deficits 4. According to John Maynard Keynes, the major cause of the Great Depression was a. The collapse of the stock market b. The inability of the Fed to conduct open market sales c. The high interest rates that existed at the time d. The huge increase in the federal budget deficit E . None of the above Difficulty: Medium 5. While the U.S. was in the Great Depression a. Many European countries were enjoying modest to substantial growth B . Many countries were erecting trade barriers through tariffs c. Many U.S. businesses took advantage of low interest rates and increased investment spending d. Most of the (then) 48 states cut taxes and increased deficit spending as a way to stimulate their economies e. All of the above Difficulty: Easy 6. The initial response of the Federal Reserve to the economic collapse at the beginning of the Great Depression was to A . Observe from the sidelines b. Lend vigorously to banks facing liquidity problems c. Guarantee customer deposits in failed banks d. Abolish previously imposed credit controls e. Conduct huge open market sales in an effort to change interest rates Difficulty: Medium 19-2
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Chapter 19 - Big Events: The Economics of Depression, Hyperinflation, and Deficits 7. If you had $1,000 invested in the stock market at its peak in 1929, approximately how much would it have been worth at the lowest level in 1932? a. $50
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Chap019 - Chapter 19 - Big Events: The Economics of...

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