Lecture 16, 17 Practice Test Flashcards
President Woodrow Wilson argued that the United States should enter World War I to ___
make the world safe for democracy
President Warren Harding argued that what America needed after World War I was ___.
normalcy
When World War I broke out in August 1914 there was a wave of ______ on Wall Street and so ______.
pessimism, the stock market was closed for four months to prevent Europeans selling their stocks and withdrawing their gold from the U.S.
Why was the British blockade of Europe so effective in WWI?
Without imports the Germans lacked adequate supplies of fertilizer.
Adam Smith’s best way to finance wars
100% Taxes
John Stuart Mill’s best way to finance wars
Mostly taxes Some borrowing (if interest rates don’t rise)
Robert Barro’s best way to finance wars
Small increase in taxes Mostly borrowing (to smooth tax increases)
During World War I many leading economists of the day argued that it would be more equitable to finance the war mainly through ____ so that ____.
taxes, high prices would not burden the poor
The most important source of finance during World War I in the sense of the source that provided the most money was _____.
borrowing from the public
In class I argued that efforts to use patriotism to encourage bond sales in WWI were ___ because ____.
only moderately successful, interest yields on government bonds did not rise very much after the war
In his famous book about the peace treaty following WWI John Maynard Keynes argued that in order for Germany to pay the reparations required by the Treaty of Versailles she would have to increase her ___ and this would be hard because (in part) because ___. (Hint: this question is about the “transfer problem”)
exports, foreign producers of competing goods would lobby for protection
During World War I money was created to pay for a substantial portion of the war effort by having ____
the Federal Reserve purchase government bonds
In his open letter to President Roosevelt in 1933, economist John Maynard Keyes wrote: “You, Mr. President, having cast off such fetters, are free to engage in the interests of peace and prosperity the technique which hitherto has only been allowed to serve the purposes of war and destruction.” The “technique” that Keynes was referring to was ____.
government borrowing and spending
In class I attributed the inflation of World War I primarily to _____.
the increase in the money supply
What did Adam Smith think should be the most important source of money for financing wars? Why?
Wars should be financed by taxes because the distaste would grow for war efforts, therefore ending the war promptly, so that it does not continue for glory and other reasons it shouldn’t.
What will be the amount of sugar supplied to the market?
OA
What will be the shortage caused by price control?
AB
The government decides to ration sugar by giving family ration tickets. Each ticket gives them the right to buy one pound of sugar. They must have a ticket or they cannot buy the sugar. How many ration tickets (measured as a quantity of sugar) will the government have to issue to prevent a shortage?
OA
