26. To illustrate the investment problem during a bust, Mises cites the example

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26. To illustrate the investment problem during a bust, Mises cites the example of a: a. home builder who finds out that he doesn’t have enough bricks to finish his project. b. cattle rancher who finds out that he doesn’t have enough cowboys to keep his herd together. c. cattle rancher who finds out that he doesn’t have enough cattle and must set them free. d. circus owner who forgot to bring nets for his trapeze artists. e. rowboat with one fixed oar. 27. According to the Austrian view, the boom-bust problem originates with: a. low interest rates during the bust. b. low interest rates during the boom. c. high interest rates during the boom. d. high interest rates during the bust. e. high interest rates during both the boom and the bust. 28. Should we respond to a recession with massive public works projects, massive infusions of money and enormous debt? That has been tried and spectacularly failed in: a. Russia b. Japan c. Brazil d. Italy e. South Korea 29. 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. 30. 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. 31. 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 32. 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. 33. 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. 34. 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. 35. Banks found their situations increasingly precarious from 1931 to 1932 because: a. depositors wanted to move their currency into savings accounts. b. the Fed was raising interest rates. c. the value of large corporate bonds, which banks held, were falling in value. d. All of the above. e. None of the above. 36. What positive signs were there in 1932 that indicated that the depression was over? a. Prices in the stock market bottomed out and were rising. b. The money supply was expanding. c. By the end of the year, unemployment was falling. d. In the middle of the year, industrial production was up by more than 10%. e. All of the above.

Explanation / Answer

26. a, home builder who finds out that he doesn’t have enough bricks to finish his project.

because buliding a house is an asset and bricks required to bulid house is an investment to bulid an asset.

27. a. low interest rates during the bust

because low interest rate incentivize to investment irrespective of market sentiments and which ultimately due to more heating bursts.

28. b. Japan

Japan used expansionary fiscal policy and expansionary monetary policy to boost economy.

29. d, all of above

because all of above methods would lead to recovery in long run .

** We are supposed to do four subparts in case of objective type .

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