1. Functional finance

Good luck! 

When was functional finance theory developed?
During World War I
During World War II
During Cold War

Lerner compared the laissez-faire approach to:
driving a car without a steering wheel
feeding the child with only water
driving a car too fast

Abba Lerner represents:

the school of Pre-Keynesian economics
the big free monetary school of economics
the school of Post-Keynesian economics

Which sentence is correct (according to Lerner)?
government officials would reduce tax revenue and/or increase public spending during times of recession
government officials would rise tax revenue and/or decrease public spending during times of recession
government officials would rise tax revenue and/or increase public spending during times of recession

According to Lerner what would be good for the economy?
low employment with no budget deficit (or surplus)
high employment with budget deficit

According to Lerner, what causes unemployment in the economy?
planned savings > planned investments
planned savings < planned investments

How the government could prevent the accumulation of public debt, according to Lerner?
limit spending
reduce taxes
nothing, the law of supply and demand will do it (if the debt is not too high)

As you are aware, an increase in government spending shifts the deficit line upward. According to Lerner, this action is required:
during times of prosperity
during times of recession
never
when the unemployment rate is low

Pick the correct option
Money supply + deficit decisions should be made with regard to their effect on the economy -> functional finance
Money supply + deficit decisions should be made with regard to their effect on the economy -> sound finance
expansionary monetary policy is good -> sound finance

What happens if spending is too high and taxes are too low?

Deflation
Inflation

Pick the correct statement.

in the 1980s both inflation and recession occurred - the functional finance rules appeared to give the opposite advice
functional finance is equivalent to sound finance
functional finance gained favour during the last 30 years
functional finance is built upon a hypothesis that the government knows what functional finance policy is most beneficial to follow

Which terms define functional finance?
Want to achieve full employment
Want to ensure there is a racial equity in the workplace
Want to ensure there is a age equity in the work place
Government can do basically anything to the money

The preferred method in functional finance of achieving full employment is by

decreasing aggregate demand
issuing new money
raising the minimum wage

In functional finance aggregate economic activity is represented by:

inflation
government expenditure
the aggregate measures of industrial production

Did Lerner believe that politicians (government officials) could solve the problem of unemployment?

Yes
No

Functional finance can be described as:
contractionary fiscal policy
expansionary fiscal policy
monetary fiscal policy

Pick the correct statement about the contractionary fiscal policy.

It is the most common used fiscal policy.
It stimulates economic growth.
It aims at slowing economic growth.

Which president of the USA followed the Keynesian economic theory?

Roosevelt
Truman
Lincoln

In functional finance approach, the government:
knows which functional policy it should follow
makes decisions with regard that debt should be avoided at all costs

Which statements describe Keynesian economics?
The market is not self-sustaining
One of the tool used are unemployment benefits
The prosperity of society was driven by creativity
Prices rise during the very first part recession.