ECON 1100 – Global Economics (Section 09) Exam #3 – Spring 2008 (Version C) Multiple Choice Questions (212 points each): 1. Which of the following was NOT one of the four primary causes of Britain’s poor economic performance during the 1970’s? a. The comprehensive and far reaching “Social Safety Net.” b. Poor labor relations, which lead to numerous strikes. c. The tremendous amount of resources devoted to inefficient and economically declining nationalized industries. d. The relatively low rates and very regressive system of taxation. 2. Friedrich von Hayek a. developed the ideas which were the foundations for Keynesianism. b. was a strong advocate of free-market capitalism. c. argued that Socialism would lead to Totalitarianism, as central planning replaced individual decision making. d. More than one of the above answers is correct. 3. Which of the following industry would NOT be considered part of the “Commanding Heights” of an economy? a. Electricity generation. b. Railroad transportation. c. A cookie factory. d. Banking and Financial Markets. 4. _______________ are financial enterprises with the primary function of protecting individuals and firms from exposure to risk. a. Investment Banks b. Venture Capitalists c. Insurance Companies d None of the above answers are correct. 5. Which of the following is NOT one of the primary functions of a central bank? a. to act as a “lender of last resort.” b. to control the overall “stock of money” in the economy. c. to manipulate macroeconomic performance via active fiscal policy. d. to manage check-clearing for other banks. 6. A “Collective Good” is one that is a. non-rival in consumption and non-excludable. b. rival in consumption and non-excludable. c. non-rival in consumption and excludable. d. rival in consumption and excludable.7. __________ is a system in which the government assumes the responsibility of improving the well-being of its citizens, particularly with respect to healthcare, education, employment, and social security. a. Monetarism b. Nationalization c. The Welfare State d. Privatization 8. The “Economic Calculation Problem” argued that a. calculating the true economic value of a worker can only be done under a socialist system. b. labor unions would be able to negotiate less aggressively with privatized enterprises than they could with government enterprises. c. the best way to manipulate macroeconomic performance was through monetary policy. d. without the information provided by market prices it is impossible to efficiently allocate resources. 9. During the time when Margaret Thatcher was in office, Great Britain a. experienced positive economic growth. b. experienced an increase in income inequality. c. embarked upon a program of “Nationalization” of many enterprises within their economy. d. More than one of the above answers is correct. 10. A Progressive Tax is one for which a. the Marginal Tax Rate becomes zero at very high levels of income. b. the Marginal Tax Rate is constant at all levels of income.. c. the Average Tax Rate increases as the level of income increases. d. the Average Tax Rate decreases as the level of income increases. 11. The period of prosperity and economic expansion following World War II was known as the _____________ in France. a. “Roaring Fifties” b. “Thirty Glorious Years” c. “Economic Miracle” d. “Affluent Society” 12. Which of the following was NOT one of the common techniques used for privatizing government owned enterprises when Margaret Thatcher was Prime Minister? a. Initial Public Offerings (IPOs) of stock to the general public. b. Auctioning of the enterprise to a single buyer in the general public. c. Employee or Management Buyout of the enterprise, typically at a price well below market value. d. Negotiated Sale to a single buyer.13. ______________ refers to a situation where government revenues are greater than government spending. a. Nationalization b. A surplus c. A deficit d. Deadweight-Loss 14. Structural Policy can be described as government policy a. which determines the “money supply” within an economy. b. related to spending and revenue generation with an economy. c. aimed at changing the underlying institutions of a nation’s economy. d. None of the above answers is correct. 15. ____________________ relied primarily upon free market institutions, but with a significant “social safety net.” a. The French system of “indicative planning.” b. The German Social Market Economy c. Soviet Five Year Plans for Industry d. Nationalization of British Industry 16. The “Stabilization Function of Government” refers to a. the role that prices play in direct resources to their most valued uses. b. Government policies aimed at minimizing fluctuations in the rate of economic growth over time. c. Government policies aimed at altering the final consumption of goods/services across consumers. d. Government production of goods or regulation of business, to ensure that the “right mix” of products are produced, each in the “ideal quantity” and at the “ideal quality.” 17. By the late 1940’s unemployment in Great Britain a. was at an all time high, with roughly 20% of the workforce unable to find employment. b. was virtual unchanged from the roughly 12% unemployment rate which the country experienced throughout much of the 1930’s. c. was as low as 1.3%, a rate well below the rates (of well over 12%) which were experienced throughout the 1930’s. d. None of the above answers are correct. 18. The Phillips Curve illustrates a. different combinations of output that an economy can produce with their available resources. b. why there would be a positive Deadweight Loss without any government intervention in a market in which there is a positive externality. c. the tradeoff between unemployment and inflation that an economy faces. d. the rate of GDP growth in an economy over time.19. _______________ says that in order for a tax to be “fair,” individuals of greater economic capacity should have larger tax burdens. a. The Justification for Government provision of information b. The notion of vertical equity c. The notion of horizontal equity d. Jeremy Bentham 20. The “Golden Share” a. is an argument in favor of a “Welfare
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