ECON 1100 – Global Economics (Section 06) Exam #4 – Spring 2011 (Version B) Multiple Choice Questions (212 points each): 1. ________________ refers to a regime in which the state regulates nearly all aspects of public and private behavior. A. Totalitarianism B. Keynesianism C. Monetarism D. Socialism 2. _______________ was a central figure in the formulation of the ideas of Utilitarianism, which argues that society should “strive for the greatest happiness for the greatest number of people.” A. Ronald Coase B. Jeremy Bentham C. John Maynard Keynes D. Keith Joseph 3. Suppose that for the world as a whole the current fertility rate is below the “replacement fertility rate.” This observation would imply that A. the population of every single country around the world must be decreasing over time. B. total global population must be decreasing over time. C. the value of the birth rate in every country must be less 2.00. D. More than one (perhaps all) of the above answers is correct. 4. _____________________ says that in order for a tax to be “fair,” two individuals of equal economic capacity should have equal tax burdens. A. The notion of vertical equity B. The Economic Calculation Problem C. The Distribution Function of Government D. The notion of horizontal equity 5. During the first decade of the 21st Century, unemployment rates in most Western European countries were ___________________ the unemployment rate in the United States. A. higher than B. lower than C. virtually equal to D. None of the above answers are correct (since unemployment rates are not measured in European countries).6. Friedrich von Hayek A. enacted policies as Prime Minister of Great Britain in the 1980’s which reduced the overall level of government intervention in the British economy and returned the country to a primarily market based economic system. B. wrote the “Road to Serfdom,” in which he argued that Socialism would lead to Totalitarianism as central planning replaced individual decision making. C. enacted policies as Prime Minister of Great Britain in the 1970’s which ultimately led to simultaneously high rates of inflation and unemployment in Great Britain throughout the 1980’s. D. More than one (perhaps all) of the above answers is correct. 7. ______________________ refers to the periodic but irregular fluctuation in overall macroeconomic activity which occurs over time. A. Proportional Taxation B. Stabilization Function of Government C. The Business Cycle D. Crowding Out 8. One of the “6 Determinants of Productivity, Income, and Wealth” is “acquired skills,” which refers to the recognition that differences in income or wealth across individuals could result from differences in A. how hard individuals choose to work. B. the amount of money that individuals receive as inheritances during their lifetime. C. the natural talents that people are endowed with at birth. D. the valuable experience that individuals gain through education, training, and employment. 9. _________________________ wrote “The General Theory of Employment, Interest, and Money.” A. Clement Atlee B. John Maynard Keynes C. Milton Friedman and Anna Schwartz D. Friedrich von Hayek 10. The “Golden Share” refers to A. the argument that “very generous welfare benefits” will reduce incentives to work at the “low end of the income scale.” B. a clause in a CEO’s contract specifying that she receive substantial compensation if her employment is terminated for any reason. C. the sale of a government enterprise to current employees at a price well below actual market value. D. None of the above answers are correct.11. Consider the following two statements: (1) “Fiscal Policy can never have any stimulative impact on the economy” and (2) “Inflation is caused primarily by too much growth in the money supply.” Most economist would A. disagree with both statements. B. agree with both statements. C. agree with Statement (2) but disagree with Statement (1). D. agree with Statement (1) but disagree with Statement (2). 12. During Margaret Thatcher’s time as Prime Minister, the highest marginal tax rate on earned income in Britain A. was increased from 33% to 92%. B. remained constant at roughly 55%. C. was decreased from 83% to 40%. D. was decreased from 40% to 18% (as a result of the implementation of a “flat tax” of 18% on all income earned in the country). 13. One of the arguments in favor of Privatization was that it could “create popular capitalism.” This argument A. focused on eliminating the difficulties with setting wages for employees within a government owned/operated enterprise. B. noted that as a result of privatization, there would be a boost in the number of people who directly had an ownership stake in business enterprises. C. recognized that the sale of nationalized enterprises would boost government revenues, thereby allowing the government to reduce its budget deficits. D. claimed that private enterprises (run by profit maximizing managers) would be more productive than government enterprises (run by bureaucrats with primary motives other than profit). For Questions 14 and 15, consider a state with an income tax as follows: for each of the first $100,000 earned a worker must pay 10% to the government; for every dollar earned beyond $100,000 a worker must pay 5% to the government. 14. Tina earns $500,000 per year. As a result, her Average Tax Rate is A. 5% B. 6% C. 7% D. 10% 15. It appears as if this tax is a A. Regressive Tax B. Progressive Tax C. Regressive Tax for “low income earners” but a Progressive Tax for “high income earners.” D. Progressive Tax for “low income earners” but a Regressive Tax for “high income earners.”16. If the government of Miltonvania (a small, landlocked city-state in central Europe, with an economy highly dependent upon ballpoint pen production) had revenues of $600,000,000 and expenditures of $750,000,000 in 2011, then in 2011 this government A. realized a budget deficit of $150,000,000. B. realized a budget surplus of $150,000,000. C. realized a budget deficit of $1,350,000,000. D. realized a budget surplus of $1,350,000,000. 17. __________________ was President of France from 1944 to 1946, during which time key sectors of the economy were Nationalized, the size and scope
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