ECON 1100 – Global Economics (Section 07) Exam #4 – Spring 2011 (Version C) Multiple Choice Questions (212 points each): 1. In the United States, the “highest Marginal Tax Rate” currently imposed under the federal income tax is A. 0%, since the Federal Income Tax was abolished by President Obama during his first year in office. B. 17%, since every dollar earned by every worker in the U.S. is taxed by the federal government at a Marginal Rate of 17%. C. 35%, a “highest Marginal Tax Rate” which is lower than the “highest Marginal Tax Rate” of 39.6% which was in place in 2000 but higher than the “highest Marginal Tax Rate” of 31% which was in place in 1992. D. 95%, the highest level that the “highest Marginal Tax Rate” has ever been in the history of our country. 2. ______________ became known as the “Mad Monk” because of the impassioned political speeches which he gave throughout Britain in the mid 1970’s extolling the virtues of free enterprise and market based economic systems. A. Keith Joseph B. Winston Churchill C. Ben Bernanke D. Milton Friedman 3. “Fiscal Policy” can be described as government policy A. which determines the “money supply” of an economy. B. intended to alter the birthrate of a society. C. related to spending and revenue generation within an economy. D. related to securing the borders of and protecting the homeland of a nation. 4. The “General Commission of Planning” that was established by the French government in 1946 was initially headed by A. Clement Atlee B. Ludwig Erhard C. Jean Monnnet D. Olivier Armantier 5. _________________ refers to 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. Privatization B. Planification C. Nationalization D. The Welfare State6. __________________ wrote “The Road to Serfdom,” in which it was argued that Socialism would often lead to Totalitarianism, as central planning replaced individual decision making. A. Friedrich von Hayek B. Margaret Thatcher C. John Maynard Keynes D. Jeremy Bentham 7. During an economic downturn, we would expect to observe A. a decrease in the unemployment rate. B. a decrease in business profits. C. a decrease in consumer incomes. D. More than one (perhaps all) of the above answers is correct. 8. Focusing on the “Average Tax Rate” of the “Top 26-50% of Income Earners,” this figure ______________ between 1980 and 2000 and then ______________ between 2000 and 2008. A. increased from 1.79% up to 3.68%; increased further from 3.68% up to 7.95% B. increased from 22.79% up to 28.94%; decreased from 28.94% down to 19.37% C. decreased from 14.80% down to 7.11%; increased from 7.11% up to 17.53% D. decreased from 11.91% down to 9.28%; decreased further from 9.28% down to 7.01% 9. ___________________ can potentially be used by the government in order to stabilize the performance of the macroeconomy (i.e., to minimize fluctuations in the rate of economic growth) over time. A. Neither Monetary Policy nor Fiscal Policy B. Both Fiscal Policy and Monetary Policy C. Fiscal Policy, but not Monetary Policy D. Monetary Policy, but not Fiscal Policy 10. The British enterprise “National Freight Corporation” was privatized by “employee or management buyout.” This technique of privatization is one in which A. the entire enterprise is sold to a single buyer, at terms agreed upon by the buyer and the government. B. shares of stock are sold to the general public, at a price calculated to ensure the sale of all shares. C. ownership of the entire enterprise is given to the government of a third world country, who then gives shares of stock in the enterprise away to citizens of its own country (in order to reduce global income inequality). D. the enterprise is sold to current managers and employees, typically at a price well below “fair market value.”11. The phase of the business cycle that refers to the point in time at which overall economic activity reaches its minimum level is the A. Recovery. B. Peak. C. Recession. D. Trough. 12. In 2010, Walker earned $200,000 of income, Sidney earned $500,000 of income and Robinette earned $800,000 of income. During this year, Walker paid 16% of his income in taxes and Robinette paid 22% of his income in taxes. Supposing that “income” provides a measure of “economic capacity” and “average tax rate” provides a measure of “tax burden,” the notion of “vertical equity” would be violated if Sidney paid _____________ of his income in taxes. A. less than 16% B. more than 16% but less than 22% C. more than 22% D. More than one (perhaps all) of the above answers is correct. 13. Monetary Policy in the United States is determined by A. both the Executive and Legislative branches of the Federal Government. B. the Federal Reserve. C. the United States Supreme Court. D. the President of the United States. 14. After World War II, a consensus emerged in France for a “new economy” consisting of: A. only a “Controlled Sector” (in which resources are owned by individuals, but the use of resources is dictated by the state). B. only a “Private Sector” (in which resources are owned and operated by individuals). C. only a “Nationalized Sector” (in which resources are directly owned and directly operated by the national government). D. a “Private Sector” (in which resources are owned and operated by individuals), a “Nationalized Sector” (in which resources are directly owned and directly operated by the national government), and a “Controlled Sector” (in which resources are owned by individuals, but the use of resources is dictated by the state). 15. Nancy argues that in a wealthy society like the U.S., all people should be guaranteed a minimum standard of living, in part by having “free” access to “necessities” such as prescription drugs and routine medical care. This argument for redistribution is based upon the ____________ justification for redistribution. A. Demand Stabilization B. Social Control C. Social Contract D. Shared Growth16. The “Fabian Society” in the U.K. A. wanted to implement socialism in Britain by way of revolution during World War II. B. greatly influenced the political philosophy and platforms of
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