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KSU ECON 1100 - ECON 1100 Exam 4

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ECON 1100 – Global Economics (Section 03) Exam #4 – Fall 2009 (Version C) – Answer Key Multiple Choice Questions (212 points each): 1. In the “Road to Serfdom” Friedrich von Hayek argued that __________________ as central planning replaced individual decision making. b. Socialism would often lead to Totalitarianism 2. Regarding the economic policies collectively known as the “New Deal” d. None of the above answers are correct. 3. Which of the following countries was NOT one of the “Asian Tigers” (the four Asian countries which experienced rapid economic growth starting in the 1960’s): c. North Korea 4. The “Dow Jones Industrial Average” a. provides a “weighted average” of the stock prices of 30 large and widely held publicly traded companies in the U.S. (currently including companies such as 3M, Coca-Cola, General Electric, Home Depot, and Walt Disney). 5. ________________ refers to a general decrease in the level of overall prices. a. Deflation 6. One of the primary lessons of the “Asian Economic Miracle” is that b. industrialization and economic development need not be based upon “import substitution” (but rather, “export led growth” is possible). 7. Milton Friedman a. was an economist of the “Chicago School of Economic Thought” (economists who were strong advocates of free-market capitalism). 8. Farmers in the United States chose to drown baby chickens d. in response to the wage and price controls implemented as part of Richard Nixon’s New Economic Policy (since at the controlled prices it was no longer worthwhile for them to raise the chickens for meat). 9. The “Velvet Revolution” refers to the non-violent revolution that took place in 1989, resulting in the overthrowing of the communist government in __________. b. Czechoslovakia 10. ________ was known as the “trust buster,” having launched anti-trust suits during his Presidential administration leading to the breakup of over 40 monopolies. d. Theodore Roosevelt11. During Margaret Thatcher’s time as Prime Minister, the highest marginal tax rate on earned income in Britain c. was decreased from 83% to 40%. 12. New Zealand experienced a per capita GDP growth rate of roughly 2% in 2007. If they were to continue to experience this rate of per capita GDP growth, then by the “Rule of 70” their per capita GDP would double in roughly ______ years. c. 35 13. The central argument of “monetarism” is that d. the most effective way to promote stable economic growth is for the Central Bank to manipulate the money supply, in an attempt to ensure an “equilibrium outcome” (with neither “excess demand” nor “excess supply”) in the market for money. 14. Under “command planning” in the Soviet Union b. it was more expensive to take a cab from the airport in Moscow to Red Square than it was to fly from Vladivostok to Moscow. 15. Which of the following was one of the common techniques used for privatizing government owned enterprises when Margaret Thatcher was Prime Minister? b. Initial Public Offerings (IPOs) of stock to the general public. 16. One explanation for the spread of the currency crises from Thailand to other Asian economies was that investors engaged in behavior similar to that of c. individuals during a “bank run.” 17. According to the “Economic Calculation Problem,” d. without the information provided by market prices it is impossible to allocate resources in an effective manner. 18. “Loans-for-Shares” refers to b. a program under which the Russian government used shares in public enterprises as collateral for loans from the private sector, with no intention of ever repaying the loans. 19. The Unemployment Rate in the United States d. was relatively low in most years from 1948 through 1974, then relatively high in most years from 1975 through 1987, then once again relatively low in most years from 1988 through 2008. 20. Individual stock ownership in the U.S. b. increased over the course of the 1920’s. 21. The economy of Hong Kong c. is a “laissez-faire” economy with virtually no government intervention.22. Which of the following was NOT a proper task of government in the opinion of Margaret Thatcher? d. Having the government own and directly control the “Commanding Heights” of the economy. 23. A “Price Control” b. refers to a legal restriction on the price at which a good can be traded. 24. One of the rationales for Privatization is that it would “create popular capitalism,” which means that d. a larger fraction of the general public would directly own stock in enterprises after Privatization. 25. A Chaebol is c. a large business conglomerate, typically owned by a single family, operated with authoritarian management and with substantial government assistance. 26. The “Great Society” refers to the b. series of domestic programs proposed by and initially enacted under the leadership of President Lyndon Johnson, with the two main goals of eliminating poverty and racial injustice. 27. Totalitarianism refers to b. a regime in which the state regulates nearly all aspects of both public and private behavior. 28. The “inverse relation” (or “tradeoff”) between the Unemployment Rate and Inflation Rate which an economy faces in the short term is illustrated by b. the “Phillips Curve.” 29. Imposing a Price Ceiling of $1,250 in this market would b. make all landlords (i.e., the “sellers”) in the market “worse off.” 30. Imposing a Price Floor of $1,000 in this market would c. have no impact on the market outcome whatsoever. 31. The annual inflation rate in the U.S. during September 2009 was d. -1.29%, taking on a negative value for the seventh consecutive month. 32. Jeffrey Sachs c. was an advocate of economic reform by way of “Shock Therapy.”33. As a result of the combined effects of the “Stock Market Crashes of 1929 and 1930-1932” the Dow Jones Industrial Average lost d. 89.19% of its value, the largest percentage decline during any three year period in history. 34. ____________ was the leader of the Soviet Union when the Solidarity Party gained political control of Poland during the semi-free elections of 1989. a. Mikhail Gorbachev 35. In an attempt to “bring down inflation without slowing the economy and raising unemployment” Richard Nixon c. introduced a “Keynesian


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KSU ECON 1100 - ECON 1100 Exam 4

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