ECON 1100 – Global Economics (Section 09) Exam #4 – Spring 2010 (Version D) Multiple Choice Questions (212 points each): 1. During the time when Margaret Thatcher was in office, Britain experienced a. an increase in income inequality. b. negative economic growth. c. positive economic growth. d. More than one of the above answers is correct. 2. The central argument of “monetarism” is that a. the most effective way to manipulate macroeconomic performance is to run budget deficits during economic downturns and to run budget surpluses during economic expansions. b. there are no policies tools which the government can use to manipulate the macroeconomy – therefore, the best things for the government to do during an economic downturn is “absolutely nothing.” c. 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. d. governments need to provide a substantial social safety net, ensuring that all people have access to food, healthcare, shelter, and education, regardless of their ability to earn money. 3. In 2008, the annual inflation rate in Japan was approximately _______. a. 12,563% b. 22.4% c. 7.8% d. 0.1% 4. After World War II, a consensus emerged in France for a “new economy” consisting of: a. only a “Nationalized Sector” (in which resources are directly owned and directly operated by the national government). b. only a “Controlled Sector” (in which resources are owned by individuals, but the use of resources is dictated by the state). c. only a “Private Sector” (in which resources are owned and operated by individuals). 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).5. The “Fabian Society” in the U.K. a. was founded in 1981, in an attempt to stop the reckless policies being implemented by Margaret Thatcher (which were dramatically increasing the role of the government in the British economy). b. wanted to implement socialism in Britain by way of revolution following World War I. c. implemented policies which resulted in the British economy entering a severe economic downturn from 1946 through 1967, during which time over 25% of the workforce was typically unemployed. d. greatly influenced the political philosophy and platforms of the British Labor Party during the 20th Century. 6. In order to include many different goods and services in a single aggregate measure, GDP is computed by a. weighting goods/services according to their production costs. b. weighting goods/services according to their market prices. c. determining values of goods/services based upon telephone surveys of consumers. d. adding together Consumer Surplus and Producer Surplus. 7. Based upon the current values of “life expectancy at birth” for different countries around the world which were discussed in lecture, a. life expectancy at birth is lowest in “capitalist societies” (such as the U.S. (51.27 years), New Zealand (56.28 years), Singapore (57.12 years), and Hong Kong (58.76 years)), as a result of big business exploiting labor and “working people to death.” b. the country with the longest life expectancy at birth is Russia (86.74 years), an outcome which is primarily a result of the exceptionally high quality healthcare provided by the government. c. countries around the world typically fall into one of two categories – “long life span countries” (those with life expectancies above 80 years, which account for about 41% of countries worldwide) and “short life span countries” (those with life expectancies below 40 years, which account for 55% of countries worldwide) – with very few countries (only 4%) realizing life expectancies between 40 and 80 years. d. None of the above answers are correct. 8. Milton Friedman a. was a strong advocate of free-market capitalism. b. was Prime Minister of Great Britain from 1945 through 1957, during which time the “Commanding Heights” of the British economy were Nationalized. c. advised Margaret Thatcher to increase tax rates on the wealthy and decrease tax rates on the poor, since when she came into office the wealthy were not paying their “fair share” in taxes. d. More than one of the above answers is correct.9. The “National Recovery Administration” a. was created by President John F. Kennedy, as an attempt at “Indicative Planning” in the U.S. b. was declared Constitutional by the Supreme Court in 1935. c. allowed industries to create “codes of fair competition,” intended to reduce destructive competition between firms, establish minimum wages for workers, and maximum weekly hours for workers. d. More than one of the above answers is correct. 10. The “Dow Jones Industrial Average” a. provides a direct measure of the rate at which one U.S. Dollar can be traded for one Euro. b. is a stock market index that was created by The New York Times in April 2006 in order to provide a measure of how detrimental the economic policies of President George W. Bush were for the U.S. economy. c. 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, Boeing, Coca-Cola, Home Depot, Microsoft, and Walmart). d. More than one of the above answers is correct. 11. John Maynard Keynes argued that: free markets are volatile and market forces might not always lead to “full employment”; such “low production equilibria” are often the result of “too little spending.” His solution was essentially to a. have the Central Bank closely control the money supply in the economy. b. replace the missing private spending with public/government spending. c. have the government directly control the use of all economic resources. d. keep government out of the economy completely (i.e, the government should make no attempt to influence macroeconomic performance). 12. The automotive company “British Rover” was privatized through a “negotiated sale.”
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