ECON 1100 – Global Economics (Section 09) Exam #3 – Fall 2007 (Version C) Multiple Choice Questions (212 points each): 1. Immediately following World War II, most countries around the world a. experienced a dramatic economic downturn known as the “Great Depression.” b. completely eliminated the role of government in the economy. c. increased the role of government in the economy. d. None of the above answers are correct. 2. Which of the following industry would NOT be considered part of the “Commanding Heights” of an economy? a. Railroad transportation. b. Electricity generation. c. Entertainment Industry. d. Banking and Financial Markets. 3. ______________ was elected Prime Minister of the United Kingdom in a landslide victory in 1945, right before the end of World War II. a. Clement Atlee b. Winston Churchill c. Franklin D. Roosevelt d. Margaret Thatcher 4. After the Nationalization of the Commanding Heights of the British economy, a. 100% of Britain’s workforce was employed in nationalized enterprises. b. 20% of Britain’s workforce was employed in nationalized enterprises. c. 0% of Britain’s workforce was employed in nationalized enterprises. d. everyone in Britain was unemployed. 5. The period of prosperity and economic expansion following World War II was known as the _____________ in France. a. “Affluent Society” b. “Roaring Twenties” c. “Economic Miracle” d. “Thirty Glorious Years” 6. __________ refers to a situation where government spending is greater than government revenues. a. A deficit b. A surplus c. Deadweight-Loss d. An inefficiency7. “The General Theory of Employment, Interest and Money” was written by a. Friedrich von Hayek b. Milton Friedman c. The “Fabian” Fabrice Morvan d. John Maynard Keynes 8. During the 1920’s many investors in the U.S. purchased stock “on margin.” This means that they a. bribed stock brokers to give them “inside information.” b. borrowed money in order to purchase stock. c. made purchases at prices well below the “true market value” of the stock. d. None of the above answers are correct. 9. The “Economic Calculation Problem” argued that a. labor unions would be able to negotiate less aggressively with privatized enterprises than they could with government enterprises. b. the best way to manipulate macroeconomic performance was through monetary policy. c. without the information provided by market prices it is impossible to rationally allocate resources. d. calculating the true economic value of a worker can only be done under a socialist system. 10. Which of the following was NOT one of the common techniques used for privatizing government owned enterprises when Margaret Thatcher was Prime Minister? a. Negotiated Sale to a single buyer. b. Initial Public Offerings (IPOs) of stock to the general public. c. Auctioning of the enterprise to a single buyer in the general public. d. Employee or Management Buyout of the enterprise, typically at a price well below market value. 11. The _____________ trigger a worldwide financial crisis, at the start of the “Great Depression.” a. Price Controls implemented by Richard Nixon b. assassination of Franz Ferdinand, Arch Duke of Austria c. Stock Market Crash of 1929 d. “New Deal” 12. ___________ was an economist of the “Chicago School of economic thought” who was influential in the formation of Monetarism as an alternative to Keynesianism. a. Charles Gates Dawes b. John Maynard Keynes c. Friedrich von Hayek d. Milton Friedman13. The Phillips Curve illustrates a. the tradeoff between unemployment and inflation that an economy faces. b. different combinations of output that an economy can produce with their available resources. c. why market equilibrium is not realized when price controls are in place. d. the rate of GDP growth in an economy over time. 14. The “Golden Share” refers to a. the sale of a government enterprise to current employees at a price well below actual market value. b. a clause in a CEO’s contract specifying that she receives substantial compensation if her employment is terminated. c. a mechanism which allowed the government to prevent control of a privatized enterprise from falling into “unsuitable hands” (i.e., “foreign ownership”). d. the argument that a substantial “Social Safety Net” will reduce incentives to work at the “low end of the income scale.” 15. Regulation in the U.S. began with the creation of the __________ in 1887 to regulate the behavior of railroads. a. Federal Trade Commission b. Federal Railroad Administration c. Federal Transportation Commission d. Interstate Commerce Commission 16. Following the Great Depression, the U.S. a. abolished all regulation of business, in an attempt to increase economic prosperity by allowing firms to make larger profits. b. embraced regulation and government intervention in the economy, but did not become a “planned economy” like many countries in Europe. c. transformed into a “planned economy,” like many countries in Europe. d. None of the above answers are correct. 17. Which of the following was NOT a proper task of government in the eyes of Margaret Thatcher? a. providing national defense. b. guaranteeing everyone equal levels of income/consumption. c. maintaining sound finances and a stable economy. d. ensuring a proper foundation of law. 18. Individual stock ownership in the U.S. a. decreased over the course of the 1920’s. b. increased over the course of the 1920’s. c. was made illegal by the Tydings-McDuffie Act of 1934. d. More than one of the above answers is correct.19. In the “Road to Serfdom” Friedrich von Hayek argued that ________________ as central planning replaced individual decision making. a. socialism would often lead to “free markets” b. socialism would often lead to totalitarianism c. Nationalization would often lead to Privatization d. monopoly would often lead to perfect competition Answer Questions (20) through (22) based upon the information conveyed in the graph below. This graph illustrates Demand and Supply for staplers in 2007. The current (“free market”) equilibrium price is $10.20, at which 14,250 units are traded. 20. In comparison to the “free market outcome,” imposing a price
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