ECON 1100 – Global Economics (Section 02) Exam #3 – Fall 2008 (Version B) Multiple Choice Questions (212 points each): 1. In most industrialized countries a. government played a minimal economic role at the start of the 20th century. b. the role of government in the economy steadily increased throughout the entire 20th century. c. there was a decline in the role of government in the economy during the last part of the 20th century. d. More than one of the above answers is correct. 2. ___________________ illustrates the short term tradeoff between unemployment and inflation that an economy faces. a. The Economic Calculation Problem b. The Golden Share c. The Phillips Curve d. A “Tech Bubble” 3. During the 1970’s the British economy experienced a. “hyperinflation,” with prices doubling almost on a daily basis. b. historically high rates of GDP growth. c. relatively high inflation, peaking at an annual rate of 24% in 1975. d. More than one of the above answers is correct. 4. The “General Agreement on Tariffs and Trade” a. brought an end to the post WW-II economic prosperity in Europe. b. forced the British government to “Privatize” the “Commanding Heights” of their economy in the early 1980’s in order to avoid running substantial budget deficits. c. was initially signed in 1947 by 23 countries, geographically from all reaches of the globe. d. increased tariffs and trade restrictions, beginning a global trend toward economic isolationism during the second half of the twentieth century. 5. There was an “Oil Crises” in the U.S. in the 1970’s as a result of a. the election of Jimmy Carter in 1976, and the subsequent transfer of power from Ford to Carter. b. the Oil Embargo imposed by Arab members of OPEC during the Yom Kippur War. c. the environmental policies signed into law by President Johnson. d. More than one of the above answers is correct.6. The “Dow Jones Industrial Average” a. is the federal government agency, created as part of the “New Deal,” which oversees and regulates financial markets in the U.S. b. is an investment fund founded in 1982 by Economist James Dow, which currently owns approximately 87% of all stock in U.S. companies. c. provides a “weighted average” of the stock prices of 30 large and widely held publicly traded U.S. companies (currently including AT&T, ExxonMobil, Home Depot, McDonald’s, and Walmart). d. None of the above answers are correct. 7. One of the arguments in favor of Privatization was that it would “create popular capitalism.” This meant that after Privatization a. the managers of the privatized enterprises would be “more popular,” since they would run the enterprises more efficiently and effectively than government bureaucrats had run the enterprises. b. politicians in the country could increase their popularity and thereby increase their likelihood for reelection by giving government owned enterprises to the poor for free. c. a larger portion of the general public would have a direct ownership stake in private enterprises. d. a smaller fraction of the general public, specifically only those individuals who are most “popular,” would have a direct ownership stake in private enterprises. 8. Fabians were a. French nationalists who successfully implemented an economic system known as “Planification.” b. followers of the German duo Fab Morvan and Rob Pilatus, who ultimately caused the “hyperinflation” which occurred in Germany between World War I and World War II. c. British socialists who sought to implement socialism not by way of revolution, but rather by peaceful means within the existing political system. d. None of the above answers are correct. 9. Many would argue that “philosophy took a back seat to politics” during Nixon’s first Presidential Administration since, contrary to previously expressed views, he a. had the United States join OPEC, in order to inflate worldwide oil prices. b. initiated a war with Argentina over the Falkland Islands, simply to increase his approval rating before the 1972 Presidential Election. c. increased the role of government in the economy by imposing price controls in an attempt to control inflation and by introducing a “Keynesian full employment budget” in an attempt to reduce unemployment. d. administered a series of programs known as the “Great Society,” dramatically increasing the role of the Federal government in the economy, in an attempt to eliminate poverty and racial injustice.10. During the time when Margaret Thatcher was in office, Britain experienced a. positive economic growth, along with a decrease in income inequality. b. positive economic growth, along with an increase in income inequality. c. negative economic growth, along with a decrease in income inequality. d. negative economic growth, along with an increase in income inequality. Answer Questions (11) through (13) based upon the information conveyed in the graph below. This graph illustrates Demand and Supply for new cars in 2008. The current (“free market”) equilibrium price is $25,200, at which 11,450 units are traded. 11. In comparison to the “free market outcome,” imposing a price ceiling of $13,500 a. would make all consumers better off. b. would increase the level of trade to 25,975 units. c. decrease Producers’ Surplus by “areas (a) plus (d).” d. More than one of the above answers is correct. 12. Suppose that in an attempt to increase the profits of auto manufacturers, the government imposes a price floor of $34,800. This policy a. increases Total Social Welfare by “area (e).” b. reduces the level of trade which takes place in this market. c. has no impact on the market whatsoever. d. None of the above answers are correct. 13. If the government imposed a price ceiling of $20,000 per unit, then a. no trade would take place (i.e., zeros units would be traded). b. there would be a positive Deadweight-Loss, but one which is less than “areas (c) plus (d).” c. Producers’ Surplus would be exactly equal to “area (b).” d. None of the above answers are correct. price 00quantity Demand 13,500 6,200 11,450 16,100 25,975 (c) (d) Supply (a) 34,800 25,200 (e) (b)14. _______________ refers to policies aimed at replacing imports of finished products with domestic production of the same goods. a.
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