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KSU ECON 1100 - Exam 4 ECON 1100

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ECON 1100 – Global Economics (Section 05) Exam #4 – Summer 2011 (Version A) – Answer Key 1. 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%. 2. _______________________ relied primarily upon free market institutions, but with a significant “social safety net.” C. The German Social Market Economy 3. The arguments made by John Maynard Keynes suggest that during an economic downturn, the government should C. run a budgetary deficit, in order to stimulate the economy by replacing missing private spending with government spending. 4. The “General Commission of Planning” that was established by the French government in 1946 was initially headed by B. Jean Monnnet 5. ____________________ refers to the time it takes for an enacted policy to have an impact on macroeconomic outcomes. A. An Implementation Lag 6. The Misery Index in the United States achieved its lowest value of the 20th century during the time when ____________________ was President. A. Calvin Coolidge 7. ________________________ can be thought of as a “reversal (or undoing) of Nationalization.” B. Privatization 8. “Crowding Out” refers to A. decreases in private spending that occur following increases in government spending (thereby reducing the stimulative effectiveness of Fiscal Policy). 9. From the mid 1950’s through the mid 1970’s, many countries throughout Europe (such as France and Germany) experienced relatively A. high, sustained rates of economic growth.10. 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. 11. In the “Road to Serfdom” Friedrich von Hayek argued that ________________ as central planning replaced individual decision making. B. Socialism would often lead to Totalitarianism 12. As a result of the Mellon-Coolidge-Harding tax cuts, the “Highest Marginal Tax Rate” under the U.S. Federal Income Tax was decreased from 73% in 1921 to 25% by 1929. Further, the total amount of revenue generated by the U.S. Federal Income Tax ______________________ between 1921 and 1929. D. increased from $700 million to over $1 billion 13. The ________________ was used as the patriotic symbol of compliance with the policies of the “National Recovery Administration.” D. Blue Eagle 14. A Central Bank can increase the Money Supply in an economy by D. More than one (perhaps all) of the above answers is correct. 15. ___________________ argued that “Inflation is always and everywhere a monetary phenomenon.” A. Milton Friedman 16. The “Dow Jones Industrial Average” B. 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, ExxonMobil, and Pfizer). 17. Monetary Policy in the United States is determined by A. the Federal Reserve. 18. Suppose the government is concerned that a price of $7.95 makes romance novels too expensive for consumers, so they impose a price ceiling of $6.70 in this market. As a result of this policy, A. Deadweight-Loss would be equal to “Areas (b)+(c).” 19. Imposing a price floor of $9.30 in this market would D. More than one (perhaps all) of the above answers is correct. 20. Consider the following two proposals: “Policy A” is a price floor of $10.00 and “Policy B” is a price ceiling of $7.00. We can infer that A. “Policy A” would create a larger Deadweight-Loss than would “Policy B.”21. The automotive company “British Rover” was privatized by “negotiated sale.” This technique of privatization is one in which B. the entire enterprise is sold to a single buyer, at terms agreed upon by the buyer and the government. 22. Which of the following contributed to the U.S. entering the Great Depression? B. The Smoot-Hawley Act. 23. ______________ 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 24. The “Treaty of Rome” A. established a “common market” in Europe and was the precursor to the European Union. 25. Which of the following events bolstered patriotism within Great Britain and increased Margaret Thatcher’s popularity, allowing her to remain in office as Prime Minister following the June 1983 general election in the U.K.? B. The military success of Britain over Argentina in the Falklands War from April 1982 to June 1982. 26. The phase of the business cycle that refers to the point in time at which overall economic activity reaches its minimum is the D. Trough. 27. In the 1972 Presidential Election, Richard Nixon B. defeated George McGovern by an Electoral College vote of 520 to 17 (the second largest margin ever, eclipsed only by the victory of Ronald Reagan over Walter Mondale in 1984 by a margin of 525 to 13). 28. According to the National Bureau of Economic Research (NBER), the most recent recession in the United States B. lasted for eighteen months, from December 2007 through June 2009. 29. In 2009 the Unemployment Rate in the U.S. was 9.26% (recall, this was only the fourth year since the end of WW-II that the rate was above 8%). In comparison, during the Great Depression the Unemployment Rate was C. above 10% for 10 consecutive years (from 1931 through 1940). 30. Fabians were C. British socialists who sought to replace the “scramble for private gain” with “collective welfare.”31. In which of the following countries were the “Commanding Heights” of the economy Nationalized shortly after the end of World War II? D. More than one (perhaps all) of the above answers is correct. 32. The “Economic Calculation Problem” argues that D. without the information provided by market prices it is impossible to allocate resources in an efficient and effective manner. 33. Between 9/3/1929 and 7/8/1932 the value of the Dow Jones Industrial Average C. decreased by 89.19%, from a value of 381.17 down to 41.22. 34. The “Winter of Discontent” refers to the D.


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KSU ECON 1100 - Exam 4 ECON 1100

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