ECON 1100 – Global Economics (Section 09) Exam #3 – Fall 2007 (Version D) 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. increased the role of government in the economy. c. completely eliminated 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. Entertainment Industry. c. Electricity generation. 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. Winston Churchill b. Clement Atlee c. Franklin D. Roosevelt d. Margaret Thatcher 4. After the Nationalization of the Commanding Heights of the British economy, a. everyone in Britain was unemployed. b. 100% of Britain’s workforce was employed in nationalized enterprises. c. 20% of Britain’s workforce was employed in nationalized enterprises. d. 0% of Britain’s workforce was employed in nationalized enterprises. 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. “Thirty Glorious Years” d. “Economic Miracle” 6. __________ refers to a situation where government spending is greater than government revenues. a. Deadweight-Loss b. An inefficiency c. A deficit d. A surplus7. “The General Theory of Employment, Interest and Money” was written by a. Friedrich von Hayek b. John Maynard Keynes c. Milton Friedman d. The “Fabian” Fabrice Morvan 8. During the 1920’s many investors in the U.S. purchased stock “on margin.” This means that they a. borrowed money in order to purchase stock. b. made purchases at prices well below the “true market value” of the stock. c. bribed stock brokers to give them “inside information.” 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. without the information provided by market prices it is impossible to rationally allocate resources. c. the best way to manipulate macroeconomic performance was through monetary policy. 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. Initial Public Offerings (IPOs) of stock to the general public. b. Auctioning of the enterprise to a single buyer in the general public. c. Negotiated Sale to a single buyer. 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. assassination of Franz Ferdinand, Arch Duke of Austria b. Stock Market Crash of 1929 c. “New Deal” d. Price Controls implemented by Richard Nixon 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. John Maynard Keynes b. Friedrich von Hayek c. Milton Friedman d. Charles Gates Dawes13. The Phillips Curve illustrates a. the rate of GDP growth in an economy over time. b. the tradeoff between unemployment and inflation that an economy faces. c. different combinations of output that an economy can produce with their available resources. d. why market equilibrium is not realized when price controls are in place. 14. The “Golden Share” refers to a. a clause in a CEO’s contract specifying that she receives substantial compensation if her employment is terminated. b. a mechanism which allowed the government to prevent control of a privatized enterprise from falling into “unsuitable hands” (i.e., “foreign ownership”). c. the argument that a substantial “Social Safety Net” will reduce incentives to work at the “low end of the income scale.” d. the sale of a government enterprise to current employees at a price well below actual market value. 15. Regulation in the U.S. began with the creation of the __________ in 1887 to regulate the behavior of railroads. a. Interstate Commerce Commission b. Federal Trade Commission c. Federal Railroad Administration d. Federal Transportation Commission 16. Following the Great Depression, the U.S. a. embraced regulation and government intervention in the economy, but did not become a “planned economy” like many countries in Europe. b. transformed into a “planned economy,” like many countries in Europe. c. abolished all regulation of business, in an attempt to increase economic prosperity by allowing firms to make larger profits. 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. guaranteeing everyone equal levels of income/consumption. b. maintaining sound finances and a stable economy. c. ensuring a proper foundation of law. d. providing national defense. 18. Individual stock ownership in the U.S. a. was made illegal by the Tydings-McDuffie Act of 1934. b. decreased over the course of the 1920’s. c. increased over the course of the 1920’s. 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. Nationalization would often lead to Privatization b. socialism would often lead to “free markets” c. socialism would often lead to totalitarianism 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
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