ECON 1100 – Global Economics (Section 06) Exam #2 – Spring 2011 (Version B) Multiple Choice Questions (212 points each): 1. The Phillips Curve A. directly explains why the unemployment rate typically decreases during a recession. B. proves that people are always self interested. C. illustrates the different combinations of output that an economy can produce with their available resources. D. illustrates the short term tradeoff between unemployment and inflation that an economy faces. 2. ____________________ is an economic system in which the means of production are privately owned and operated for a profit. A. Capitalism B. Communism C. Socialism D. Egalitarianism 3. In order to include many different goods and services in a single aggregate measure, GDP is computed by weighting different goods/services according to A. their production costs. B. the value placed on the item by the buyer, as revealed through telephone surveys of consumers. C. market prices. D. the profit which is earned by the seller of the item. 4. One of the three types of “Economic Incentives” is “Moral Persuasion,” which could be described as A. the use of “monetary rewards” or “direct increases in consumption” which result from engaging in an activity. B. attempts to convince individuals to behave in a certain manner because it is “the right thing to do.” C. the use of “force” or “intimidation” to obtain compliance. D. the use of torture or other “enhanced interrogation techniques” in order to elicit information from someone. 5. Which of the following countries currently has an economic system which would be best described as “Pure Capitalism”? A. Sweden. B. The United States. C. France. D. None of the above answers are correct.6. ___________ traces its philosophical roots to the work of 19th Century Philosopher Karl Marx. A. Communism B. Capitalism C. The Misery Index D. The Invisible Hand 7. Focusing on the “real household income of the household at the 20th percentile” and “real household income of the household at the 80th percentile” in the U.S. over the past three decades, over this time period A. “the rich became richer while the poor became poorer” (i.e., the real income cutoff level of the 80th percentile increased while the real income cutoff level for the 20th percentile decreased). B. “the rich became poorer while the poor became richer” (i.e., the real income cutoff level of the 80th percentile decreased while the real income cutoff level for the 20th percentile increased). C. both “the rich and the poor became richer” (i.e., the real income cutoff level of both the 20th percentile and the 80th percentile increased). D. both “the rich and the poor became poorer” (i.e., the real income cutoff level of both the 20th percentile and the 80th percentile decreased). 8. ________________ refers to the freedom of an individual to buy or not buy a good/service at a price determined in an unfettered market. A. Moral Persuasion B. Command Planning C. Indicative Planning D. Consumer Sovereignty 9. The World Bank is A. a branch of the U.S. Government with the explicit goal of buying up all land around the world with known oil reserves (so that the U.S. will not have to be dependent on foreign oil in the future). B. a private enterprise with the primary purpose of providing foreign private investment to Less Developed Countries, since such investments are often quite profitable (due to low prices of labor and other inputs in LDC’s). C. a lending agency which makes long-term low interest rate loans and provides technical assistance to Less Developed Countries. D. None of the above answers are correct. 10. The ___________________ refers to the “trap” in which countries are poor because they cannot afford to save and invest, but they cannot easily save and invest because they are poor. A. “Rule of 70” B. Invisible Hand C. Misery Index D. Vicious Cycle of Poverty11. In 2006, the value of the Gini-Coefficient in the Norway was 0.28, while the value of the Gini-Coefficient in South Korea was 0.35. These values directly suggest that in 2006 A. the economic system in South Korea was closer to “Pure Capitalism,” while the economic system in the Norway was closer to “Pure Socialism.” B. incomes were distributed “more equally” in Norway than in South Korea. C. average incomes were higher in South Korea than in Norway. D. fewer workers were unemployed in Norway than in South Korea. For Questions 12 and 13, consider a society facing the tradeoffs between “Consumption Goods” and “Capital Goods” which are illustrated by the Production Possibilities Curves below. The curve labeled “1975 PPC” illustrates the PPC of this society in 1975. In 1975 this society chose “Point A” on this curve. As a result, by 2011 the society faced the PPC labeled “2011 PPC.” 12. The “outward shift” of the PPC (from “1975 PPC” to “2011 PPC”) which occurred between 1975 and 2011 could be best described as A. Economic Development. B. a Recession. C. Economic Growth. D. Deflation. 13. If this society had instead chosen “Point B” in 1975, then the relevant PPC in 2011 would likely lie ___________________ in the graph above. A. somewhere beyond the curve labeled “2011 PPC” (i.e., further from the origin) B. exactly on the curve labeled “2011 PPC” C. somewhere below the curve labeled “2011 PPC” (i.e., closer to the origin) D. None of the above answers are correct, since the graph does not convey enough information to be able to infer how the placement of the 2011 PPC would have differed if “Point B” had instead been chosen in 1975. Consumption Goods B A 0 0 Capital Goods 2011 PPC 1975 PPC14. Under a _______________, the government directly controls nearly all economic activity, with almost all production taking place within government owned/controlled enterprises. A. system of Command Planning B. system of Indicative Planning C. comparative economic system D. free market, capitalist system 15. Based upon the current values of “life expectancy at birth” for different countries around the world which were discussed in lecture, A. countries around the world typically fall into one of two categories – “long life span countries” (those with life expectancies above 75 years, which account
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