ECON 1100 – Global Economics (Section 09) Exam #4 – Spring 2010 (Version D) – Answer Key 1. During the time when Margaret Thatcher was in office, Britain experienced d. More than one of the above answers is correct. 2. The central argument of “monetarism” is that c. 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. 3. In 2008, the annual inflation rate in Japan was approximately _______. d. 0.1% 4. After World War II, a consensus emerged in France for a “new economy” consisting of: d. a “Private Sector” (in which resources are owned and operated by individuals), a “Nationalized Sector” (in which resources are directly owned and directly operated by the national government), and a “Controlled Sector” (in which resources are owned by individuals, but the use of resources is dictated by the state). 5. The “Fabian Society” in the U.K. d. greatly influenced the political philosophy and platforms of the British Labor Party during the 20th Century. 6. In order to include many different goods and services in a single aggregate measure, GDP is computed by b. weighting goods/services according to their market prices. 7. Based upon the current values of “life expectancy at birth” for different countries around the world which were discussed in lecture, d. None of the above answers are correct. 8. Milton Friedman a. was a strong advocate of free-market capitalism. 9. The “National Recovery Administration” c. allowed industries to create “codes of fair competition,” intended to reduce destructive competition between firms, establish minimum wages for workers, and maximum weekly hours for workers.10. The “Dow Jones Industrial Average” c. 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, Microsoft, and Walmart). 11. John Maynard Keynes argued that: free markets are volatile and market forces might not always lead to “full employment”; such “low production equilibria” are often the result of “too little spending.” His solution was essentially to b. replace the missing private spending with public/government spending. 12. The automotive company “British Rover” was privatized through a “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. 13. According to the classification in the textbook, which of the following is not a “Less Developed Country”? b. Ireland 14. The “Misery Index” a. is computed by taking the sum of the current unemployment rate and the current annual inflation rate. 15. The “mixed economy consensus” that emerged in Europe following World War II resulted from: d. More than one of the above answers is correct. 16. Transactions involving goods produced in the past (such as the sale of an eight year old automobile by a used car dealer) are b. not included in current GDP, because GDP only measures the value of goods and services produced in the current year. 17. The Federal Communications Commission was created in order to b. regulate all non-governmental use of the radio spectrum. 18. In the “Road to Serfdom” Friedrich von Hayek argued that ________________ as central planning replaced individual decision making. d. socialism would often lead to totalitarianism 19. The “Treaty of Rome” d. established a “common market” in Europe in 1957, and would ultimately evolve into the creation of the European Union. 20. In the years preceding the “Stock Market Crash of 1929,” many investors in the U.S. purchased stock “on margin.” This means that they a. borrowed money in order to purchase stock.21. The “Golden Share” refers to b. a mechanism which allowed the government to prevent the ownership of an enterprise privatized by “initial public offering” from falling into “unsuitable hands” (i.e., “foreign ownership”). 22. For the 2009 Fiscal Year, the federal government in the U.S. spent approximately $3.52 trillion dollars, while bringing in revenue of only $2.11 trillion. These figures imply that for the year the government ran a a. budget deficit of approximately $1.41 trillion. 23. Which of the following was NOT a primary element of the policies which became known as “Thatcherism”? a. A comprehensive program of Nationalization. 24. The “Great Inflation” refers to the period of high inflation in the U.S. b. from the early 1970’s through the early 1980’s (from roughly June 1973 to July 1982). 25. If a price ceiling of $7.25 were imposed in this market, then ________ units would be traded. a. 5,300 26. In comparison to the “free market outcome,” imposing a price floor of $15.50 would c. make some sellers better off, but also make some other sellers worse off. 27. Imposing a price ceiling of $9.50 would create a Deadweight-Loss d. which is positive, but less than “area (b) plus area (c).” 28. Per Capita GDP in the United States as a whole is approximately c. $46,000, greater than the Per Capita GDP (PPP) of the European Union as a whole (which is approximately $32,900). 29. “Black Thursday” refers to the b. U.S. stock market crash which occurred on Thursday, 10/24/1929, at the start of what would become the Great Depression. 30. The ______________ are high income nations that have market economies based upon large stocks of technologically advanced capital and a well educated work force (such as the United States, Canada, Australia, New Zealand, and Japan). d. “Industrially Advanced Countries” 31. Farmers in the United States chose to drown baby chickens d. in response to the wage and price controls implemented as part of Richard Nixon’s New Economic Policy (since at the controlled prices it was no longer worthwhile for them to raise the chickens for meat).32. The series of domestic programs proposed by and initially enacted under the leadership of President Johnson in the 1960’s, with the two main goals of eliminating poverty and racial injustice, is known as the d. Great Society.
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