ECON 1100 – Global Economics (Section 03) Exam #3 – Summer 2008 (Version B) – Answer Key Multiple Choice Questions (212 points each): 1. Totalitarianism refers to b. a regime in which the state regulates nearly all aspects of both public and private behavior. 2. In most industrialized countries, the role of government in the economy __________ during the first part of the twentieth century and ___________ during the last part of the twentieth century. c. increased; then decreased. 3. ______________ was elected Prime Minister of the United Kingdom in a landslide victory in 1945, right before the end of World War II. c. Clement Atlee 4. The “mixed economy consensus” that emerged in Europe following World War II resulted from: b. prestige of and respect for the Soviet system of central planning. 5. As of 2008, Russia has a birth rate a. of approximately 1.34, well below their “replacement fertility rate.” 6. Which of the following industries would NOT be considered part of the “Commanding Heights” of an economy? b. Soft drink manufacturing. 7. Nationalization refers to c. the acquisition of ownership and control of a privately owned enterprise by the national government, either with or without compensation to the original owners. 8. For the U.S. Federal Income Tax: an individual in the “Top 1% of wage earners” has an ATR (Average Tax Rate) of 23.13%, an individual in the “Top 11%-25% of wage earners” has an ATR of 9.27%, and an individual in the “Bottom 50% of wage earners” has an average tax rate of 2.98%. These observations would suggest that c. the U.S. Federal Income Tax is s progressive tax. 9. Issues related to healthcare are b. likely to become of greater importance during our lifetimes, as the median age within most industrialized countries continues to increase.10. One of the rationales for Privatization is that it would lead to a “boost for productivity,” which meant that d. profit seeking managers will operate an enterprise more efficiently and effectively than government bureaucrats with other objectives. 11. The Phillips Curve illustrates c. the tradeoff between unemployment and inflation that an economy faces. 12. Johannes Semler was replaced by Ludwig Erhard as the German Director of Economic Administration in the American/British Occupation Zone after referring to U.S. food aid to Germany as b. chicken feed. 13. Under the current U.S. Federal Income Tax, the “Top 1% of wage earners” pay b. about 39.38% of all taxes collected, an amount roughly equal to the 40.33% of all taxes collected paid by the “bottom 95% of wage earners.” 14. _______________ specifies what different parties must do under all possible realizations of external circumstances, and provides for enforcement or compensation for non-performance. b. A contract 15. Which of the following was one of the common techniques used for privatizing government owned enterprises when Margaret Thatcher was Prime Minister? d. More than one of the above answers is correct. 16. _______________ is a system in which the government assumes the ultimate responsibility of improving the well-being of its citizens, particularly with respect to healthcare, education, employment, and social security. c. The Welfare State 17. From the mid 1950’s through the mid 1970’s, many countries throughout Europe (such as France and Germany) experienced a. relatively high rates of economic growth. 18. _______________ are financial enterprises with the primary function of assisting large businesses in issuing stocks and bonds into primary financial markets. a. Investment Banks 19. The _______________ gave the French government control of the banking, electricity, gas, and coal industries within France. d. Nationalization Acts of 1945 and 1947 20. Bob earns $20,000 per year. As a result, he must pay ________ in income taxes. b. $3,00021. Sandy earns $200,000 per year. At her current level of income, Sandy’s “Marginal Tax Rate” is c. 10% 22. Pearl’s income is $40,000 per year and her Average Tax Rate is 12.5%; Sandy’s income is $200,000 per year and her Average Tax Rate is 10.5%; Patrick’s income is $5,000 per year and his Average Tax Rate is 20%. These observations would suggest that this tax c. is a Regressive Tax. 23. Which of the following is NOT one of the primary functions of a Central Bank? b. to manipulate macroeconomic performance via active fiscal policy. 24. The “replacement fertility rate” b. is the birth rate which would lead to a “constant population” over time. 25. During the 1970’s in Great Britain a. individuals at the “high end of the income scale” had reduced incentives to work, as a result of the highly progressive tax structure which was in place. 26. _____________ described Capitalism as a “gale of creative destruction,” recognizing that the failure of enterprises from time to time must be viewed as a natural facet of the system. c. Joseph Schumpeter 27. The “Credit Union of Georgia” is an example of a c. Depository Institution. 28. The “General Agreement on Tariffs and Trade” c. was an agreement initially signed by 23 countries (from all reaches of the globe), that provided mechanisms for negotiating multilateral reductions in tariffs. 29. “Assisting Exports” refers to a. trade policies which make it easier for firms within a country to sell their goods abroad. 30. “Structural Policy” can be described as government policy c. aimed at changing the underlying institutions of a nation’s economy. 31. The “Winter of Discontent” refers to a. the large scale labor strife which occurred throughout many sectors of the British economy in 1978-1979.32. “In some instances it is difficult or very costly for consumers to gather accurate information on important characteristics of some goods. Therefore, having the government impose and enforce standards on safety, quality, and effectiveness of such goods may assist consumers in making good economic decisions in the marketplace.” This argument provides the c. justification for government regulation of products. 33. The “Economic Calculation Problem” argued that d. without the information provided by market prices it is impossible to allocate resources in an effective manner. 34. Most modern industrialized countries b. have rates of Unionization between 33%
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