ECON 1100 – Global Economics (Section 09) Exam #3 Answer Key – Fall 2007 (Version C) Multiple Choice Questions (212 points each): 1. Immediately following World War II, most countries around the world c. increased the role of government in the economy. 2. Which of the following industry would NOT be considered part of the “Commanding Heights” of an economy? c. Entertainment Industry. 3. ______________ was elected Prime Minister of the United Kingdom in a landslide victory in 1945, right before the end of World War II. a. Clement Atlee 4. After the Nationalization of the Commanding Heights of the British economy, b. 20% 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. d. “Thirty Glorious Years” 6. __________ refers to a situation where government spending is greater than government revenues. a. A deficit 7. “The General Theory of Employment, Interest and Money” was written by d. John Maynard Keynes 8. During the 1920’s many investors in the U.S. purchased stock “on margin.” This means that they b. borrowed money in order to purchase stock. 9. The “Economic Calculation Problem” argued that c. without the information provided by market prices it is impossible to rationally allocate resources. 10. Which of the following was NOT one of the common techniques used for privatizing government owned enterprises when Margaret Thatcher was Prime Minister? c. Auctioning of the enterprise to a single buyer in the general public.11. The _____________ trigger a worldwide financial crisis, at the start of the “Great Depression.” c. Stock Market Crash of 1929 12. ___________ was an economist of the “Chicago School of economic thought” who was influential in the formation of Monetarism as an alternative to Keynesianism. d. Milton Friedman 13. The Phillips Curve illustrates a. the tradeoff between unemployment and inflation that an economy faces. 14. The “Golden Share” refers to c. a mechanism which allowed the government to prevent control of a privatized enterprise from falling into “unsuitable hands” (i.e., “foreign ownership”). 15. Regulation in the U.S. began with the creation of the __________ in 1887 to regulate the behavior of railroads. d. Interstate Commerce Commission 16. Following the Great Depression, the U.S. b. embraced regulation and government intervention in the economy, but did not become a “planned economy” like many countries in Europe. 17. Which of the following was NOT a proper task of government in the eyes of Margaret Thatcher? b. guaranteeing everyone equal levels of income/consumption. 18. Individual stock ownership in the U.S. b. increased over the course of the 1920’s. 19. In the “Road to Serfdom” Friedrich von Hayek argued that ________________ as central planning replaced individual decision making. b. socialism would often lead to totalitarianism 20. In comparison to the “free market outcome,” imposing a price ceiling of $6.00 would decrease Producers’ Surplus by c. area (c) plus area (g) 21. Imposing a price ceiling of $6.00 would create a Deadweight-Loss equal to a. area (f) plus area (g). 22. If a price floor of $12.50 were imposed in this market, then b. more than 7,800 but fewer than 14,250 units would be traded.23. During much of the 1970’s the U.S. economy experienced d. simultaneously high levels of both inflation and unemployment. 24. Which of the following was NOT a primary element of the policies which became known as “Thatcherism”? b. Expanding the scope of the “Welfare State.” 25. As part of his economic policy, Richard Nixon c. implemented price controls in an unsuccessful attempt to curb inflation. 26. “Black Thursday” refers to a. October 24, 1929 – the first day of the “Stock Market Crash of 1929.” 27. The British enterprise “National Freight Corporation” was privatized through an “employee/management buyout.” This technique of privatization is one in which a. the enterprise is sold to current managers and employees, typically at a price well below “fair market value.” 28. _____________ created a plan that “shook the French economy out of its stalemate and propelled it into the modern age.” b. Jean Monnet 29. The “General Agreement on Tariffs and Trade” a. was an agreement initially signed by 23 countries (from all reaches of the globe), that provided mechanisms for negotiating multilateral reductions in tariffs. 30. Ludwig Erhard (who became the German Director of Economic Administration in the American/British Occupation Zones in 1948) belonged to a group of economists called the “Ordoliberals,” who wanted to b. establish an economic system which relied primarily upon free markets, but with a significant “social safety net.” 31. _________ is the study of the performance of national economies as a whole, and the policies that governments use to improve their performance. a. Macroeconomics 32. From 1980-1991 (a period of time when Margaret Thatcher was in office), Great Britain experienced c. a larger increase in “income inequality” than was experienced by other industrial economies with similar rates of economic growth. 33. A primary implication of the work of John Maynard Keynes is that d. the most effective way for the government to influence macroeconomic outcomes is by using fiscal policy.34. The “Winter of Discontent” refers to d. the large scale labor strife which occurred throughout many sectors of the British economy in 1978-1979. 35. 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. 36. _______________ refers to the acquisition of ownership and control of a privately owned enterprise by the national government. c. Nationalization 37. The comprehensive “Social Safety Net” that was in place in Great Britain by the 1970’s b. reduced incentives to work at the “low end” of the income scale. 38. ______________ was the title given to the programs initiated by Franklin Roosevelt between 1933 and 1938 with the goal of providing “relief, recovery,
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