ECON 1100 – Global Economics (Section 09) Exam #3 – Spring 2010 (Version D) – Answer Key Multiple Choice Questions (212 points each): 1. “Assisting Exports” refers to a. trade policies which make it easier for firms within a country to sell their goods abroad. 2. As of 2008, the birthrate in the U.S. was approximately b. 2.10, roughly equal to the country’s “replacement fertility rate.” 3. The highest rates of Unionization in the world are found a. in Scandinavian countries. 4. In 2007: George earned $923,807 of income, of which he paid 24.0% in U.S. Federal Income Taxes; John earned $386,527 of income, of which he paid 30.7% in U.S. Federal Income Taxes; and Joe earned $319,853, of which he paid 20.7% in U.S. Federal Income Taxes. If “income” provides a measure of “economic capacity” and “average tax rate” provides a measure of “tax burden,” then these figures would suggest that the U.S. Federal Income Tax d. violates the notion of vertical equity. 5. A Corporation is b. a legal entity that can, through the sale of stock, raise capital from a large number of individuals, each of whom shares in profits. 6. ______________ refers to monetary payments made by the government to certain individuals, with the primary aim of directly altering levels of income in society. d. Income Support 7. Consider the following policies: “subsidy payments to specific firms,” “targeted funding of research and development,” “discriminatory tax relief,” and “the use of tariffs/quotas to protect domestic industries.” These policies are examples of d. “micro level” industrial policy. 8. A “Collective Good” is one that is d. non-rival in consumption and excludable. 9. Which of the following is one of the primary policy tools used by a central bank? d. Setting the “discount rate” (i.e., the interest rate at which the central bank lends money to other banks).10. _____________ described capitalism as a “gale of creative destruction,” correctly recognizing that the failure of some business from time to time must be viewed as a normal and unavoidable facet of the system. d. Joseph Schumpeter 11. Altruism refers to a. unselfish concern for the welfare of others. 12. _______________ are financial enterprises with the primary function of protecting individuals and firms from exposure to risk. d. Insurance Companies 13. Since its inception in 1913, the U.S. Federal Income has always been b. a Progressive Tax. 14. The ____________ argument for income redistribution is based upon a claim that “a wealthy society has an obligation to guarantee everyone a minimum standard of living.” b. Social Contract 15. Under the U.S. Federal Income Tax, the “Bottom 50% of wage earners” currently pay ____________ of all taxes collected ____________________. d. about 3.07%; an amount which is significantly less than their share of total adjusted gross income earned (of 12.83%). 16. “Commercial Banks,” “Savings and Loans,” “Credit Unions,” and “Postal Savings Banks” are examples of b. Depository Institutions. 17. The _______________ says that in order for a tax to be “fair,” two individuals of “equal economic capacity” should have “equal tax burdens.” b. notion of horizontal equity 18. “Structural Policy” can be described as government policy c. aimed at changing the underlying institutions of a nation’s economy. 19. “Financial Disclosure” refers to b. requirements of firms to publicly report their financial status using a standard system of accounting. 20. In the U.S., Labor Unions d. More than one of the above answers is correct.21. Jeremy argues that: “If we take $10 away from a ‘rich person’ and give it to a ‘poor person,’ the ‘rich person’ probably won’t even notice that the money is gone while the ‘poor person’ will be made much happier. Therefore, such transfers would allow society to realize a ‘greater level of happiness for a greater number of people.’” His argument in favor of income redistribution is based upon b. Utilitarianism. 22. Focusing on the “Highest Marginal Tax Rate” under the U.S. Federal Income Tax in each individual year since its inception in 1913, this “Highest Marginal Tax Rate” c. was as high as 70% as recently as 1980, when President Ronald Reagan was first elected. 23. If the United States were to enact trade policies with an objective of “Protecting the Home Market,” such policies would b. give U.S. firms advantages at supplying goods within the U.S. market. 24. The “replacement fertility rate” b. is the birth rate which would lead to a “constant population” over time. 25. Government provision of “elementary education” is a good example of b. redistribution in-kind. 26. Mindy earns $14,500 per year. As a result, at her current level of income her “Marginal Tax Rate” is b. 2%. 27. Mork earns $160,000 per year. As a result, at his current level of income his “Average Tax Rate” is b. 9% 28. Based upon the information provided above, it appears as if this tax c. is a Progressive Tax. 29. The “Allocation Function of Government” refers to c. Government production of goods or regulation of business, to ensure that the “right mix” of products is produced, each in the “ideal quantity” and at the “ideal quality.” 30. Focusing on the “Top 26% to 50% of Income Earners,” the “Average Tax Rate” of this group under the U.S. Federal Income Tax b. decreased from 11.91% to 9.28% between 1980 and 2000, and then decreased even further from 9.28% to 7.01% between 2000 and 2006.31. The “median age in the U.S. population” c. increased in value from 32.9 in 1990 to 35.3 in 2000, and is projected to increase further to over 42 by 2020. 32. Government provision of or subsidization of college education can be justified by recognizing that: c. in many instances there are “external benefits” to educating an individual (some of which cannot be realized by the individual in the form of a higher salary in the labor market), since an educated worker often provides “spillover benefits” which increase the productivity of others with which they work; as with any good for which there is a positive externality, the free market would provide “too little” of the good. 33. Which of the following countries impose a
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