ECON 1100 – Global Economics (Section 03) Exam #4 – Fall 2009 (Version C) Multiple Choice Questions (212 points each): 1. In the “Road to Serfdom” Friedrich von Hayek argued that __________________ as central planning replaced individual decision making. a. Socialism would often lead to “free markets” b. Socialism would often lead to Totalitarianism c. high Unemployment would often lead to high Inflation d. Nationalization would often lead to Privatization 2. Regarding the economic policies collectively known as the “New Deal” a. all economists agree that these policies transformed the U.S. economy into one which relied heavily upon “command planning.” b. all economists believe that the U.S. would have recovered from the “Great Depression” more quickly if these policies had not been put in place. c. all economists believe that the “Great Depression” would not yet be over if these policies had not been put in place. d. None of the above answers are correct. 3. Which of the following countries was NOT one of the “Asian Tigers” (the four Asian countries which experienced rapid economic growth starting in the 1960’s): a. Singapore b. Hong Kong c. North Korea d. South Korea 4. The “Dow Jones Industrial Average” a. 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, Coca-Cola, General Electric, Home Depot, and Walt Disney). b. is a stock market index that was created by the economist James Dow in August 1985, in order to provide a measure of how much better the economy was performing under President Ronald Reagan than it had been performing under President Jimmy Carter. c. provides a direct measure of the rate at which one U.S. Dollar can be traded for one Euro. d. More than one of the above answers is correct. 5. ________________ refers to a general decrease in the level of overall prices. a. Deflation b. The Misery Index c. Inflation d. Hyperinflation6. One of the primary lessons of the “Asian Economic Miracle” is that a. the only way to achieve long term economic prosperity is by having the government directly control nearly all economic activity. b. industrialization and economic development need not be based upon “import substitution” (but rather, “export led growth” is possible). c. the global economy is rigged against new entrants (in that it is nearly impossible for currently poor countries to become wealthy and prosperous). d. for “fairness,” almost all tax revenue should come from the “rich” while the tax burden of the “poor” should be virtually zero. 7. Milton Friedman a. was an economist of the “Chicago School of Economic Thought” (economists who were strong advocates of free-market capitalism). b. advised Margaret Thatcher to increase spending on Social Welfare programs in Great Britain, since the government was providing virtually no “social safety net” when Thatcher became Prime Minister. c. attempted to convince Russian President Boris Yeltsin that his proposed program of “Voucher Privatization” would be a complete failure. d. More than one of the above answers is correct. 8. Farmers in the United States chose to drown baby chickens a. in protest of the lack of economic assistance provided by President Hoover (whose 1928 campaign slogan was “A chicken in every pot and a car in every garage.”) during the early years of the Great Depression. b. in protest of the British invasion of the Falkland Islands in 1982. c. as a show of their support for businesses participating with the “codes of fair competition” established by the National Recovery Administration during the Great Depression. 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). 9. The “Velvet Revolution” refers to the non-violent revolution that took place in 1989, resulting in the overthrowing of the communist government in __________. a. Russia b. Czechoslovakia c. East Germany d. Poland 10. ________ was known as the “trust buster,” having launched anti-trust suits during his Presidential administration leading to the breakup of over 40 monopolies. a. Richard Nixon b. Lyndon Johnson c. Franklin Roosevelt d. Theodore Roosevelt11. During Margaret Thatcher’s time as Prime Minister, the highest marginal tax rate on earned income in Britain a. remained constant at the relatively low level of 7%. b. was increased from 25% to 80%. c. was decreased from 83% to 40%. d. was decreased from 30% to 0% (as a result of all income taxes being eliminated for all workers in the country). 12. New Zealand experienced a per capita GDP growth rate of roughly 2% in 2007. If they were to continue to experience this rate of per capita GDP growth, then by the “Rule of 70” their per capita GDP would double in roughly ______ years. a. 70 b. 50 c. 35 d. 2 13. The central argument of “monetarism” is that a. there are no policies tools which the government can use to manipulate the macroeconomy – therefore, the best things for the government to do during an economic downturn is “absolutely nothing.” b. governments need to provide a substantial social safety net, ensuring that all people have access to food, healthcare, shelter, and education, regardless of their ability to earn money. c. the most effective way to manipulate macroeconomic performance is to run budget deficits during economic downturns and to run budget surpluses during economic expansions. d. 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. 14. Under “command planning” in the Soviet Union a. the industrial sector was very efficient and could produce more output with fewer inputs than enterprises in similar sectors in other countries. b. it was more expensive to take a cab from the airport in Moscow to Red Square than it was to fly from Vladivostok to Moscow. c. virtually no productive resources were devoted to national defense. d. More than one of the above answers is correct. 15. Which of the
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