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KSU ECON 1100 - Exam 4 ECON 1100

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ECON 1100 – Global Economics (Section 05) Exam #4 – Fall 2010 (Version B) Multiple Choice Questions (212 points each): 1. Which of the following industries would NOT be considered part of the “Commanding Heights” of an economy? A. Banking and Financial Markets. B. Railroad transportation. C. Electricity generation. D. Music and Entertainment. 2. The “Golden Share” refers to A. the argument that “very high marginal tax rates” will reduce incentives to work at the “high end of the income scale.” B. a clause in a CEO’s contract specifying that she receive substantial compensation if her employment is terminated for any reason. C. the recognition that providing generous welfare benefits will greatly reduce incentives for low income individuals to work. D. 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”). 3. The “Dow Jones Industrial Average” is A. a stock market index, the value of which is the weighted average of the stock prices of 30 large and widely held U.S. companies (such as 3m, Coca-Cola, Microsoft, and Walmart). B. the federal government agency, created as part of the “Great Society,” which oversees and regulates financial markets in the U.S. C. an investment fund founded by former Wall Street Journal Editor Charles Dow, which currently owns about 78% of all stock in U.S. companies. D. More than one of the above answers is correct. 4. The British enterprise “National Freight Corporation” was privatized by “employee or management buyout.” This technique of privatization is one in which A. the government purchases a non-profitable enterprise and then operates the business at a loss, to prevent the enterprise from going out of business and laying-off its current employees and managers. B. the enterprise is sold to current managers and employees, typically at a price well below “fair market value.” C. shares of stock are sold to the general public, at a price calculated to ensure the sale of all shares. D. the entire enterprise is sold to a single buyer, at terms agreed upon by the buyer and the government.5. During Margaret Thatcher’s time as Prime Minister, the highest marginal tax rate on earned income in Britain A. was decreased from 83% to 40%. B. was decreased from 28% to 0% (as a result of all income taxes being eliminated for everyone in the country). C. remained constant at 10%. D. was increased from 50% to 83%. Answer Questions 6 through 8 based upon the information conveyed in the graph below. This graph illustrates Demand and Supply for gas in December 2010. The current (“free market”) price is $2.649, at which 9,675 units are traded. 6. Suppose the government is concerned that a price of $2.649 per gallon makes gas too expensive for consumers, so they impose a price ceiling of $1.999 in this market. As a result of this policy, A. all buyers in the market are made better off. B. 21,125 gallons of gas would be purchased. C. Deadweight-Loss would be equal to “Area (f).” D. None of the above answers are correct. 7. Imposing a price floor of $3.399 in this market would A. increase Total Social Surplus by “Areas (b)+(e).” B. decrease Total Consumers’ Surplus by “Areas (a)+(c).” C. change Total Producers’ Surplus by “Areas (a)–(d).” D. More than one of the above answers is correct. 8. Which of the following policies would create a Deadweight-Loss in this market that is positive but less than “Areas (c)+(d)”? A. Imposing a Price Ceiling of $2.249. B. Imposing a Price Ceiling of $1.999. C. Imposing a Price Ceiling of $1.499. D. Imposing a Price Floor of $2.199. price 00quantity Demand 3.399 2.649 1.999 6,500 9,675 13,240 21,125 (c) (a) (b) (d) (e) (f) Supply9. In which of the following countries were the “Commanding Heights” of the economy Nationalized shortly after the end of World War II? A. France B. The United States C. Great Britain D. More than one of the above answers is correct. 10. Medicaid A. was created as part of President Franklin Roosevelt’s “New Deal.” B. was abolished by President George W. Bush in March 2003. C. is a U.S. federal government program which provides funding for medical and healthcare services for low income individuals. D. More than one of the above answers is correct. 11. The Unemployment Rate in the U.S. (reported on a monthly basis) A. was above 10% for 11 months in 2009, which was the first time ever that the rate had gone above 10%. B. was above 10% for 3 months in 2009, which was the first time that the rate had gone above 10% since the early 1980’s. C. reached 15.4% in September 2010, which was the 24th consecutive month during which the rate was above 10%. D. has never been below 10%. 12. “The General Theory of Employment, Interest and Money” was written by A. John Maynard Keynes B. Friedrich von Hayek C. Margaret Thatcher D. Milton Friedman 13. The Phillips Curve directly illustrates A. why total tax revenue could actually be lower under very high rates of taxation than under moderate rates of taxation. B. why it is nearly impossible to efficiently allocate economic resources without the information provided by market outcomes. C. different combinations of output that an economy can produce with their available resources. D. the tradeoff between unemployment and inflation that an economy faces. 14. ________________ created a plan that “shook the French economy out its stalemate and propelled it into the modern age” by way of setting “targets and priorities for investment, with a particular focus on reconstruction of essential industries” in the decades following the end of WW–II. A. Jean Monnet B. François Mitterrand C. President Lyndon Johnson D. William Beveridge15. Which of the following was NOT one of the primary policy elements which became known as “Thatcherism”? A. A rejection of Keynesianism in favor of Monetarism. B. A comprehensive program of “Nationalization.” C. Reducing levels of taxation and making the tax system less progressive. D. Reducing the scope of the “welfare state.” 16. Fabians were A. British socialists who sought to replace the “scramble for private gain” with “collective welfare.” B. French


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KSU ECON 1100 - Exam 4 ECON 1100

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