ECON 1100 – Global Economics (Section 09) Exam #3 – Spring 2008 (Version D) – Answer Key Multiple Choice Questions (212 points each): 1. Which of the following was NOT one of the four primary causes of Britain’s poor economic performance during the 1970’s? b. The relatively low rates and very regressive system of taxation. 2. Friedrich von Hayek d. More than one of the above answers is correct. 3. Which of the following industry would NOT be considered part of the “Commanding Heights” of an economy? b. A cookie factory. 4. _______________ are financial enterprises with the primary function of protecting individuals and firms from exposure to risk. a. Insurance Companies 5. Which of the following is NOT one of the primary functions of a central bank? b. to manipulate macroeconomic performance via active fiscal policy. 6. A “Collective Good” is one that is a. non-rival in consumption and excludable. 7. __________ is a system in which the government assumes the responsibility of improving the well-being of its citizens, particularly with respect to healthcare, education, employment, and social security. b. The Welfare State 8. The “Economic Calculation Problem” argued that c. without the information provided by market prices it is impossible to efficiently allocate resources. 9. During the time when Margaret Thatcher was in office, Great Britain d. More than one of the above answers is correct. 10. A Progressive Tax is one for which a. the Average Tax Rate increases as the level of income increases. 11. The period of prosperity and economic expansion following World War II was known as the _____________ in France. a. “Thirty Glorious Years”12. 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. 13. ______________ refers to a situation where government revenues are greater than government spending. c. A surplus 14. Structural Policy can be described as government policy b. aimed at changing the underlying institutions of a nation’s economy. 15. ____________________ relied primarily upon free market institutions, but with a significant “social safety net.” a. The German Social Market Economy 16. The “Stabilization Function of Government” refers to c. Government policies aimed at minimizing fluctuations in the rate of economic growth over time. 17. By the late 1940’s unemployment in Great Britain b. was as low as 1.3%, a rate well below the rates (of well over 12%) which were experienced throughout the 1930’s. 18. The Phillips Curve illustrates a. the tradeoff between unemployment and inflation that an economy faces. 19. _______________ says that in order for a tax to be “fair,” individuals of greater economic capacity should have larger tax burdens. a. The notion of vertical equity 20. The “Golden Share” d. is a mechanism which allowed the government to prevent control of a privatized enterprise from falling into “unsuitable hands” (i.e., “foreign ownership”). 21. Hillary has an annual income is $250,000, of which she pays 14% in federal income tax. John has an annual income of $65,000, of which he pays 24% in federal income taxes. Barack has an annual income of $125,000, of which he pays 19% in federal income tax. Based upon this information, c. this federal income tax appears to be a regressive tax.22. 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.” 23. “Financial Disclosure” refers to b. requirements of firms to publicly report their financial status using a standard system of accounting. 24. _________ is the study of the performance of national economies as a whole, and the policies that governments use to improve their performance. b. Macroeconomics 25. Which of the following is NOT one of the primary policy tools of a Central Bank? d. Taxation. 26. ___________ was an economist of the “Chicago School of economic thought” who was influential in the formation of Monetarism as an alternative to Keynesianism. c. Milton Friedman 27. One of the arguments in favor of privatization in Great Britain under Margaret Thatcher was that privatization could “reduce government borrowing,” since c. the sale of nationalized enterprises could generate a substantial amount of revenue for the government, thereby making it easier for the government to reduce their deficit or run a surplus. 28. The highest rates of Unionization in the world are found b. in Scandinavian countries. 29. Which of the following is NOT one of the four primary types of “Depository Institutions”? c. Investment Banks. 30. 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. 31. The overall role of government in most industrialized countries c. initially increased and subsequently decreased throughout the course of the twentieth century.32. The _______________ established a “Common Market” in Europe, which could be described as an unprecedented joining of diverse economies, built in part upon the “mixed economy consensus.” b. Treaty of Rome 33. If the United States were to enact trade policies with an objective of “Assisting Exports,” such policies would b. make it easier for U.S. firms to sell goods abroad. 34. Which of the following was NOT one of the primary policy elements which became known as “Thatcherism”? a. a comprehensive program of “Nationalization.” 35. ________ an important role in the labor market by regulating the legal age of workers, length of workweek, minimum wages, and other working conditions. d. The Government plays 36. _____________ created a plan that “shook the French economy out of its stalemate and propelled it into the modern age.” d. Jean Monnet 37. A Corporation is a. a legal entity that can, through the sale of stock, raise capital from a large number of individuals, each of whom
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