ECON 1100 Global Economics (Section 09) Exam #4 Fall 2013 (Version A) Multiple Choice Questions ( 2. points each):

Transcription

1 ECON 1100 Global Economics (Section 09) Exam #4 Fall 2013 (Version A) 1 Multiple Choice Questions ( 2 2 points each): 1. Fiscal Policy can be described as government policy A. which determines the money supply of an economy. B. aimed at changing the underlying institutions of a nation s economy. C. related to securing the borders of and protecting the homeland of a nation. D. related to spending and revenue generation. 2. is a U.S. welfare program which provides medical care for people with low incomes. A. HAPPY (Healthcare Aid Provision for the Poor and Young) B. Medicaid C. The National Health Service D. Social Security 3. Under the current U.S. Federal Income Tax, the Top 1% of wage earners pay A. virtually no taxes, due to all of the loopholes in the current tax code. B. about 36.7% of all taxes collected, an amount which is greater than the 29.5% of all taxes collected paid by the bottom 90% of wage earners. C. about 16.9% of all taxes collected, an amount exactly equal to their share of total adjusted gross income earned. D. about 14.8% of all taxes collected, an amount which is slightly less than their share of total adjusted gross income (which is 16.9% of total adjusted gross income). 4. The Fabian Society in the U.K. A. implemented policies which resulted in the British economy entering a severe economic downturn from 1946 through 1967, during which time over 20% of the workforce was typically unemployed. B. was founded in 1976, in an attempt to stop the rapid expansion of government in the British economy. C. greatly influenced the political philosophy and platforms of the British Labor Party during the 20 th Century. D. wanted to implement socialism in Britain by way of revolution during World War II. 5. In the Road to Serfdom Friedrich von Hayek argued that as central planning replaced individual decision making. A. Regressive Taxation would often lead to reduced income inequality B. free markets would often lead to Planification C. Socialism would often lead to Totalitarianism D. Privatization would often lead to Nationalization

2 6. The circulation and official use of the Euro as currency began in. A B C D Questions 7 through 9 are related to the content of the guest lecture given by Mr. Maurice McTigue on Tuesday, 11/12/ Comparing per capita GDP of New Zealand to other countries around the world, between 1950 and the mid-1980s, New Zealand went from having A. the highest value down to having the 82 nd highest value globally. B. the 3 rd highest value down to having the 29 th highest value globally. C. the 22 nd highest value up to having the 10 th highest value globally. D. the 54 th highest value up to having the 7 th highest value globally. 8. When reforming government ministries (i.e., agencies/departments), legislators in New Zealand regularly A. enacted measures which required ministries to show proof of results, and not simply proof of spending (to make sure that agencies were operating as efficiently/effectively as possible). B. shifted to an approach in which ministry budgets were reduced by 2% each year. C. started by reassessing what specific functions ministries should be doing (in order to address instances of mission creep ). 9. Following the elimination of agricultural subsidies in New Zealand, property values fell. As a result, many farmers had negative equity in their land. Banks wanted the government to provide a bailout, which the government refused to do. Related to this situation, Mr. McTigue noted how A. the banks came up with creative financing arrangements which resulted in very low rates of foreclosure and no bank failures (illustrating the concept of spontaneous order in action). B. nearly all of the banks subsequently failed, followed by a decrease in the amount of labor used in the banking sector and an increase in the amount of labor used in the tourism sector (illustrating Joseph Schumpeter s idea of creative destruction ). C. the majority of farmers subsequently foreclosed on their property, forcing the government to increase income taxes in order to provide increased social welfare benefits to the farmers (an outcome which was clearly worse for society than if the farmers/banks had just been provided a bailout at the onset). D. lobbyists for the film industry in New Zealand successfully got lawmakers to provide subsidies which resulted in the Lord of the Rings being filmed in the country (illustrating the concept of rent seeking ).

3 10. If the federal government of Bernankevania (a small landlocked country in eastern Europe, with an economy highly dependent upon production of dishwasher detergent) had revenues of 3,225,000,000 and expenditures of 3,900,000,000 in 2012, then in 2012 this government A. realized a budget deficit of 7,125,000,000. B. realized a budget surplus of 7,125,000,000. C. realized a budget deficit of 675,000,000. D. realized a budget surplus of 675,000, During Margaret Thatcher s time as Prime Minister, the highest marginal tax rate on earned income in Britain A. remained constant at 50%. B. was decreased from 83% to 40%. C. was decreased from 50% to 0% (as a result of all income taxes being eliminated for all workers in the country). D. was increased from 20% to 70%. 12. Which of the following is NOT one of the primary policy tools used by a central bank? A. Loaning money to low income households at below market interest rates, so that they have money available to purchase medical insurance. B. Setting the discount rate. C. Setting reserve requirements. D. None of the above answers are correct (since each of the choices listed is one of the primary policy tools used by a central bank). Questions 13 and 14 are related to the content of Dr. Steve Radelet s video lecture. 13. When describing trends in global poverty over the past 30 years, Dr. Radelet noted that the percentage of the global population living in extreme poverty (defined as less than $1.25 per day) between 1981 and A. increased slightly from approximately 39% to approximately 43% B. decreased slightly from approximately 71% to approximately 68% C. decreased dramatically from approximately 52% to approximately 22% D. remained relatively constant at roughly 15% 14. When making observations on changes in the predominant political systems globally during recent decades, Dr. Radelet observed that A. the number of democracies in Sub-Saharan Africa increased from 3 in 1989 to more than 20 in B. the number of monarchies in Europe increased from 4 in 1960 to 9 in C. the number of communist countries globally increased from 2 in 1988 to 24 in D. None of the above answers are correct (this is actually a trick question, since he made no mention whatsoever of changes in political systems).

4 15. The Equation of Exchange is. A. MSC MPC MEC B. MV PQ C. Y C I G NX DWL D( p) S( p D. ) 16. Which of the following was NOT one of the primary policy elements which became known as Thatcherism? A. A comprehensive program of Nationalization. B. A rejection of Keynesianism in favor of Monetarism. C. Reducing levels of taxation and making the tax system less progressive. D. Reducing the scope of the welfare state. 17. Consider the following two statements: (1) Fiscal Policy has a significant stimulative impact on a less than fully employed economy and (2) Management of the business cycle should be left to Congress and the President; activist monetary policy should be avoided. Most economists would A. agree with both statements. B. disagree with both statements. C. agree with Statement (1) but not Statement (2). D. agree with Statement (2) but not Statement (1). 18. was President of France from 1944 to 1946, during which time key sectors of the economy were Nationalized, the size/scope of social welfare programs were increased, and the country began to rely upon indicative planning. A. Johannes Semler B. Jean Monnet C. Charles de Gaulle D. William Beveridge For Questions 19 and 20, consider a country with an income tax as follows: for each of the first $100,000 earned a worker must pay 10% to the government; for every dollar earned beyond $100,000 a worker must pay 20% to the government. 19. Bill earns $250,000 per year, and Mandy earns $75,000 per year. As a result, A. Bill s Marginal Tax Rate is lower than Mandy s Marginal Tax Rate. B. Bill s Average Tax Rate is greater than Mandy s Average Tax Rate. C. Bill must pay a greater amount of dollars in taxes than does Mandy. 20. It appears as if this tax is a A. Progressive Tax. B. Regressive Tax. C. Proportional Tax. D. Confiscatory Tax.

5 21. Focusing on the benefits provided through the Temporary Assistance for Needy Families (TANF) welfare program, the maximum monthly payment to a oneparent family of three in January 2003 A. was $0 in every single state in the U.S. (due to this program being abolished by George W. Bush on his first day as President). B. was $500 in every single state in the U.S. C. varied by state (due to benefit levels being set by each state) from a low of $170 in Mississippi to a high of $923 in Alaska. D. None of the above answers are correct. 22. When examining outcomes from the U.S. Federal Income Tax, we observed that between 1980 and 2009 the Average Tax Rate of the Top 26%-50% of income earners (i.e., the 2 nd quartile of income earners) A. remained relatively constant, taking on a value between 34% and 36% in every single year during this period. B. increased substantially, from 2.34% in 1980 to 7.75% in C. decreased slightly, from 22.15% in 1980 to 20.03% in D. decreased substantially, from 11.91% in 1980 to 5.56% in For question 23, consider a society which has realized the changes in and trend in Real GDP illustrated in the graph below. Real GDP $ GDP Growth trend line 0 time 0 May 2006 November 2009 April 2012 April 2007 January 2008 October This country experienced an expansion from A. November 2009 through April B. January 2008 through October C. April 2007 through April D. May 2006 through January 2008.

6 24. A mixed economy consensus emerged throughout much of Europe following World War II as a result of the A. fact that the war caused destruction and misery in numerous countries throughout the continent, prompting many to feel that government was needed to assist in the ultimate reconstruction. B. tremendous economic prosperity that all free market economies experienced in Europe during the 1930 s. C. prestige and respect that many had at the time for the Soviet System of Command and Control Planning. 25. The U.S. economy grew for an uninterrupted 10 year period from A. July 1953 through July B. April 1973 through April C. March 1991 through March D. November 2003 to the present day. 26. Which of the following events bolstered patriotism within Great Britain and increased Margaret Thatcher s popularity, allowing her to remain in office as the Prime Minister following the June 1983 general election in the U.K.? A. The complete dismantling of the British army in 1982 by Margaret Thatcher, which successfully allowed the country to realize a peace dividend and devote additional productive resources to welfare programs (thereby increasing welfare benefits for all members of society). B. The technological achievements of the British space program, which successfully landed a dog on Mars in February 1983 (the first living being to walk on a different planet). C. The record setting feats of British athletes in the 1980 Summer Olympics in Barcelona, Spain. D. The military victory of Britain over Argentina in the Falklands War from April 1982 to June Which of the following countries currently has an income tax that is essentially a flat tax (i.e., a proportional tax)? A. Russia. B. The Ukraine. C. The United States. 28. became known as the Mad Monk because of the impassioned political speeches which he gave throughout Britain in the mid 1970 s extolling the virtues of free enterprise and market based economic systems. A. Keith Joseph B. John Maynard Keynes C. Milton Friedman D. Joshua Hall

7 29. The General Agreement on Tariffs and Trade (GATT) A. was initially signed in 1947 by 23 countries, geographically from all reaches of the globe. B. established a common market in Europe and was the precursor to the European Union. C. gave the German government ownership of the Commanding Heights of their economy. 30. Crowding Out refers to A. decreases in private spending that occur following increases in government spending (thereby reducing the stimulative effectiveness of Fiscal Policy). B. the fact that people who reside in metropolitan typically have less square footage per person than those living in rural areas. C. the reduced incentive for people to earn income when marginal tax rates are relatively high. D. the reduced incentive for people to earn income when welfare benefits become more generous. 31. The notion of equity says that in order for a tax to be fair, two individuals of equal economic capacity should have equal tax burdens. A. monetary B. diagonal C. vertical D. horizontal 32. The British enterprise British Rover was privatized by negotiated sale. This technique of privatization is one in which A. ownership of the entire enterprise is given to the government of a third world country, who then gives shares of stock in the enterprise away to its own citizens (in order to reduce global income inequality). B. the enterprise is sold to current managers and employees, typically at a price well below fair market value. C. the entire enterprise is sold to a single buyer, at terms agreed upon by the buyer and the government. D. shares of stock are sold to the general public, at a price calculated to ensure the sale of all shares. 33. Which of the following would be considered part of the Commanding Heights of an economy? A. A brewery. B. A greeting card store at the Town Center at Cobb shopping mall. C. An electricity generating plant.

8 34. Consider a bank that is currently holding deposits of $500,000,000. If the central bank decreases the reserve requirement from 10% to 9%, then the amount of money that this bank is allowed to loan out will A. decrease from $10,000,000 to $9,000,000. B. decrease from $50,000,000 to $45,000,000. C. increase from $9,000,000 to $10,000,000. D. increase from $450,000,000 to $455,000, was Prime Minister of Great Britain when the country Nationalized the Commanding Heights of its economy after World War II. A. Friedrich von Hayek B. Margaret Thatcher C. Winston Churchill D. Clement Attlee 36. In 2012, Ann earned $25,000 of income while Bobby and Carl each earned $50,000 of income. Ann paid 6% of her income in taxes, Bobby paid 9% of his income in taxes, and Carl paid 4% of his income in taxes. Supposing that income provides a measure of economic capacity and average tax rate provides a measure of tax burden, it would appear as if this tax A. violates the notions of both horizontal equity and vertical equity. B. satisfies the notions of both horizontal equity and vertical equity. C. satisfies the notion of vertical equity but violates the notion of horizontal equity. D. satisfies the notion of horizontal equity but violates the notion of vertical equity. 37. The arguments made by John Maynard Keynes in The General Theory of Employment, Interest, and Money suggest that during an economic downturn, the government should A. decrease the money supply so that we can keep the inflation rate as low as possible. B. run a budgetary deficit, in order to stimulate the economy by replacing missing private spending with government spending. C. run a budgetary surplus, so that we do not accumulate a tremendous amount of debt that will ultimately burden our children and grandchildren. D. deploy the military in order to conquer and colonize other countries with large amounts of natural resources (e.g., Middle Eastern countries with tremendous oil reserves). 38. The refers to the number of times that a typical dollar is used in a transaction in a given year. A. supply of money B. Privatization of money C. speed of money D. velocity of money

9 39. Between 1979 and 1991, the number of Britons who directly owned stock in private enterprises A. increased from roughly 3 million to roughly 11 million. B. increased from roughly 6 million to roughly 15 million by 1983, and then decreased from roughly 15 million in 1983 to roughly21 million by C. decreased from approximately 22 million to zero (as stock ownership was made illegal). D. None of the above answers is correct (since stock ownership in Great Britain has always been illegal). 40. refers to the time that policymakers must wait in order to collect and process economic data and confirm that a stabilization policy is indeed needed. A. A Redistribution Lag B. A Decision Lag C. An Implementation Lag D. An Information and Recognition Lag

10 (Blank Page)