ECON 1100 – Global Economics (Section 06)
Exam #4 – Fall 2012 (Version C)
Multiple Choice Questions ( 2 1
2
points each):
1.
________ means “restructuring,” referring to restructuring of the Soviet economy.
A. Kleptocracy
B.
C.
Tolkachi
Perestroika
D. Glasnost
2. In the 1972 Presidential Election, Richard Nixon
A. actually lost the Electoral College vote by a total of 302 to 236, but was declared the winner of the election by the Supreme Court after he bribed five of the nine justices (actions which were uncovered in what became known as the “Watergate Scandal”).
B. was defeated by Jimmy Carter by an Electoral College vote of 395 to 143
(the second largest margin ever, eclipsed only by the victory of Barack
Obama over Mitt Romney in 2012 by a margin of 402 to 136).
C. defeated George McGovern by an Electoral College vote of 520 to 17 (the second largest margin ever, eclipsed only by the victory of Ronald Reagan over Walter Mondale in 1984 by a margin of 525 to 13).
D. narrowly defeated George McGovern by an Electoral College vote of 271 to 267 (the closest margin ever in U.S. history).
3. In Russia between 1992 and 1996
A. the percentage of GDP devoted to national defense steadily increased, so that by 1996 roughly 50% of GDP used for military purposes.
B. large scale privatization took place, so that by 1996 over 70% of GDP was generated in the private sector.
C. the state acquired ownership and control of the “Commanding Heights” of the economy for the first time.
D. More than one (perhaps all) of the above answers is correct.
4. The “Winter of Discontent” refers to
A. the crash of the London Stock Exchange on 2/10/2003, after which Great
Britain entered into an economic recession which is still ongoing.
B. the large scale labor strife which occurred throughout many sectors of the
British economy in 1978-1979.
C. the hyperinflation which occurred in Great Britain in the 1990’s, eliminating the life-savings of many middle class Britons.
D. None of the above answers are correct.

5.
During the 1920’s many investors in the U.S. purchased stock “on margin.” This means that they
A. made purchases at prices well below the “true market value” of the stock.
B. used “insider information” to buy stocks which they knew for certain would increase in value.
C. purchased stock in firms that were “marginal” in terms of recent economic performance (i.e., companies which made small profits in recent years).
D. borrowed money in order to purchase stock.
6. Friedrich von Hayek
A. wrote the “Road to Serfdom,” in which he argued that Socialism would lead to Totalitarianism as central planning replaced individual decision making.
B. was an economist of the “Austrian School” of economic thought (which advocates free market capitalism).
C. enacted policies as Prime Minister of Great Britain in the 1990’s which reversed many of the “free market reforms” which were put in place during Margaret Thatcher’s time in office.
D. More than one (perhaps all) of the above answers is correct.
8.
7. Which of the following was part of FDR’s New Deal?
A. The passage of the Agricultural Adjustment Acts of 1933 and 1938.
B. A drastic reduction of Federal Income Tax rates for all workers.
C.
D.
An elimination of all regulations on business.
More than one (perhaps all) of the above answers is correct.
9.
Between 1990 and 2010, Real Per Capita GDP in Poland
A. decreased by roughly 112.56%.
B.
C.
D. decreased by roughly 17.24%. increased by roughly 85.39%. increased by roughly 625.74%.
The Dow Jones Industrial Average is
A. the federal government agency, created as part of Theodore Roosevelt’s
“Square Deal,” which oversees and regulates financial markets in the U.S.
B. an investment fund founded by financial economist James Dow, which currently owns roughly 50% of all stock in U.S. companies.
C. a stock market index, created to gauge the performance/value of the industrial sector of the U.S. stock market.
D. More than one (perhaps all) of the above answers is correct.
10.
During the 1970’s the British economy experienced
A. persistent and widespread labor strife.
B.
C.
D. deflation (i.e., a negative inflation rate). an unemployment rate below 2%.
More than one (perhaps all) of the above answers is correct.

11.
The “end of communism” in Europe began in
A.
B.
C. the Soviet Union.
France.
China.
D. Poland.
Answer Questions 12 through 14 based upon the information conveyed in the graph below. This graph illustrates Demand and Supply for “Good Y” in November 2012.
The current (“free market”) price is $15.65, at which 3,575 units are traded. price Supply
16.75
15.65
14.55
Demand
13.95
0
0 1,750 3,575 4,800 7,625 quantity
12. Suppose the government is concerned that a price of $15.65 is too low for sellers, so they impose a price floor of $16.50 in this market. This policy makes
A. all sellers worse off (and all buyers worse off).
B. some sellers better off and some sellers worse off (and all buyers worse off).
C. all sellers better off (and all buyers better off).
D. all sellers better off (but all buyers worse off).
13. If a price ceiling of $14.55 were imposed in this market, then ________ units would be traded.
A. fewer than 1,750.
B. exactly 1,750.
C.
D. more than 1,750 but fewer than 7,625. exactly 7,625.
14. Consider the following two proposals: “Policy A” is a price ceiling of $14.00 and
“Policy B” is a price floor of $16.50. We can infer that
A. Deadweight-Loss would be zero under either “Policy A” or “Policy B.”
B. Deadweight-Loss would be positive and of exactly the same magnitude under either “Policy A” or “Policy B.”
C.
“Policy A” would create a larger Deadweight-Loss than would “Policy B.”
D.
“Policy B” would create a larger Deadweight-Loss than would “Policy A.”

15.
The British auto manufacturer “British Rover” was privatized by “negotiated sale.” This technique of privatization is one in which
A. the enterprise is sold to current managers and employees, typically at a price well below “fair market value.”
B. the entire enterprise is sold to a single buyer, at terms agreed upon by the buyer and the government.
C. shares of stock in the enterprise are sold to the general public, at a price calculated to ensure the sale of all shares.
D. the government seizes ownership of the enterprise without paying any compensation whatsoever to the original owners.
16. _______________________ said, “I could always tell a country was more left wing by how rough the toilet paper was…They can say what they like about
Capitalism, but they sure know what soft tissue is.”
A. Jeffrey Sachs (Columbia University economist).
B. Vladimir Potanin (20 th century Russian businessman).
C. Angus Young (lead guitarist of AC/DC).
D. Karl Marx (19 th
century philosopher, economist, and revolutionary).
17. The Soviet Command Economy was established in
A. 1917, following the Russian Revolution.
B. 1945, at the end of World War II.
C. 1989, after the fall of the Berlin Wall.
D. 2001, shortly after the election of George W. Bush.
18. 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 government support and ultimate international success of British electronic, newbeat, club/dance musicians (e.g., Jesus Jones, EMF, The
KLF, and Big Audio Dynamite), which dramatically enhanced the image of Great Britain throughout the world.
B. The success of British athletes in the 1980 Summer Olympics in Atlanta,
GA.
C. The complete dismantling of the British army in 1981 by Margaret
Thatcher, which successfully allowed the country to realize a “peace dividend” and devote additional productive resources to its welfare state.
D. The military triumph of Britain over Argentina in the Falklands War from
April 1982 to June 1982.
19. __________________ refers to a simultaneous realization of higher inflation along with increased unemployment and decreased growth.
A. A recession
B. Deflation
C. Stagflation
D. Privatization

20. The Misery Index in the United States achieved its lowest value of the 20 th century during the time when ______________________ was President.
A. Barack Obama
B. John F. Kennedy
C. Calvin Coolidge
D. Theodore Roosevelt
21. The European Central Bank was created in _______.
A.
B.
2011
1998
C. 1945
D. 1917
22. According to a study published by the Federal Reserve Bank of Dallas in 2002, the annual cost to society of imposing trade restrictions to save a single job in the
U.S. peanut industry is approximately
A. $0 (since the study proved theoretically that trade restrictions never impose any costs on society).
B. $14,236.
C. $187,223.
D. $523,425,109.
23. The Beveridge Report
A. established the Red Army as the rulers of West Germany in 1945.
B. outlined a series of social programs to “slay the five giants” of want, disease, ignorance, squalor, and idleness, which were plaguing British society at the end of World War II.
C. argued that a system of planning will never be able to achieve efficient outcomes, precisely because under such a system the planners do not have access to the information which would otherwise be generated and revealed by market activities.
D. gave the French government ownership and control of the banking, electricity, gas, and coal industries in the country in the mid-1940’s.
24.
As part of the voucher privatization in Russia in the 1990’s, which group of people was eligible to claim vouchers which could ultimately be exchanged for ownership claims in enterprises by way of “auction like purchases”?
A. Only Russian children, since in the words of Russian President Boris
Yeltsin, “I believe the children are our future; give them ownership shares in private enterprise and let them lead the way.”
B. All Russian citizens.
C. Only veterans of the Red Army.
D. Only “Communist Party Elites.”

25. During the Great Depression, standards for hours, wages, and working conditions for government employees in the U.S. were fixed at
A. artificially desirable levels by the Walsh-Healey Act of 1936.
B. artificially desirable levels by an executive order signed by Herbert
Hoover.
C. artificially undesirable levels by the Simpson-Bowles Commission.
D. artificially undesirable levels by the Hayek-Keynes Act of 1933.
26. ________________ refers to a transition from socialism to market capitalism that advocates rapid deregulation of prices, liberalization of trade, and privatization.
A. Totalitarianism
B.
C.
D.
Shock Therapy
Solidarity
None of the above answers are correct.
27. Which of the following countries implemented a system that relied heavily upon
Indicative Planning after World War II?
A. The Soviet Union.
B.
C.
D.
France.
Germany.
More than one (perhaps all) of the above answers is correct.
28. During the time when FDR was President, the lowest Marginal Tax Rate under the U.S. Federal Income Tax
A. was increased from 1% to 2%.
B.
C. was increased from 4% to 23%. remained unchanged at 25%.
D. was decreased from 4% to 0% (as a result of the U.S. Federal Income Tax being abolished for the duration of the Great Depression and World War
II).
29. At the end of the Korean War, Per Capita GDP was slightly higher in North Korea than in South Korea. By 2011 (after roughly 50 years of North Korea operating under a system of Command Planning), Per Capita GDP in North Korea was approximately __________ of the level of Per Capita GDP in South Korea.
A.
B.
5.6%
51.2%
C. 92.4%
D. 212.8%
30. During the Great Depression, Jacob Maged of Jersey City, NJ was fined $100 and put in jail for 3 months for
A. attempting to assassinate President Roosevelt.
B. charging 35¢ to press a suit.
C.
“insider trading” and “investment fraud.”
D. being unemployed.

31.
In the “Road to Serfdom” Friedrich von Hayek argued that ________________ as central planning replaced individual decision making.
A. Communism would often lead to Capitalism
B. Socialism would often lead to Totalitarianism
C.
“price controls” would often lead to “free markets”
D. Nationalization would often lead to Privatization
32. Between 1929 and 1933, prices of agricultural output in the U.S.
A. decreased by more than 50%, leading to a sudden drop in the incomes of farmers.
B. increased by about 20%, slightly below the inflation rate over this time.
C. increased by over 75%, dramatically increasing the cost of and limiting access to food (particularly for low and middle class Americans).
D. None of the above answers are correct.
33. ____________________ relied primarily upon free market institutions, but with a significant “social safety net.”
A. The Nationalization of British Industry
B. The French system of Planification
C. The German Social Market Economy
D. Soviet Five Year Plans for Industry
34. As a result of the Mellon-Coolidge-Harding tax cuts, the “Highest Marginal Tax
Rate” under the U.S. Federal Income Tax was decreased from 73% in 1921 to
25% by 1929. Further, the total amount of revenue generated by the U.S. Federal
Income Tax ______________________ between 1921 and 1929.
A. decreased slightly from $940 million to $910 million
B. decreased dramatically from $3.1 billion to $560 million
C. increased slightly from $2.46 billion to $2.51 billion.
D. increased from $700 million to over $1 billion
35. Between 2003 and 2009, the ratio of the unemployment rate in Spain to the unemployment rate in the United States was approximately ________.
A. 3.47
B. 1.85
C. 0.96
D. 0.42
36. Which of the following industries would be considered part of the “Commanding
Heights” of an economy?
A. Banking and Finance.
B. Leisure and Recreation.
C. Music and Arts.
D. More than one of the above answers is correct.

37. Following the Great Depression, the U.S.
A. abolished all regulation of business, in an attempt to increase economic prosperity by allowing firms to make larger profits.
B. transformed into an economy which operated under a system of
“Command Planning.”
C. entered a period in which economic performance remained poor for several decades.
D. None of the above answers are correct.
38. _________________________ can be thought of as a reversal (or undoing) of
Nationalization.
A. Privatization
B. Planifiaction
C. Totalitarianism
D. The breakdown of the Phillips Curve
39. Starting in January 1929, the volume of global international trade
A. remained roughly constant for 96 straight months (neither increasing nor
B. decreasing by more than 1% between any two consecutive months). increased for 136 straight months.
C. decreased for 6 straight months.
D. decreased for 53 straight months.
40. Olivier lives in a country with economic policies that can be described as a
“welfare state.” This implies that
A. the average standard of living (measured by per capita income) in
Olivier’s country is significantly higher than it would otherwise be.
B. the economy of Olivier’s country realizes “full employment.”
C. the government in Olivier’s country assumes the responsibility of improving the welfare of its citizens (particularly in regards to matters related to healthcare, education, employment, and social security).
D. the poverty rate in Olivier’s country is 0% (i.e., there are no poor people in the country).

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