Eco335 Dr. Robert Jantzen Exam #3 Review Questions 1. A. According to economic efficiency, what kinds of risks should insurance policies cover? Why so? Why does the US private health insurance market fail to operate efficiently? Discuss in terms of supply side and demand side failures. B. Discuss the Obama Health Care plan. What are its key features? C. Liberals generally support the Obama reforms. Why so? What are their criticisms of the Obama reforms? D. What is the Conservative perspective on the Obama reforms? What is their prescription for fixing the US health insurance system? 2. A. What is Medicare? How is it financed? Why is the program in financial trouble? Is its financing equitable? B. Discuss the Liberal program for reforming Medicare. Would the reforms improve the program’s finances, efficiency and equity? How so? C. Discuss the Conservative program for reforming Medicare. Would the reforms improve the program’s finances, efficiency and equity? How so? 3. A. The immediate cause of the Great Recession of 2008-9 was a financial crisis that arose because many people who had borrowed money for housing were unable to make their payments. Why did the mortgage crisis happen, and once it happened, why did it threaten the entire financial system, not just mortgage lenders? Discuss the roles played by mortgage lenders, government financing agencies (like FNMA and FHMC), mortgage securities (like MBS and CDOs), rating agencies (Moody’s, S&P), government bank regulators and credit default swap issuers (like AIG). B. The Troubled Asset Relief Program (TARP) was the chief government response to the crisis. Did the program “solve” the housing crisis by stabilizing banks that made mortgage loans, decreasing foreclosures and stopping falling housing prices? Why or why not? C. Is the crisis in housing behind us? Why or why not? 4. Self-study exam question A. Why do Conservatives believe the economy is self-regulating? What is the proper role of government in the economy? Why do they believe government policies caused the Great Depression and the Stagflation of the 1970s? B. Why do Liberals believe the economy is not self-regulating? What is the proper role of government in the economy? What role did government play in causing the Great Depression and the Stagflation of the 1970s? C. Why do Radicals believe that both Conservatives and Liberals are wrong about government’s role in stabilizing the economy? Why do they believe that the United States, irrespective of economic policy, is heading towards another Great Depression? OVER 5. Self-study exam question A. In the long run, the economic well-being of a nation’s people depends on their productivity (output per hour produced) and their employment levels. High productivity without jobs doesn’t work, nor does high employment with low productivity. How has productivity behaved in the US in the past 60 years? How about unemployment? B. What is the Conservative prescription for maximizing productivity and employment? Why did the US fail to achieve its potential in the 1970s and why did it perform better afterwards? C. What is the Liberal prescription for maximizing productivity and employment? Why did the US fail to achieve its potential in the 1970s and why did it perform better afterwards? 6. Self-study exam question To an average person, the big three indicators of economic well-being are jobs, income and inflation. How is the US economy doing? Has it recovered fully? Discuss the evidence.