FINALLY!! econ 330 final exam

In a planned economy which of the following is most likely to occur if there is a shortage of a product?

Long-waiting lines for the product

Say the Chinese economy is currently 20 trillion dollars in GDP, grows at a rate of 8% annually, has a population of 1 billion, and a population growth rate of 1% annually. From this data we can conclude:

Correct Answer All other choices

Countries that have grown intensively typically have _________ when compared to countries that have only grown extensively.

All other choices:

-Higher levels of technology

-Greater dynamic efficiency

-Higher standards of living per person

Which type of incentive is most likely to be use in a planned economy?

punitive

According to Marx, which of the following is true?

capitalism causes one social class to conflict with the other.

Which of the following free-market philosophers believed that Capitalism would end because its image would be tarnished by corruption, causing people to seek out Socialism as a more equitable alternative.

Schumpeter

Which of the following enterprises would most likely face a soft budget constraint.

SDSU

Which of the following Philosophers would have aligned most with Marx in terms of his Theory of History?

Charles Darwin

According to Karl Marx:

Economies evolve through history when the relations of production conflict with the forces of production.

According to the WSJ articles, which of the following regions is on the verge hyperinflation?

Argentina

According to the WSJ articles, which of the following is most accurate?

A new law in Holland, if passed by the senate, would establish working from home as a legal right.

According to the WSJ articles, which of the following represented goals under the leadership of PM Shinzo Abe?

Ease the money supply to stimulate economic growth.

In his essay "The End of History" Francis Fukuyama contents:

Capitalism represents the superior economic system that proved its viability upon the end of the Soviet Empire

Which of the following countries has NEVER operated under a Communist Regime?

United Kingdom

The "Clash of Civilization" described by Samuel Huntington considers future wars to be:

defined by culture that transcend national boundaries.

Which of the following countries would be best compared to understand the effect of different economic systems on economic outcomes?

China vs. Hong Kong

Adverse selection and moral hazard are problems related to which of the following economic institutions?

decision-making

The principal-agent problem is best exemplified by which of the following scenarios?

A babysitter on duty invites her boyfriend over without telling the parents employing her.

"Rules of the game" can also be described as economic:

institutions

The ___________ represents the principal and the _______________ represents the agent:

Stockholder, Board of Directors

After WWII which of the following nations integrated elements of both capitalism and socialism to create a unique type of "market socialism"?

Yugoslavia

Which of the following does NOT help explain the collapse of the Yugoslavian nation in the 1990s?

All other choices

-question worded incorrectly

Which of the following is most accurate regarding Yugoslavia?

It was a nation unified by a common ruler

Which of the following would most likely occur in a capitalist economy?

Failure to produce non-rival and non-excludible goods

Mercantilism is best represented by which of the following?

Colonization of the Americas by European powers in the 15th century

According John Maynard Keynes:

The capitalist system is unstable, but government can use activist policies to manage it

According the Austrian School of Economics and Hayek in particular:

Socialism cannot create the information necessary to run a productive economy

Government intervention in a capitalist system is often justified based on:

All other choices:

-Monopoly power

-Positive externalities

-Negative externalities

According to Mises and Hayek's, planned socialism is inferior to free-market capitalism due to its:

Inability to produce enough information for efficient economic decision-making

If a new coal factory opens in a neighborhood and emits plumes of smoke into the air, which of the following is most accurate?

The social cost exceeds the private cost

According to the WSJ articles, which of the following is least accurate?

France claimed Germany was hoarding fuel and using Moscow as an excuse.

Based on the WSJ articles, which of the following is true?

China has accused the U.S. of trying to create an alliance of Asian countries similar to NATO

Based on the WSJ articles, which of the following is NOT an issue currently faced by the EU nations.

high interest rates

Government control over the major industries is usually referred to as:

commanding heights

Planned Socialism typically involves:

State or collective ownership of resources and a centralized locus of distribution

Under planned socialism which of the following would the Central Planning Board most prefer?

Vertical but no horizontal trust

Which of the following moral philosophers would have been most influential in the construction of the Soviet economy?

Thomas Hobbes

"The ABCs of Communism" represents:

A book whose primary objective was to inspire support for communism among workers

Homo Soveticus, as applied in the Soviet Union, can best be exemplified by which of the following phrases?

"You are part of something bigger than yourself"

Commanding Heights refers to which of the following?

Government control over the major industries of an economy

Extensive Growth

-Results from expansion of inputs

-Represented by growth in GDP, but not per capita GDP.

Intensive Growth

-Results from increased input efficiency

-Represented by growth in per capita GDP

-Typically reflects changes to institutions and/or technology

Allocative Efficiency

Allocating resources toward the goods and services people desire.

Static Technical Efficiency

-economy producing at capacity at a point in time

-Operating on the Production Possibility Frontier (PPF)

-Often measured by a capacity utilization ratio

-Results in lowest average cost production

Dynamic Technical Efficiency

-Economy increasing capacity over time

-Shifting the PPF out

-Measured by growth in potential GDP

-Results in lowering the average cost of production over time

-Heavily influenced by: Resources, technology, Institutions

Equity in income distribution is highly subjective

-Equal opportunity: distribution is based on effort, frugality, inheritance, physical and human capital, luck, etc.

-Equal outcome: distribution based on state evaluation of "equity" that may or may not be democratically determined

-Mixed evaluations tend toward government subsidies, taxes, transfers, and other means based on specific circumstances (e.g. aid to the poor, disabled, elderly, etc..)

Marx

-Capitalism is unsustainable

-Focused on the institutional arrangements and how they change over time

-History involves the real struggle for survival to deal with the economic problem of scarcity

- The world is not static but "becoming", evolving; Unilineal view (e.g. Darwin's evolution)

marxist fundamentals

-Labor Theory of Value: All commodity value comes from labor

-Surplus Value: Any value expropriated from the worker (i.e. profits, interest, and rent)

-Base of Society: The economic system that determines the productive relationships entered into

-A history of inferior economic systems has generated class conflicts that are the primary causes of human hostility, misery, and evil.

-Superstructure of Society: Religion, art, government, law, and education

-Forces of Production: Resource allocation naturally progressing through time. - Labor—Land—Capital—Technological

-Relations of Production: Relationships people must enter into, in order to survive and produce

-Economic Evolution: Qualitative Changes occur as the Productive Relations block the Productive Forces unleashing a revolution and the ultimate attainment of a higher level of relations.

Proletariat

A social class owning none of the means of production other than their own labor, which they must rent to the capitalist to survive

Bourgeoisie

he social class owning the means of production (i.e. the capitalist)

Primitive Accumulation

capitalism is a system that allows the Bourgeoisie to exploit the Proletariat through their ownership of the input capital

alienation

people become mere objects, "cogs in the machine", and are removed from their innate talents, curiosity, and ingenuity.

false consciousness

Both classes may fail to see the injustice of the system; innocent oppressor

socialism

-Transition state to Communism

-State planned economy via decentralized councils or committees

-Common ownership of property

-Money and profits are abolished and replaced with labor vouchers to incentive effort

-State will ultimately cease once all remnants of capitalism have withered away.

Communism

- No Classes

- Utopia

- World-wide

- State-less

- Property-less

Schumpeter

-Capitalism is a dynamic process of innovation driven by the pursuit of profits

-Superior firms outcompete and replace inferior firms

-socialism emerges as an alternative to rebalance the economy in favor of the masses

-Capitalism is the optimal economic system but may be unsustainable

hayek

-Democratic societies face the regular choice of collectivism or individualism in the form of legislative mandates

-Collectivism replaces Individualism

-Autocracy/Oligarchy replaces Democracy

-Depressions and wars accelerate collectivism as individuals are willing to sacrifice personal liberties for state sponsored protections

-Capitalism faces an ongoing battle against the forces of Socialism

mises

Socialist Economies Lack:

1) Information: Centralized planning cannot process the considerable amount of information regarding relative prices, quantities, and technologies to generate efficient outcomes

2) Property Rights: Minimal incentive to efficiently utilize scarce resources.

kornai

-capitalist hard budget constraint (profit and limits on inputs)

-socialist soft budget constraint (no limit on inputs)

hobbes

-advocates an all powerful, "Leviathan", state

-An unaccountable sovereign is the remedy for the disorder of nature

-The Leviathan's subjects should accept the "peace and defense" that state power to "terrorize" brings.

locke

-limited state

-natural rights: Property is a natural right derived from the addition of value; Man has a right to defend his "life, health, liberty, or possessions"

-social contract: gov't is used to protect rights

smith

-laissez-faire

-invisible hand

-opposed mercantilism (the seizing and protection of important natural resources plus strong gov't to protect nation)

Veil of Ignorance (Rawls)

-hypothetical scenario in which people would be born without any clue of the advantages of disadvantages that lay before them in life

-In this scenario rational people would choose an equal distribution of income to ensure they are not impoverished.

Monetarism

-Contends price stability is the most critical to economic stability

-Government should only use Monetary Policy to stabilize prices.

rational expectations

-accepts classical tenets and rejects policy activism as impotent

-Individuals use all available information to try to anticipate the future, eliminating the long-term effectiveness of fiscal and monetary policies.

Heirs of Marx & Hobbes

-Concerned with market exploitation and market distribution of income/wealth

-Democrats

-Progressives

-Socialists

Heirs of Locke & Smith

-Concerned with state exploitation and redistribution of income/wealth

-Republicans

-Libertarians

-Anarcho-capitalists

Lenin's New Economic Policy

-privatization of industry restored for smaller enterprises: a sort of "Market Socialism"

-Commanding Heights: Centralization of only the most important industries (e.g. oil, energy, communications, transportation).

Stalin: Socialism in One country

-Stalin decided to focus on perfecting socialism in the USSR before bringing about an international proletariat revolution

-cult of Personality: Use of idealizing propaganda to muster support for a leader

-secret police (KGB)

-homo soveticus

Enrico Barone

Mathematically demonstrated that a centrally planned state could achieve efficient resource allocation if they possessed perfect knowledge of:

1) Individual demand schedules

2)Enterprise production functions

3)Existing stock of producer and consumer goods

Vertical transaction and trust

-Order from an administrative superior that is binding on the subordinate

-Present when subordinates obey orders given to them by superiors

horizontal transaction and trust

-Conducted by subordinates at the same level of the administrative structure without the approval of administrative superiors

-Present when parties to horizontal transactions trust each other sufficiently to engage in transactions not sanctioned by superiors

Autarky

-a situation in which a country does not trade with other countries

-Russian Ruble was not tradeable in foreign exchange markets

-Imports relegated to necessities that could not be produced domestically

-Exports, primarily agriculture, were only to be used to pay for imports.

Perestroika and glasnost

-Gorbachev's economic & political reforms of the Soviet Union

-led to the breakup of the Soviet Union

-decentralization, international trade, more freedom

shareholder

owner of a company

Stakeholders

non-owner affected by the actions of the corporation (managers, employees, suppliers)

hostile takeover

-involuntary acquisition of a publicly traded company

-Increases accountability for mismanagement and undervalued companies.

Market Capitalization

-Market value of all outstanding shares of stock at a given point in time

-Higher stock market capitalization suggest preference for stocks over bonds or bank loans.

common law

-Based on custom and precedents rather than a written legal code

Principle of Judicial Precedent

- Court decisions should be consistent with past decisions. - Superior and Appellate courts evolved to bind lower courts to rulings and create consistency across the different parts of an economy

Thomas Hobbes (European intellectual foundation)

-idea that economic freedom, property rights, and private contracts must be abridged for the public interest.

Mercantilism

- Favors strong state to control trade relationships

- State sells licenses, charters, and grants monopoly rights to special interest groups.

Stakeholder Capitalism

-Places the interests of stakeholders above shareholders (contrasts w/Shareholder Capitalism).

cross-ownership

-Corporations owning shares of other corporations

-May concentrate corporate control in the hands a few large companies

-Reduces minority shareholder influence and incentive for smaller investors to participate.

interlocking directorates

-Directors serving on the boards of multiple companies

-illegal in the US

-reduces shareholder influence and incentive for small investors

insider trading

-A corporate official that trades on information about the company's performance that public shareholders do not possess.

European corporate transparency

-The supply of regular, accurate, and readily accessible information concerning corporate operations and prospects

-Lower in European model

European labor market inflexibility

-creates two tiered labor market

-there are full time employees but many part-time workers

-higher long term unemployement rate

tax wedge

-The difference between the wage received by the worker and the wage paid by the employer

-Higher wedge causes migration of employers and employees to more competitive nations.

European Welfare State

-Larger in European model than others

-Higher payroll taxes

-Elderly population rely more heavily on public transfers for consumption

Asian intellectual origins

-developed in Japan and China

-rapid growth; "Japanese Economic Miracle"

-Confucianism: Notion of a virtuous and powerful government, Loyalty & Nationalism, Solidarity and Collectivism, Bravery and Benevolence

Asian Tigers

-Hong Kong, Singapore, South Korea, Taiwan

-extremely rapid growth with high rates of capital formation

-Free markets, low taxes, minimal welfare state

-Export promotion (rejects import substitution)

-Rapid demographic transition; Universal education

Asian model

-Savings in excess of Investment fuels foreign investment and global integration

-High literacy rates increase productivity and help advance technology

-Low government revenue reduces the size of government, taxes, and regulations, advancing productivity.

Asian corporations

-stakeholder over sharholder

Zaibatsu

-vertical or horizontal conglomerates dominating Japan pre-WWII

-Strong interlocking directorates, bank relationships, and family ties

-Dissolved after WWII by occupational forces.

Kieretsu

-Replaced Zaibatsu organizations

-Vertical or horizontal conglomerates with large banks at the center

-Emphasize growth of conglomerate over profit maximization

Asian labor markets

-Elements of both Anglo and European Models

-Hire and fire system but regulated to provide basic rights to workers

-Highly paternalistic

-Low unionization levels and unions are typically enterprise specific.

share economy

-Employee shares company risk through bonuses as a large percent of their pay

-Adds flexibility to labor costs and may attenuate the business cycle

-Lower historic unemployment rates in Japan support this idea.

Asian Welfare

-Confucianism places greater role on family, over government, support

-Lack of public pension system increases savings rates

Asian Income

-High growth of income without greater inequality

-Greater political stability results in better atmosphere for investment and lowers the costs of capital