American Free Enterprise Midterm

ECO-3813: Professor Garcia

What is the ancient birthplace of globalization

China

Which country is credited with spearheading the first wave of globalization

Great Britain

What key technology emerged during the Third Industrial Revolution

the internet

Which of the following is subject to human power

the use of a thing

Which of the following is NOT a reason why it is licit for a man to possess his own things

Private ownership rewards people according to how much effort they put into their work

Which of the following is TRUE according to Aquinas

A just price exists but it is not fixed with precision

What are the three factors of production

land, labor, and capital

Which of the following statements is true

Markets are self-regulating

In the Hans Rosling video watched in class, what two dimensions were measured for countries over time? List three observations from the video.

The Hans Rosling Video measured life expectancy and income per person (health and wealth). In the video, I learned that gaining independence helped struggling countries. The industrial revolution drove up life expectancy. Lastly, life expectancy has more than doubled from the 70s to now.

Define globalization and globalism. Describe two winners and two losers from globalization. Then, from a Christian perspective, explain what obligations do winners have towards losers.

Globalization is a phenomenon driven by technology and the movement of ideas, people and goods. Globalism is the belief that free trade and the global economy should take priority over a country's own national interests. Two winners from globalization are the middle class and owners of mobile capital. Two losers are small business owners that can’t compete and isolated countries such as North Korea. In Philippians 2:3-4 we are told to not only look at our own interests, but the interests of others. This means that winners should help losers in any way that they can.

According to Aquinas, explain the three practical advantages of private property. From a biblical perspective, should there be private property? Give a biblical example (verse, story, etc.) to support your answer.

According to Aquinas the three practical advantages of private property are more responsibility, organization, and peace. Genesis 1:26 supports the idea that humans were placed above other creatures. God has control over creation itself but humans were given the use and management of creation. We can own private property but we shouldn’t treat our ownership as an excuse to ignore those in need.

Describe the two types of exchanges according to Aquinas. Describe two circumstances when profit is justified according to Aquinas. Give a biblical example (verse, story, etc.) that illustrates legitimate exchange or explains when exchange is illegitimate or sinful.

According to Aquinas, the two types of exchange are an exchange for necessities and an exchange for profit. An exchange for necessities is something needed to survive while an exchange for profit can lead to greed. A profit can be justified if the item has been improved in some way or if the seller is losing by selling the product. A biblical example of sinful exchange is in Matthew 21 when Jesus drives the merchants out of the temple because they were making money through dishonest and inappropriate practices.

Explain the three mechanisms through which specialization produces economic gains and a rise in efficiency according to Adam Smith. Give a biblical example (verse, story, etc.) of the division of labor or specialization. What is Adam Smith’s warning regarding the negative effects of increased specialization?

To start, increased repetition of a task leads to more efficiency and skill. Smith also believed that with specialization there was less time wasted moving from task to task. Lastly, the use of specialized machinery helped the completion of tasks. In Exodus 18, Moses is told to delegate judicial responsibility instead of doing it all himself. Smith warns that too much specialization can make workers less intelligent and less motivated because they are performing the same simple task without using their minds or learning other skills.

Describe the four principles of taxation according to Adam Smith. Describe two reasons why Adam Smith warns against taxing a firm’s profit.

The four principles of taxation are fairness, certainty, convenience, and efficiency. This means that taxes should be paid according to someone's income, predictable and clear, collected at a convenient time, and inexpensive to collect. Smith argues that high taxes can discourage businesses from investing or expanding, which slows economic growth. He also thinks that businesses may raise their prices or lower their wages to compensate for higher taxes.

Describe the three primary roles of government according to Adam Smith. Explain how education generates positive externalities and how these benefits support government involvement.

The first role of government is defense: to protect citizens from foreign countries. The second role is justice: to protect citizens from each other. The third role is public works such as education, roads, bridges, and societal needs. Education creates positive externalities because it helps people be more productive, make better decisions, and contribute to society. The government should have a role in providing education because everyone benefits from a more educated population.

Define the bourgeoisie and proletariat according to Karl Marx. Explain the conflict between the two classes. From a political and economic perspective, what does Marx ask the proletariat to do?

The bourgeois are the modern capitalists who are higher ups and succeeding in society. The proletarians are the working class who depend on their wages to survive. The conflict that occurs between them is due to the bourgeois wanting to maximize their profits by paying workers less while the proletariat want better wages and working conditions. Marx wants the proletarians to unite and take control of the means of production. Essentially, he wants them to overthrow the bourgeois and create a classless society.

Describe five measures that Karl Marx believes will be generally applicable in most advanced countries under communism.

The first measure is to abolish private property of land. The second is to create a high progressive tax so that the rich pay more taxes. The third is to abolish rights of inheritance so that wealth can’t be passed down. The fourth is to provide free public education for children. The fifth measure is to take control of the media, communication, and transportation.

Describe two similarities and two differences between Adam Smith and Karl Marx. Separately, identify one important concern they share and how their proposed solutions to this concern differ.

Adam Smith and Karl Marx both believed that the economy shapes society and recognized that specialization affects workers. Smith supported capitalism, free trade, and private property while Marx wanted communism and collective ownership. Smith believed free markets and competition could improve living standards. On the other hand, Marx believed that workers needed to unite and overthrow capitalism to create a classless society.