4- Econ 990 Exam Practice Questions

1) Which of the following is most accurate regarding the aftermath of the industrial revolution of the 18th and 19th centuries?

Abject poverty has been eliminated in most of the western world but still exists in northern Europe and Japan.

The ratio of global GDP produced by the Asian countries has shrunk relative to the west.

Africa has experienced the greatest increase in per capita GDP due to their higher population relative to other areas of the world.

While countries like the U.S and those of Western Europe have grown dramatically, subsistence living has remained the norm throughout the rest of the world.

The ratio of global GDP produced by the Asian countries has shrunk relative to the west.

2) Which of the following would be the best indicator for comparing the standard of living across different countries?

A) GDP

B) Per Capita GDP

C) Longevity statistics

D) GDP growth rate

B) Per Capita GDP

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

A) Western civilization will end as the result of a violent war of culture.

B) Communism will end by 2050 ushering in a new era of western liberalism.

C) Domestic terrorism poses the greatest threat to our national identity and represents the "end of history".

D) Capitalism represents the superior economic system that proved its viability upon the end of the Soviet Empire in the late 20th century.

D) Capitalism represents the superior economic system that proved its viability upon the end of the Soviet Empire in the late 20th century.

4) The Great Moderation refers to:

A) The thousands of years that man has strived to improve economic performance and escape subsistence living.

B) The period of the late 20th and early 21st centuries that represent decreasing government involvement in many western countries and greater stability in economic performance.

C) The period of the late 20th and early 21st centuries that represent increasing government involvement in many western countries and greater stability in economic performance.

D) A period from approximately 1980-2007 when political leaders in the U.K., U.S., and Germany shift away from decades of fascist leadership to form a "Great Moderation" toward democracy.

B) The period of the late 20th and early 21st centuries that represent decreasing government involvement in many western countries and greater stability in economic performance.

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

A) A stockholder that owns shares of Apple invests in Microsoft and does not inform the board of directors.

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

C) An insurance agent earns a commission by selling an insurance policy to a client.

D) A member of the board of directors of a major corporation votes to lower the pay of the acting CEO.

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

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

A) Higher prices for the product

B) Lower prices for the product

C) Long-waiting lines for the product

D) Inflation

C) Long-waiting lines for the product

8) Which type of incentive is most likely to be used in a planned economy?

A) Material

B) Punitive

C) Monetary

D) Adverse

B) Punitive

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

A) Directives

B) Institutions

C) In-directives

D) Social Mores

B) Institutions

10) The ___________represents the principal and the _______________represents the agent:

A) Stockholder, Board of Directors

B) CEO, Board of Directors

C) Board of Directors, Shareholders

D) Citizens, Dictator

A) Stockholder, Board of Directors

11) Which is the most consistent with the ideas of Karl Marx?

A) Property rights exist under communism.

B) Economies evolve through revolution.

C) Socialism is the most advanced stage of economic evolution.

D) All the above.

B) Economies evolve through revolution.

12) In the class lecture we talked about market socialism and utilized which of the following historic regions as the best example of such a system?

A) Sweden

B) Czechoslovakia

C) Yugoslavia

D) Scotland

C) Yugoslavia

14) Which of the following is the least objective metric of success in evaluating different economic systems?

A) Gini Coefficient

B) Capital Utilization Ratio

C) GDP

D) GDP Per Capita

A) Gini Coefficient

15) Which of the following are important questions that help define an economic system?

A) Who can own land?

B) Is political authority democratic or autocratic?

C) Do consumers or government determine what gets produced?

D) All the above

D) All the above

16) "Capitalism" is most associated with which of the following?

A) Individual property rights, material incentives, democracy, and decentralized information.

B) Material incentives, centralized information, democracy, collective property rights with markets facilitating exchange between collectives.

C) Collective ownership of resources, decentralized information, material incentives, and democracy.

D) Material incentives, centralized information, individual property rights, democracy.

A) Individual property rights, material incentives, democracy, and decentralized information.

17) If the U.S. is growing it's GDP per capita at the maximum sustainable rate and producing at full employment, it would be most accurately represented as:

A) Producing at 80% capacity

B) Dynamically efficient

C) Statically efficient

D) All the above

D) All the above

18) Countries that have grown intensively typically have _________when compared to countries that have only grown extensively.

A) Higher levels of technology

B) Higher standards of living per person

C) Greater dynamic efficiency

D) All the above

D) All the above

19) Promoters of planned socialism prefer greater collective influence over decision-making to counter capitalism's _________________:

A) High mortality rates

B) High material abundance.

C) "Unfair" income inequality

D) Low living standards of the poor.

C) "Unfair" income inequality

20) Suppose the United States has a Gini coefficient of 0.35 and Sweden has a Gini coefficient of 0.65, which of the following statements is true?

A) The distribution of income is more equal in Sweden.

B) The Lorenz Curve for the U.S. is bowed further to the right (away from the 45-degree line).

C) Income distribution is unfair in Sweden compared to the U.S.

D) The distribution of income is more equal in the United States.

D) The distribution of income is more equal in the United States.

23) If a Marxist revolution were successful in a previously capitalist country, which of the following is the new government least likely to do?

A) Ban religion

B) Assign jobs to individuals and mandate employment.

C) Set up a democratic form of government.

D) Provide free, public education, to children.

C) Set up a democratic form of government.

25) According to Marx's Theory of History, which of the following NOT a characteristic of the Capitalist system?

A) Class conflict

B) Surplus value appropriated from the Proletariat.

C) Superstructure that empowers the Bourgeoisie.

D) Inevitable revolution.

E) Low material standard of living.

E) Low material standard of living.

1. Mercantilism is best represented by which of the following?

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

b. British government increasing taxes on American colonies.

c. The purchase of colonial sugar by the British in the West Indies.

d. The sale of gold by the British to pay overseas debts.

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

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

a. Monopoly power

b. Negative externalities

c. Positive externalities

d. All the above

d. All the above

3. Which of the following is most likely to lead a country into an industrial revolution?

a. High savings rates.

b. Subsistence living.

c. Large proportion of citizens working in manufacturing.

d. Religious-based education

a. High savings rates.

4. Adam Smith would most likely agree with which of the following opinions?

a. Self-interest can be leveraged for the betterment of society.

b. Our bread is baked out of the benevolence of the butcher.

c. Natural law is "Unnatural".

d. Government is not necessary.

a. Self-interest can be leveraged for the betterment of society.

5. Markets pursue an efficient allocation of resources in which of the following ways?

a. When there are shortages, buyers compete, causing prices to drop.

b. When there are surpluses, sellers compete, causing prices to increase.

c. When there are shortages, sellers compete, causing prices to drop.

d. When there are surpluses, sellers compete, causing prices to drop.

d. When there are surpluses, sellers compete, causing prices to drop.

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

a. Failure to produce non-rival and non-excludible goods.

b. Failure to produce rival and excludable goods.

c. The rich get richer, and the poor get poorer.

d. A business cycle causing depressions every 10-12 years.

a. Failure to produce non-rival and non-excludible goods.

According to the Austrian School of Economics and Hayek in particular:

a. Redistribution of income is critical to creating an egalitarian income distribution.

b. There is a veil of ignorance justifying greater use of planned socialist principles.

c. Socialism cannot create the information necessary to run a productive economy.

d. People are irrational, so government policy must be used to stabilize the economy.

c. Socialism cannot create the information necessary to run a productive economy.

8. The Anglo Saxon model is most influenced by which of the following people?

a. English Philosopher, John Locke

b. American President, George Washington

c. German Philosopher, Karl Marx

d. Soviet President, Mikhail Gorbachev

e. None of the above

a. English Philosopher, John Locke

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

a. Fascism

b. Communism

c. Commanding Heights

d. Path Dependence

e. Market Socialism

c. Commanding Heights

10. Planned Socialism typically involves:

a. A mixed means of allocation that utilizes markets for raw materials such as coal but centrally plans the production of necessities such as food and clothing.

b. State ownership of capital and individual ownership of real estate.

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

d. An authoritarian form of government that is democratically elected.

e. An economic system that involves distribution of goods via small collectives known as "Micro Commanding Communes (MCCs)".

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

11. Which of the following is most accurate regarding the historical roots of the American system?

a. It was modeled after the French monarchy of Louis the 14th.

b. It uses a codified, rather than a common law, legal system.

c. A revolutionary war was fought, in part, due to British tax policy in colonial America.

d. There are four separate but equal branches of government.

e. The first industrial revolution began in the United States in the late 18th century.

c. A revolutionary war was fought, in part, due to British tax policy in colonial America.

12. Which of the following is a typical goal of capitalism?

a. Equality of wealth

b. Equality of income

c. Equality of consumption

d. Equality of opportunity

e. Inequality of wealth, income, consumption, and opportunity

d. Equality of opportunity

13. The Soviet system of central planning was very successful in which of the following ways?

a. Information technology (IT) advancements.

b. Adapting to frequent changes in the demand for goods and services.

c. Increasing returns to capital over time.

d. Space exploration.

d. Space exploration.

14. Which of the following moral philosophers would have been most influential in the development of the Soviet economy?

a. John Maynard Keynes

b. John Locke

c. Thomas Hobbes

d. Ludwig Von Mises

c. Thomas Hobbes

15. According to American Economist, Walter Rostow, sustained economic growth requires all but which of the following:

a. Religious-based education system

b. Infrastructure to support mass mobility

c. Stable financial system

d. Standard of living above poverty (i.e., middle class)

a. Religious-based education system

16. Homo Soveticus, as applied in the Soviet Union, is exemplified by which of the following phrases?

a. “Each man must bear the burden of his own mistakes”

b. “Cast greed aside and act solely for the benefit of the country”

c. “Work hard and you will reach your God-given potential”

d. “Ambition is at the heart of individual greatness”

b. "Cast greed aside and act solely for the benefit of the country"

17. Under planned socialism which of the following would most undermine state control of the economy.

a. Vertical but no horizontal trust

b. Horizontal but no vertical trust

c. Horizontal and vertical trust

d. Neither vertical nor horizontal trust

b. Horizontal but no vertical trust

18. In Feudal England, which of the following would be least common?

a. Artisans and craftsmen specializing in home-based production and trading in local markets.

b. Strong unions for specific occupations that often had political and economic power.

c. Monarchical style of governance, typically tied to familial lineage.

d. Welfare system that channeled money from churches to the most impoverished classes.

e. Separation of church and government.

e. Separation of church and government.

19. According to Keynes, capitalism will exhibit inherent failures over time; which of the following was he most concerned with?

a. Wars and revolutions

b. Protecting private property from state confiscation.

c. Generating information.

d. Volatile business cycles

e. Maintaining borders since foreigners will always want to relocate to the more prosperous capitalist nations.

d. Volatile business cycles

20. Which of the following least reflects the historical roots of the first industrial revolution in Europe?

a. An early property rights system called "enclosures" that allocated specific plots of land to specific individuals, increasing production and efficiency.

b. Inability of creditors to seize the personal property of shareholders in a bankruptcy.

c. Ability of corporations, rather than the owners, to enter into contracts in the corporate name.

d. British Parliament seizing power from the king, effectively turning the country into a democracy.

e. World War one and the build-up of all over the world.

e. World War one and the build-up of all over the world.

21. In lecture we discussed the lifestyle in the Soviet Union in last two decades before its collapse. Based on this, which of the following is most accurate?

a. McDonalds was one of the most expensive, yet desirable outlets for eating out.

b. Graffiti was commonplace, often defacing iconic statues of soviet leaders.

c. Typical living quarters were large with a private bedroom and bathroom for each household member (one for spouses).

d. When government fixed-prices were finally allowed to adjust based on market forces, the Ruble increased in value and prices on most goods dropped significantly.

e. There was always a shortage of soviet-made shoes.

a. McDonalds was one of the most expensive, yet desirable outlets for eating out.

23. Based on the second project, which is the most accurate regarding the United States data?

a. We are running a trade surplus.

b. Total national debt is less than total GDP.

c. Stock market capitalization is low, hovering around 45% of GDP.

d. Investment exceeds consumption as a percent of GDP.

e. None of the above

e. None of the above

26. The Marxist view suggests that if a coffee thermos sells in the marketplace for $40 and the owner of the business incurs $30 of costs to make the product, the owner of a business is entitled to ______ upon selling the product.

$40 of surplus value

$30 of surplus value

$10 of surplus value

$0 of surplus value

$10 of surplus value

27. According John Maynard Keynes:

Redistribution of income is critical to creating an egalitarian income distribution

There is a "leaky bucket" in redistribution of income

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

Markets do not inherently create a business cycle

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

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

Ukraine

Russia

Vietnam

Cuba

United Kingdom

United Kingdom

Social Democrats in Germany are a party most similar to the _______in England and the _______in the U.S.

Conservatives, Democrats

Christian Democrats, Republican

Labor, Democratic

Communists, Libertarians

Labor, Democratic

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

Communism will end by 2050 ushering in a new era of western liberalism.

Western civilization will end as the result of a violent war of culture.

Islam poses the greatest threat to Western Liberalism

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

Which of the following is most accurate regarding the aftermath of the industrial revolution of the 18th and 19th centuries?

While countries like the U.S and those of Western Europe have grown dramatically, subsistence living has remained the norm throughout the rest of the world.

The ratio of global GDP produced by the Asian countries has shrunk relative to the west.

Africa has experienced the greatest increase in per capita GDP due to their higher population relative to other areas of the world.

Abject poverty has been eliminated in most of the western world but still exists in northern Europe and Japan.

The ratio of global GDP produced by the Asian countries has shrunk relative to the west.

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

Institutions

Directives

Culture

In-directives

Institutions

Which type of incentive are most likely to be used to deal with the Principal Agent Problem in a market-based capitalist economy?

certificate of accomplishment

threat of termination

employer praise

cash bonuses

cash bonuses

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

An insurance agent earns a commission by selling an insurance policy to a client.

A member of the board of directors of a major corporation votes to lower the pay of the acting CEO.

A majority shareholder of Apple invests in Microsoft and does not inform the board of directors.

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

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

Which of the following are important questions that help define an economic system?

All the other choices

Do consumers or government determine what gets produced?

Who can own land?

Is political authority democratic or autocratic?

All the other choices

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:

The Chinese economy will be at 40 trillion GDP in 10 years.

Per capita GDP is currently $22,500.

All other choices

Per capita GDP will double in 10 years.

Per capita GDP will double in 10 years.

Which of the following is the least objective metric of success in evaluating different economic

systems?

Happiness Index

Gini Coefficient

Income Per Capita

Capital Utilization Ratio

Happiness Index

Which of the following is NOT a typical economic outcome pursued by modern

nation-economies?

Viability

Equality of Income

Economic Growth

Stability

Equality of Income

The U.S. economy grew an average of 3 percent per year from 1900-2023 due to technological

and capital advances. Over this same time frame the population grew on average 1%. Which of

the following types of growth and efficiency best represents the U.S. over this time frame?

intensive growth with dynamic efficiency

extensive growth with dynamic efficiency

intensive growth with static efficiency

extensive growth with static efficiency

intensive growth with dynamic efficiency

According to Marx, which of the following is true?

the state becomes a means through which the political class confiscate the wealth of the social class.

the forces of production will eventually block the relations of productions.

capitalism causes one social class to conflict with the other.

economic evolution is the result of a superstructure determined by the Proletariat

capitalism causes one social class to conflict with the other.

In terms of material abundance, true Communism is likely most analogous to which of the following preceeding economic systems?

Capitalism

Primitave Communalism

Socialism

Feudalism

Primitave Communalism

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

Thomas Malthus

David Ricardo

all the other choices

Charles Darwin

Charles Darwin

The False Consciousness of Capitalism suggests a capitalist is:

inherently immoral seeking to enslave the population through force.

not inherently immoral but acts as such due to the superstructure of society.

inherently immoral and purposely acts to extract surplus value from the masses.

not inherently immoral but acts as such due to the greater power of the proletariat.

not inherently immoral but acts as such due to the superstructure of society.

Markets pursue an efficient allocation of resources in which of the following ways?

When there are shortages, sellers compete, causing prices to increase

When there are surpluses, sellers compete, causing prices to increase

When there are surpluses, sellers compete, causing prices to drop

When there are shortages, buyers compete, causing prices to drop

When there are surpluses, sellers compete, causing prices to drop

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

The rich get richer and the poor get poorer

A business cycle causing depressions every 10-12 years

Failure to produce rival and excludable goods

Failure to produce non-rival and non-excludible goods

Failure to produce non-rival and non-excludible goods

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

There is a positive external cost

The private cost exceeds the social cost

The deadweight loss is zero

The social cost exceeds the private cost

The social cost exceeds the private cost

The moral philosopher most influential in the American style of economics and politics is?

Thomas Hobbes

John Locke

John Maynard Keynes

Milton Friedman

John Locke

Which of the following is NOT a likely justification for state intervention in the market?

Rich are getting richer and the poor poorer

Markets may fail to produce goods that are non-rival and non-excludible

Markets may fail to produce goods that are rival and excludible

A Great Depression

Markets may fail to produce goods that are rival and excludible

Which of the following is not a typical goal of socialism?

Equality of income

Equality of voting

Equality of Consumption

Equality of wealth

Equality of voting

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

"Work hard and you will reach your God-given potential"

"Each man must carry the weight of the world on his shoulders"

"You are part of something bigger than yourself"

"Ambition is at the heart of individual greatness"

"You are part of something bigger than yourself"

Planned Socialism typically involves:

An economic system that involves distribution of goods via small collectives known as "MicroCommanding Communes (MCCs)"

A mixed means of allocation that utilizes markets for necessities and governments for military protection only

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

An authoritarian form of government that is democratically elected

State ownership of capital and land but individual ownership of labor

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

If you were a tech start up company that needs millions of dollars in funding to get going, which of the following countries would be most compatible with your goals?

France

Germany

Honduras

U.S.

US

Which of the following least reflects the historical roots that spawned the first industrial revolution in Europe?

Ability of corporations, rather than the owners, to enter into contracts in the corporate name

The American Revolution

An enclosure system in Feudal Europe

British Parliament seizing power from the king, effectively turning the country into a democracy

Inability of corporations to seize the personal property of shareholders in a bankruptcy

The American Revolution

One of the primary benefits of the corporate form of ownership is?

none of the other choices

as a shareholder you get direct control over management decisions.

as a worker you are "at will" in employment, protecting you from termination without due cause.

as a bondholder you are guaranteed to recover your money if the business goes bankrupt.

as a stockholder you cannot be sued personally for the obligations of the business.

as a stockholder you cannot be sued personally for the obligations of the business.

Which of the following would be most important for a capitalist country to encourage investment in a broad array of new technologies?

High market capitalization

Impersonal banking system

Volatile markets with a high degree of speculation

Strong venture capital markets

Strong venture capital markets

Which of the following is most accurate regarding the alliances that eventually led to the formal formation of the European Union?

It began as a common market between six european nations.

It began with the formation of the European Central Bank

It began with a post-WWII agreement to adopt a common currency, the Euro

It evolved after WWI to help allied nations recover.

It began as a common market between six european nations.

Which of the following could provide one EU country an advantage over another EU country in terms of governing influence?

Commissioner count in the EU Commission.

All of the other choices

Council member count in the EU Council.

population

fiscal compliance

population

The European model is most distinctive from the Anglo model in which of the following ways?

greater government involvement in economic decisions

an emphasis in maximizing profits, even if it means very low wages.

Less liklihood of insider trading in stock markets

more fertile environment for start-up companies.

more corporate transparancy

greater government involvement in economic decisions