2- Econ 330 final study guide

The Great Moderation refers to:

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.

The economic system that endows property rights upon the individual but has significant government oversight and management over how individuals direct their property, is best labeled:

State capitalism

Communism spread across the world after WWII but the catalyst for this expansion traces back to the:

Bolshevik Revolution

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

Labor, Democratic

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

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

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

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

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

Correct: c)

The federal government mandates that sugary beverages be labeled as such so consumers can make more informed judgements about what to purchase. What type of policy is this?

Indicative planning

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

a) Do consumers or government determine what gets produced?

b) Is political authority democratic or autocratic?

c) Who can own land?

Correct: All the other choices

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

cash bonuses

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

Statically efficient

Which of the following is NOT a typical economic outcome pursued by modern nation-economies?

Equality of Income

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

Real Per Capita GDP

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

Happiness Index

According to Karl Marx:

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

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

Economies evolve due to conflict and ultimately revolution.

According to Marx, which of the following is true?

Capitalism causes one social class to conflict with the other.

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

a) SDSU

b) McDonalds

c) the NFL

d) All other choices

Correct: d) All other choices

Which of the following movements is underway in Hong Kong?

Pro-Democracy activists are fleeing to Taiwan

Which of the following foreign policy areas are Trump and Biden most likely in agreement?

Reducing the number of troops in Afghanistan and the Middle East.

Which country recently elected a new prime minister?

Japan

In no more than 3-4 sentences, contrast the concept of Francis Fukayama's "End of History" and Samuel Huntington's "Clash of Civilization"

Francis Fukayama's "End of History" states that since western liberalism won the cold war against communisim, there were no other options and western liberalism would prevail. Samuel Huntington's "Clash of Civilization" states that while western liberalism won the battle, the next cold war or conflict that will arise will be because of a clash of culture rather than a clash of political or economic differences. Fukayama was optimistic that because there were no more economic alternatives there would be no more wars or battles between regions, Huntington argues that the next conflict will be due to culture.

Using the table below evaluate the following statement in no more than 1-2 sentences.

"Capitalism is more conducive to generating good economic outcomes than socialism"

False, good outcomes could be the result of open trade.

In no more than 3-4 sentences explain Hayek's concept of "Human Action" and "Spontaneous Order" by using the skating rink or traffic light analogy from the lecture videos.

"Human Action" and "Spontaneous Order" is best explained through the analogy of a skating rink. There are no signs or rules to guide individuals where to skate on the rink, yet skaters rarely bump into others. There is a spontaneous creation of how humans ought to behave in the skating rink that was created by humans. If a human were to go against this and disrupt the order, then they are at risk of getting kicked out of the skating rink.

In no more than 3-4 sentences and using the Marxian Theory of History, describe why the institution of slavery did not really exist for tens of thousands of years under Primative Communalism.

Slavery does not exist under primative communalism because production is so low that any attempt to expropriate value from another would preclude the slaves survival, and hence the value of the institution to masters. In essence, productivity must grow sufficiently to make slavery worthwhile to the master so he/she can actually get something for their coersive efforts.

In no more than 3-4 sentences explain how a worker's Marginal Revenue Product could increase causing him to have more income than other workers. Why might some object to any income inequality created by MRP differences?

If a worker is more productive then they can increase their Marginal Revenue Product which in turn will increase their wage due to the material incentives that reward productivity. Since Marginal Revenue Product is influenced by the accessibility of certain resources like education or infrastructure then this creates an unequal playing field as not everyone has the same access to said resources. Thus some might object to income inequality as the increase in ones wage may be a result of more accessibility rather than pure productivity.

In no more than 3-4 sentences explain how today's Republicans and Democrats have different perspectives on capitalism. Is it a capitalist vs socialist debate? What figures in history are most significant to each party and do the views of these figures define the parties?

It is not a polarized debate since both parties to date tend to favor capitalism over socialism but Republicans favor a more market-centered approach and are concerned with too much power resting in the state. Democrats, in contrast tend to favor a more state-centered approach and are concerned with market power such as monopolies/oligopolies. Republicans are more likely to take their lead from Locke and Smith, Democrats from Marx and Hobbes. Both parties, however, are moderated and cannot be defined by the ideas of a few people or ideologies.

In no more than 3-4 sentences contrast the concept of "Homo Economicus" and "Homo Soveticus".

Homo Economicus refers to a person motivated by material rewards such as money and upward mobility. Homo Soveticus refers to a person motivated by non-material/moral rewards such as praise, respect, community, team, and allegiance to the collective.

In no more than 3-4 sentences, explain why economic growth in the former USSR was impressive after WWII but began to subside each successive decade through the 1980s. What was the eventual outcome?

Rapid capital accumulation and corresponding industrialization allowed growth rates to soar. This was fueled by government ushered savings. Eventually, the marginal benefits of industrialization subsided and growth stalled leading to large-scale economic hardship and the abandonment of the Soviet Communist Model.

Which of the following countries has recently been experiencing high inflation, a dramatic increase in its demand for U.S. dollar reserves, and sanctions imposed on it's leadership by the Trump Administration?

Iran

Which of the following is least accurate regarding COVD-19 in the U.S and Europe from June to the present?

a) The daily death rate from COVD is less than 4 per 1 million people.

b) The EU now has higher case rates than the U.S.

c) Testing rates have increased since summer.

d) The U.S. has higher death rates than the EU.

Correct: b)

According John Maynard Keynes:

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

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

Adam Smith would most likely agree with which of the following statements?

a) "An all-powerful state is necessary to contain the chaos of the market"

b) "Greed is a natural right"

c) "Markets are one of many examples where individuals voluntarily come together to improve their lives"

d) "Greed is always good"

Correct: c)

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

a) The social cost exceeds the private cost

b) The private cost exceeds the social cost

c) There is a positive external cost

d) The deadweight loss is zero

Correct: a)

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

Volatile business cycles

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

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

According the Austrian School of Economics and Hayek in particular:

Socialism cannot create the information necessary to run a productive economy

Socialism can be best defined as:

An economic system that involves state or collective ownership of resources and a centralized means of distribution

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"

"The ABCs of Communism" represents:

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

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

Space exploration

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

Vertical but no horizontal trust

The Soviet system was most like the U.S system in which of the following ways?

Material rewards for more productive managers

Which of the following is a typical goal of socialism?

Equality of consumption

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

Commanding Heights

Common law differs from Civil law in which of the following ways?

Common law uses precedent whereas Civil law uses code

Common law is most associated with?

Judicial precedent

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

Strong venture capital markets

Which of the following characteristics of the Anglo Model would a minority-share investor find appealing?

a) high market capitalization

b) widely held stock available on a major stock exchange

c) all of the others

d) the potential for a hostile takeover should the executives mismanage the company

e) profit sharing for workers

Correct: c)

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

The American Revolution

All but which of the following represent a typical justification for deregulation?

a) all of the other choices

b) to advantage profiteering businesses at the expense of consumers.

c) to move control of business away from the government to the individual firms and consumers.

d) to improve business productivity

e) to reduce inefficiency

Correct: b)

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

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

Which of the following did NOT evolve from the steel and coal common markets created after WWII in Europe?

European Central Bank

Compared to a worker in the U.S., a worker in a European Model country would be less likely to have which of the following:

full-time work

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

greater government involvement in economic decisions

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.

Which of the following are standards set by the European Union to ensure member countries maintain a minimum level of financial health?

a) Adoption of the Euro as each nation's primary currency

b) debt to GDP ratio of greater than 60%

c) Fiscal deficits of more than 3%

d) none of the others

Correct: d)

Compared to the Anglo Model, European Model countries tend to have a _______________gap between what employers pay workers and the worker's take-home pay. They also tend to have_________ worker and ____________shareholder control over company decision-making.

greater, greater, lesser

Which of the following countries uses the Euro as their currency but is not a member of the European Union?

a) Croatia

b) None of the other choices

c) Russia

d) Turkey

Correct: None of the other choices

Which of the following is most accurate regarding the European Union?

a) The EU, if analyzed as a nation, has the highest GDP in the world.

b) All EU nations utilize the Euro as their currency

c) Member countries typically have high per capita incomes.

d) none of the others

Correct: d)