Deck 2: Capitalism and Democracy

Question 1

When critics charge that the bailout package sponsored by President Obama is one in which "losses are socialized and profits privatized," they mainly mean

A) the U.S. economy has become a socialist economy in which the government gets all the profits from economic activity.
B) taxpayers end up paying for corporate losses, but corporations keep the profits.
C) corporate profits eventually go to the government, but losses are borne by the corporations.
D) there is too much government regulation of business.
E) there is not enough government regulation of business.

Answer 1

B

Question 2

Which of the following is a reason why, according to the text, business interests are sometimes thwarted in politics?

A) The Constitution establishes a system of checks and balances.
B) Companies have conflicting political interests.
C) Contrary to popular belief, there is no tension between democracy and capitalism.
D) Most CEOs know they can't get away with trying to buy the votes of members of Congress.
E) Most CEOs are basically honest people.

Answer 2

B

Question 3

According to the text

A) what's good for major U.S. corporations always turns out to be good for the public.
B) capitalism does not require a constant expansion of commodity production.
C) capitalism does require a constant expansion of commodity production, but this expansion has no adverse affects.
D) capitalism does require a constant expansion of commodity production, and this expansion frequently collides with the fact that the world has finite resources.
E) of all possible economic systems, capitalism is the most environmentally friendly.

Answer 3

D

Question 4

The text makes all of the following claims except

A) capitalism's dynamism is also the source of its instability.
B) the alteration of boom and bust is a universal characteristic of capitalism.
C) capitalism is uniquely qualified to promote efficiency and production.
D) capitalism is an inherently undemocratic form of production.
E) of all possible economic systems, capitalism is the least dynamic.

Question 5

In the text, the "Monopoly" game metaphor refers to

A) the virtues of a self-regulating market economy.
B) the need for the state to set rules governing the market.
C) the idea that greed leads to success in the market.
D) the idea that the rules made by the state make the market unfair and inefficient.
E) the assertion that market relations are completely voluntary.

Question 6

The following are all elements of capitalism except

A) the private ownership of the means of production.
B) wage labor.
C) without a buyer for their labor, workers have no means of supporting themselves.
D) peasants are tied to a lord's domain.
E) production for the market.

Question 7

The costs that firms create but taxpayers and individuals end up liable for are called ______________.

A) externalities
B) investments
C) public goods
D) business cycles
E) subsidies

Question 8

According to the text, corporations have all of the following powers except

A) the ability to choose how production is organized.
B) the ability to choose where to invest.
C) the ability to choose what to invest in.
D) the ability to choose whether to invest at all.
E) the ability to set their tax rates.

Question 9

According to the text, elected officials are under enormous pressure to offer inducements to business primarily because

A) wealthy business executives provide almost 90 percent of all campaign contributions.
B) the country's economic well-being heavily depends on decisions made by businesses.
C) high-priced corporate lawyers allow corporate CEOs to break the law without getting caught.
D) the vast majority of elected officials previously served as corporate CEOs.
E) most elected officials are corrupt.

Question 10

According to the text, government regulation

A) invariably undermines capitalism.
B) is essential to the operation and survival of capitalism.
C) is contradictory to the principles upon which a democracy is supposed to operate.
D) was the main cause of the economic downturn that began in 2008.
E) may have been essential to U.S. capitalism in the nineteenth century but is no longer necessary.

Question 11

According to the text, the principal cause of the housing crisis in the first decade of the twenty-first century was

A) too much government regulation.
B) a severe drop in the stock market.
C) the government's refusal to bail out Lehman Brothers.
D) mortgage lenders peddling risky mortgages.
E) President George W. Bush's firing of the chair of the Federal Reserve.

Question 12

According to the text, capitalism is usually defined as a system in which

A) everyone has the opportunity to succeed.
B) everyone has the opportunity to start a business.
C) capital is privately owned and controlled.
D) capital is controlled and owned by the government.
E) there is a free market.

Question 13

The main component of the structural bias of business in the political system is

A) political campaign contributions made by businesses.
B) business control over the means of production.
C) the power of business lobbyists.
D) the weakening of labor unions.
E) the dismantling of the welfare state.

Question 14

According to the text, what accounts for capitalism's dynamism and innovation?

A) technological change
B) fulfilling society's needs
C) competitive drive for profits
D) the diversity of businesses
E) government regulation of business practices

Question 15

Because they own and control the means of production, the prerogative of capitalists includes all of the following except

A) the decision whether to invest.
B) the decision where to invest.
C) the decision what to invest in.
D) the decision to discriminate on the basis of race or gender in hiring a workforce.
E) the decision over how production is organized.

Question 16

The term private government refers to

A) corporations' charitable donations in national emergencies.
B) a corporation's political campaign contributions.
C) a system where a private organization, such as a business firm, exercises power over its members and others.
D) a set of institutions that exercises binding legitimate authority within a territory.
E) the close relationship between lobbyists, members of Congress, and officials in the federal bureaucracy.

Question 17

Of the following, which is the best example of an externality?

A) a decision made by a U.S. company to move its operations overseas
B) a decision by a company to fire undocumented workers
C) the pollution that results from a firm's manufacturing process but for which the firm doesn't have to pay
D) the share of a firm's profits that are donated to charities
E) the share of a firm's profits that are paid out as dividends to stock holders

Question 18

Compared with workers who do the same kind of work but who do not belong to labor unions, the wages of union members are approximately

A) 30 percent lower.
B) 10 percent lower.
C) the same.
D) 10 percent higher.
E) 30 percent higher.

Question 19

Which of the following is a second reason why, according to the text, business interests are sometimes thwarted in politics?

A) The U.S. political system is a federal one.
B) The Bill of Rights guarantees all adult citizens the right to vote.
C) The political clout of labor unions is much greater in the United States than elsewhere.
D) The public is much more informed about politics than it was a century ago.
E) Democratic procedures require policy makers to respond to many interests, not just those of business.

Question 20

In response to the financial crisis that began during his presidency, George W. Bush

A) fired the secretary of the Treasury.
B) fired the chair of the Federal Reserve.
C) sponsored a $700 billion financial bailout package.
D) called for tax increases of almost $1 trillion to stop the federal debt from increasing.
E) signed legislation that created approximately 3 million temporary jobs for low-income citizens.

Question 21

Summarize with examples how, according to the text, the same factor that accounts for the dynamism of capitalism also produces collisions with public interests.

Question 22

Compared with other rich capitalist democracies, the gap between rich and poor in the United States is

A) much less.
B) slightly less.
C) about the same.
D) greater.
E) so difficult to measure that comparisons are impossible.

Question 23

Explain and evaluate the authors' statement that "market systems have their benefits, but they also have their dark side."

Question 24

Of all current Fortune 500 CEOs

A) 50 percent are female.
B) 40 percent are white males.
C) 20 percent are African American or Latino.
D) 30 percent are white females.
E) 90 percent are white males.

Question 25

Approximately what percentage of the U.S. labor force are members of a labor union?

A) 2 percent
B) 12 percent
C) 22 percent
D) 32 percent
E) 42 percent

Question 26

Approximately what percent of all income that is earned in the United States is earned by the top quintile (top 20 percent) of households?

A) 10 percent
B) 20 percent
C) 30 percent
D) 40 percent
E) 50 percent

Question 27

According to the text, capitalism distributes money and wealth ______________, and it distributes economic power ______________.

A) equally . . . . . unequally
B) equally . . . . equally
C) unequally . . . . unequally
D) unequally . . . . equally
E) in ways that defy rational explanation . . . . in ways that also defy rational explanation

Question 28

In the year 2000, three-quarters of U.S. workers were employed in

A) manufacturing jobs.
B) white-collar and service sector jobs.
C) agriculture.
D) union jobs.
E) public sector jobs.

Question 29

Summarize the reasons why, according to the text, capitalism can be considered a form of private government.

Question 30

According to the text

A) the notion of shareholder democracy is misleading.
B) the gap between the pay of CEOs and the pay of average workers has decreased in recent years.
C) business executives are the most poorly organized group in U.S. society.
D) as a result of affirmative action, the majority of corporate CEOs are now either women or people of color.
E) the vast majority of Americans own at least some stock in the form of being shareholders themselves or indirectly through mutual funds or retirement plans.

Question 31

Approximately what percent of all stock that is owned in the United States is owned by the wealthiest 10 percent of the population?

A) 10 percent
B) 30 percent
C) 50 percent
D) 80 percent
E) 100 percent

Question 32

Comparing class mobility in the U.S. and in other Western countries, the data indicate that

A) class mobility is higher in the United States than in all other Western countries.
B) class mobility is lower in the United States than in all other Western countries.
C) the United States is in the middle regarding class mobility compared to other Western countries.
D) the United States fluctuates between high and low levels of class mobility depending on which party is in power.
E) class mobility cannot be measured.

Question 33

According to the text, the growing concentration of economic power

A) makes capitalism more efficient than it has ever been.
B) makes it easier for citizens to hold corporations accountable for their illegal behavior.
C) facilitates economic equality.
D) is the main reason for the increase in racism in the United States.
E) threatens democracy.

Question 34

When political scientists and economists say that the U.S. economy has been "financialized" over the past generation, they most nearly mean that

A) ATMs are in greater use than ever before.
B) more citizens are using banks than ever before.
C) more than 90 percent of the U.S. population now owns stock in a large corporation.
D) fewer people than ever before are paying for things in cash.
E) the business of moving money around has increased in importance compared with the manufacture and production of goods.

Question 35

Compared with the percentage of workers who are in unions in other industrialized countries, the percentage of U.S. workers who are in unions is

A) lower.
B) about the same.
C) slightly higher.
D) much higher.
E) so difficult to measure that such comparisons are impossible to make.

Question 36

An economy dominated by large firms that produce for national and international markets and are able to dictate prices to suppliers and retailers, as well as wages to their workers, is called ______________.

A) monopoly capitalism
B) corporate capitalism
C) competitive capitalism
D) democratic socialism
E) cartel capitalism

Question 37

The authors make the claim that "the workplace is an authoritarian political system in which employers rule." Summarize the reasons why the authors make this claim.

Question 38

Compared with most democratic capitalist countries, the amount of government regulation in the United States is

A) much greater.
B) slightly greater.
C) about the same.
D) less.
E) so difficult to measure that it's impossible to make comparisons with other countries.

Question 39

The competitive sector of the economy refers to

A) the ten largest U.S. firms.
B) the companies listed in the Forbes 500.
C) the competition between the U.S. economy and the economies of other countries.
D) the firms that operate in many different countries.
E) small businesses and firms.

Question 40

All of the following are sources of capitalist class cohesion except

A) the existence of interlocking boards of directors.
B) membership in exclusive social clubs.
C) attendance at public colleges and universities.
D) membership in peak business associations such as the Business Roundtable.
E) membership in other business associations such as the U.S. Chamber of Commerce.

Question 41

The authors make the claim that the decisions made by business firms are "preeminently political." What evidence do the authors use to support their claim? Do you agree or disagree with the authors' claim? Explain your answer.

Question 42

Summarize the reasons for the decline of unions in the United States.

Question 43

Summarize how the structure of employment in the United States has changed since 1970.

Question 44

What has been the historic role of unions in American political economy? Assess their influence and importance.

Question 45

U.S. leaders have often claimed that the United States's extreme market capitalism is superior to other forms of capitalism. But even before the economic crisis of 2008-09, those claims gave the U.S. model more credit that it deserved. Summarize the evidence provided in the text in support of its assertion that the U.S. model gets more credit than it deserves.

Question 46

Although powerful, business interests do not always get their way in the political system. What are the factors that explain this phenomenon?

Question 47

Describe how capitalism creates a structural advantage for business in the political system.

Question 48

Summarize the evidence provided in the text to show that the notion of shareholder democracy is highly misleading.

Question 49

Describe the structural changes in the U.S. economy since the end of World War II.