Deck 5: Economic Policy of the State

Question 1

In the years after the Great Recession of 2008-2009 in the United States:

A) interest rates were high and unemployment was low.
B) interest rates were high and unemployment was high.
C) interest rates were low and inflation was low.
D) interest rates were high and inflation was low.
E) the government took a hands-off approach to the economy.

Answer 1

C

Question 2

The region with the lowest level of government corruption is:

A) East Asia
B) Southern Europe
C) Scandinavia
D) Eastern Europe
E) South America

Answer 2

C

Question 3

According to your text, two general economic concerns exist in the minds of the public: performance of the economy and ___________________.

Answer 3

distribution of benefits or provision of services

Question 4

Two things that governments can do to create greater equality are:

A) regressive taxation and subsidies for the poor
B) progressive taxation and subsidies for the poor
C) increasing interest rates and progressive taxation
D) increasing interest rates and subsidies for the poor
E) lower taxes for the wealthy and increase taxes on the poor

Question 5

A central bank is set up to:

A) handle government transactions and establish revenue targets
B) handle government transactions and control interest rates
C) handle government transactions and collect taxes
D) trade government assets and print currency
E) redistribute wealth

Question 6

"Rent seeking" hurts the economy because:

A) it drives the cost of housing up, exacerbating homelessness and the number of people seeking government help
B) it drives the cost of housing down, decreasing the profit margins of real estate companies
C) it transfers money into pockets of the dominant coalition's supporters rather than into the most efficient economic uses of the money
D) it increases inflation
E) it encourages honesty in government

Question 7

A reason for the failure of import substitution industrialization in Ghana is:

A) owners of factories often took advantage of the lack of competition to charge high prices for shoddy goods
B) the imports that substituted for local goods were not of good quality
C) imports flooded the market and hurt national industries
D) no countries were willing to sell their goods in Ghana
E) investment capital was not stimulated

Question 8

Using the example of South Korea, this chapter suggests that negative pressures on government and policy-making from rent-seekers can be neutralized when the local ______________ simply does not support such thinking or behavior.

Question 9

Baumol's disease focuses on the elasticity of the manufacturing sector as it creates prices for its end-use products.

Question 10

The practice in underdeveloped countries of setting high tariffs to discourage imports and encourage the establishment of factories in their own states that could flourish without foreign competition is referred to as ______________ industrialization.

Question 11

The main indicator of economic growth is:

A) inflation
B) total GDP
C) change in real per capita GDP
D) the performance of the stock market
E) the cost of a "market" basket

Question 12

The pressure from rising wages in manufacturing spills over to wages for service workers and in turn raises the cost of services. This linkage is called ________________________.

Question 13

Two factors that improve unemployment, inflation, and economic growth simultaneously are:

A) education and technological innovation
B) import substitution and nationalization
C) regressive taxation and education
D) nationalization and education
E) consumer spending and trade restraint

Question 14

The state of the economy is a major factor in the evaluation of a government and ALL governments require revenue.

Question 15

The use of public resources for private gain is called _______________.

Question 16

A government that uses tax money to buy support is engaging in ___________.

Question 17

A general rise in prices, indicating that the currency is worth less than it used to be, is called:

A) inflation
B) interest
C) profit
D) revenue
E) PPP

Question 18

A transfer of money that does not relate to production is called _________.

Question 19

The relationship between interest rates and unemployment in the short run is:

A) when interest rates go up, economic activity declines and unemployment rises
B) when interest rates go down, economic activity declines and unemployment rises
C) when interest rates go up, economic activity increases and unemployment increases
D) when interest rates go down, economic activity increases and unemployment increases
E) none of the above is found in a pattern

Question 20

The ________________ of a government controls interest rates, manages transactions, oversees private financial institutions, and the ebb and flow of monetary reserves.

Question 21

Technological innovation and education, as economic tools of government, are too slow to have an impact on the dynamic factors of inflation or unemployment.

Question 22

Corruption is especially hard to fight in transitional political systems where norms of behavior are in flux.

Question 23

The purpose of rents in a political system is to permit authorities to buy support.

Question 24

Your text argues that corruption has no direct economic costs but has many psychological costs including cynicism, lack of faith, and disregard for the rule of law.

Question 25

The dilemma of policy-making by government as it engages in the distribution of goods or services is to ultimately conclude that INEQUALITY is the option that creates the greater good in society.

Question 26

Based on the data in your text, significant income inequalities are rather common in the selected sample societies and a surprisingly broad global pattern of income inequalities appears to exist regardless of type of political system.

Question 27

The conventional wisdom is that a central bank should be created by the state as a public agency with vast autonomy because, to be effective, it must make unpopular and politically volatile decisions.

Question 28

So-called "rational choice models" in political science assume that individuals will take their cues from government about what is the way for each to get as much from the state as possible.

Question 29

Import-substitution industrialization plans by governments often fail when large multilateral corporations target the country with massive shipments that flood the domestic market and drive local industries out of business.

Question 30

Daily more than one trillion dollars move around the world.

Question 31

Given global changes, the range of things the state has the capacity to control has shrunk, and the maneuvering room for unilateral action has also been narrowing.

Question 32

One arguably effective way to combat unemployment is to create jobs through large-scale government projects.

Question 33

Classic economic logic suggests that inflation and unemployment can BOTH be addressed effectively at the same time if government policies are wise and aggressive in their application.

Question 34

Some governments, like that in the South Korean example, are fortunate not to deal much with rent-seeking.

Question 35

Groups and others in society often cast themselves in the role of rent-seekers.

Question 36

Ordnungspolitik means unregulated by politics.

Question 37

What are some of the explanations for the tremendous variation between countries in terms of how well they provide prosperity for society and economic growth for their citizens?

Question 38

One big reason that countries vary in their record of growth is that some governments make big mistakes in managing or investing in their economies.

Question 39

The German example of political economy is one in which the post-World War II German government has been created around the notion that government should be as little engaged in the economy as possible. Maximum latitude is invested in each corporate entity with only the lightest touch by government.

Question 40

Germany and Japan both have higher manufacturing labor costs than does the USA.

Question 41

What is Baumol's Disease? How does it help explain why states expand?

Question 42

Critical Thinking
Try thinking through all the implications for a political system that has higher levels of autonomy for its state apparatus. What advantages and disadvantages would accrue to such a regime? Is there a troubling or satisfying implication for expanding democracy in a system?

Question 43

What is the main argument for having central banks independent of the government's political leaders?

Question 44

What factors explain why it is more and more difficult for a country to control its own economic destiny?

Question 45

Why is corruption an important issue in the study and practice of politics?