Econ 104- Final Exam (Professor Hendrik Van den Berg) umass

Adam Smith is noted for having suggested three main tasks for government in an industrial society, including (check all correct answers):

-provide public goods where private firms are unlikely to provide them. -protection of private property.,

A contingent asset:

-provides for different future values depending on certain events or circumstances occurring. -is sometimes called insurance. -provides protection against future risks.

Social reproduction occurs mostly in:

-the household sector.

The Classical paradigm starts off with several basic premises, including:

-the metaphor of the invisible hand. -Say's law

Technology is the major determinant of what the economic system looks like and how it functions because technology affects:

-the organization of society around production. -the actual production processes in the economy. -the effective quantities of physical capital and natural inputs that humans can make use of.

Financial transactions can fail to be carried out even when there are potential gains to both lenders and borrowers for several reasons, including (mark all correct answers):

-the problem of adverse selection. -the problem of moral hazard. -a lack of trust. -the potential for fraud.

Included in the United Nations Universal Declaration of Human Rights is:

-the right to an education -the right to free speech. -the right to medical care.

Human technology includes:

-the techniques and processes that humans use to produce specific products. -the social culture that influences how humans interact and work within their societies. -the communications systems humans created to pass techniques, methods, and social rules of behavior along to others.

Say's Law states that total aggregate demand for goods and services can never be greater than total production, but it can be less, in which case the economy suffers from unemployment.

False

The evidence on shipments of manufactured goods for the period 1835 - 1929 suggests that the Classical model is accurate as a description of the U.S. economy during that period.

False

The so-called demographic transition has now run its full course everywhere in the world, and world population growth has settled down to a steady low rate.

False

The textbook does not list the redistribution of income as a possible function of government.

False

Thorstein Veblen was a Swedish economist who wrote that human behavior is almost exclusively driven by the pursuit of wealth.

False

The 2007 financial crisis was caused, in part, by:

the inaccurate ratings of collateralized debt obligations.

"Effective labor" in the economy is:

the product of the number of individual people times their human capital.

Bourdieu defines a field as:

the social or work environment in which people spend much of their time and where they concentrate their efforts to advance their social interests.

One thing that money is not is:

the value of the alternative use of the commodity used as money.

Economists build models that are (answer all that are correct):

verbal, mathematic, graphic, metaphors

Adam Smith's "division of labor" refers to:

what economists now refer to as "specialization."

It is possible to eliminate omitted variable bias in models by further simplifying the model and eliminating the troublesome variables.

False

Adam Smith advocated limiting government to only three roles in the economy: national defense, protection of property, and provision of public goods.

False

Patents and copyrights are traditional social arrangements that have no formal legal basis, which is why they are seldom used in modern economies today.

False

A description of capital should include the following:

-it experiences a process of depreciation over time. -it grows by means of a process of accumulation over time. -it takes on many forms, including social, cultural, natural, and economic capital.

According to the discussion of human well-being in Chapter 2 of the textbook:

-People value human relations as well as their material consumption of goods and services produced in the economy. -People may improve their well-being by working more and increasing their income, but they may also increase their well-being by working less and enjoying leisure.

Which of the following statements are true according to Chapter 1 in the the textbook?

-The economy does not exist separately from nature or the social system. -An economic system is continually evolving.

Which of the following statements is(are) true?

-The government can enhance the value of money by requiring that all finance be stated in terms of money values and all debt be settled using that money. -The government can enhance the acceptance and use of money by requiring all taxes be paid with money.

In the late 1800s and the early 20th century, Neoclassical economists built on the Classical model by:

-assuming markets set prices accurately at the point where marginal costs and marginal utility intersect -elevating mathematical logic as the most important criterion for judging economic models -describing the distribution of income as a natural phenomenon defined by the free market prices of factors of production

Government is an institution that can carry out:

-collective decisions and actions. -the oppression of certain groups in society. -foreign wars.

Economists have learned about what makes people happy by:

-directly asking people how happy they are and then comparing those replies to the specific characteristics and living conditions of those people. -examining people's consumption habits at different levels of income. -analyzing how popular stories, novels, and other artistic works depict idealized societies.

Inherited cultural capital includes:

-habits developed during upbringing. -language, dialect, and social mannerisms. -body language.

Thorstein Veblen claimed that:

-human behavior was strongly influenced by institutions. -by how institutions activate or dampen the various conflicting behavioral tendencies that exist in varying degrees in all people.

A model will fail to accurately predict future phenomena because:

-it is not well-grounded -it is not logically consistent -its predictions do not match real-world outcomes

Suppose that the population of a country is equal to 10,000,000. Suppose, also, that in one year 200,000 people are born and 100,000 people die. In this year, the rate of population growth is equal to:

10%.

Aristotle claimed that happiness is, in part, determined by luck, but recent research on human happiness shows that human happiness is fully determined human effort; luck has nothing to do with how happy each individual person is.

False

By the 20th century, the right of ownership had been reduced by most governments to cover only things created by one's own labor or things that served as a direct extension of oneself.

False

Which of the following statements best describes the value of a dialectic perspective in economics?

A dialectic perspective serves as a reminder of the things that might influence future outcomes; it provides warnings and suggestions, not exact answers.

Which of the following statements is not true?

A hand shake can never function as money; only something tangible like a gold coin can reliably serve as money.

The United Nations Human Development Index has been published for several decades as an alternative to GDP as an indicator of human well-being. Which of the following is not a component of this index?

Access to the internet

Which of the following statements is not true?

Child labor is exclusively a modern capitalist phenomenon--there was no child labor before the rise of capitalism over the past several centuries.

In high income countries, the contribution of the human capital component of effective labor to person's capacity to produce is but a small fraction of the contribution of the basic biological capacity of a worker.

False

According to the Classical economists, the fact that capital depreciates over time means that the capital stock only grows if investment exceeds saving.

False

The owners of a business have limited liability— limited to their initial investment in the business — in the case of the following form of business organization:

Corporation

Which of the following statements was written by Richard Florida?

Creative people cluster not simply because they like to be around one another or they prefer cosmopolitan centers with lots of amenities, though both those things count. They and their companies also cluster because of the powerful productivity advantages, economics of scale, and knowledge spillovers such density brings.

The following is not an accurate description of culture:

Cultural capital cannot really be considered a form of capital because it cannot be accumulated, nor does it depreciate.

In the circular flow, investment is shown as a flow of payments from producers to the financial sector.

False

A corporation is a naturally-occurring type of producer organization, so government interference in its operation is never socially efficient.

False

A scientific hypothesis is a proven conceptual framework, idea, or relationship that has been thoroughly confronted with direct observations from the real world or with the findings of a series of carefully designed experiments

False

Absentee ownership is compatible with John Locke's justification of private property.

False

The names associated with the dialectic process include [select all that apply]:

Hegel., Socrates, Marx

Among the boxes connected by money flows in the circular flow diagram shown in Chapter 1 is (are):

Households, Financial Sector, Producers

Which of the following descriptions is not characteristic of a modern private corporation:

It is an institution completely unsupported by and not in any way dependent on any act of government.

The workers who destroyed factory machinery in Great Britain during the early 1800s were often referred to as:

Luddites

Patents and copyrights:

Make a non-rival good excludable.

Not among the components of the economic system highlighted in the circular flow diagram is/are:

Nature

There are essentially two types of money that make up the money supply in the United States today:

base money and bank money.

The short speech by George Lefcoe, a former commissioner at the Los Angeles County Regional Planning Commission, at his retirement party suggests that:

Power corrupts.

The social anthropologist, David Graeber, described three forms of human interactions, among which is (are):

Reciprocity, Hierarchy, Communistic behavior

An example of the third type of "separation" that Thorstein Veblen wrote about is:

The advertising industry.

Veblen's third separation is best described as:

The correct answer is: wasteful production carried out for no other reason than to increase profit.

The textbook stated that humans occupy the following systems or "spheres of human existence":

The economic sphere, The natural sphere.

Frederick Engels postulated three laws of dialectics from his reading of Hegel, but these do not include:

The law of historical recurrence.

The sudden change of liquid water into ice is an example of which of the following laws of dialectics postulated by Frederick Engels?

The law of the passage of quantitative changes into qualitative changes.

According to the economist Kenneth Boulding (1956, p. 198), scientific progress is threatened by increasing specialization, which was leading to "isolated subcultures with only tenuous lines of communication between them...One wonders sometimes if science will not grind to a stop in an assemblage of walled-in hermits, each mumbling to himself words in a private language that only he can understand." Boulding therefore urges economists to embrace systems theory when they engage in economic analysis.

True

Finance is the sector of the economy most likely to cause economic instability, but it is also true that no economy can function without finance.

True

High-income economies do not have the same economic structure as low-income economies, in part because of variations in the income elasticities of demand for goods and services.

True

John Locke argued that private ownership of property was justified if it was created by one's own labor.

True

NG, like many other purchasers of mortgage backed CDOs, did seem to recognize that there was some potential for default, but it felt fairly safe because it protected itself by purchasing credit default swaps to insure themselves against any failures of the CDOs.

True

Prominent historians of science, such as Thomas Kuhn (1965) and J. D. Bernal (1962), have presented well documented histories that show scientific knowledge does not always progress according to the steps of the scientific method.

True

The Classical economists reasoned that, even in the case of steady investment enabled by a steady savings rate, the stock of capital -- and the economy -- eventually stops growing.

True

The Mercantilists are usually described as advocating for government to regulate and intentionally manipulate international trade for the purpose of accumulating gold.

True

The establishment of the corporation as a separate legal entity required a definition of property that went well beyond the traditional definition of property as something created with one's own labor or that which functions as a direct extension of the person.

True

The factor of production called labor is really a combination of a biological human being plus that being's accumulation of human capital following after birth.

True

The growth of market power is economically inefficient because it empowers firms to increase their profits by (1) reducing output, (2) raising prices, or (3) lowering wages and prices to suppliers of labor and other inputs.

True

The interests of corporate management and the corporation's shareholders are often at variance with the interests of other stakeholders, such as the workers, suppliers, customers, and members of the communities where the corporations operate.

True

The term dialectics is derived from dialectical method of discussion, which is a discourse or a dialogue between two or more people holding different viewpoints and/or sets of information but interested in getting to the truth of the matter so that everyone improves their understanding.

True

The traditional scientific method effectively assumes that reality — the ultimate truths about our natural, social, and economic existence — consists of universal constants waiting to be discovered. The materialist dialectic framework, on the other hand, points economists toward looking at changes over time, rather than things as they are, and this forces them to recognize that knowledge is often time-dependent and place-dependent rather than universal.

True

Chapter 1 of the textbook states that a real economic system is:

continually evolving; both its components and the connections between the components change over time.

Dialectic discussion is synonymous with:

a discussion or an open dialogue.

The validity of Say's Law depends on:

a loanable funds market through which all saving allocated.

The habitus of a field is:

a set of subjective but widely accepted and followed perceptions, customs, social norms, and forms of outward behavior and expression.

Human culture can be defined as:

a variable set of informal institutions that arise gradually over time as people interact with, and conform to, the rest of the members of society.

Many shareholders in corporations do not really care to know what was going on in the enterprise, as long as they are reasonably sure that the profits, dividends, or interest payments arrived on time. We refer to this type of ownership as:

absentee ownership.

The population profile illustrates the:

age structure of the population.

A copyright turns a written work into:

an excludable product.

Not a valid example of Thorstein Veblen's "third separation" in business is

an increase in the variety of products available to consumers.

Walras' modeled the economy:

as one big system of equations representing all of the markets in which all economic exchanges simultaneously occur.

The textbook mentions that Adam Smith wrote about other government functions beyond his basic three functions, including:

improving the distribution of income.

The American insurance giant, AIG, contributed to the 2007 financial crisis by:

issuing credit default swaps to the purchasers of credit default swaps without setting aside reserves to cover potential losses.

If we use the formula for gravity from physics to model the economic effects of international trade, we can be accused of using a model that is:

not well grounded.

When more money symbols are required to purchase the same amount of real goods and services that were acquired with a smaller amount of money symbols in the past, we are experiencing:

price inflation

Adam Smith noted that in a less advanced society, "there is a good deal of variety in the occupations of every individual, there is not a great deal in those of the whole society.... In a civilized state, on the contrary, though there is little variety in the occupations of the greater part of individuals, there is an almost infinite variety in those of the whole society." Smith thus suggested the lack of variety in work in a modern economy was a problem for the economy, but it could be mitigated by:

public education.

The United Nations Universal Declaration in Human Rights was:

ratified by the members of the United Nations in 1948 with no opposing votes.

The materialist dialectic framework:

seeks to understand change over time, rather than things as they are, and this forces the social scientist to recognize the time-dependence and place-dependence of all acquired knowledge.

If it costs the government less to create money than the value of what it can acquire with the money it creates, then the government earns something called:

seignorage.

Alienation refers to:

separation and isolation of workers from the complete productive process.

Financial transactions:

simultaneously create matching debts and assets.

Money is an asset that serves all of the following roles:

store of value, medium of exchange, and unit of account.

Pierre Bourdieu refers to the use of cultural capital against someone who holds less cultural capital in order to alter that person's actions or social position as:

symbolic violence.

A progressive tax:

taxes people with high incomes at a higher rate than it taxes people with lower incomes.

The average rate of population growth in the world is equal to:

the average birth rate minus the average death rate.