Economics: Market Capitalism - Assignment Example

Economics 5150 Final Examination Fall All economic systems can be ified as market capitalism or centrally planned socialism. --False 2.Classification criteria for economic systems include decision-making systems, mechanisms for information and coordination, incentive structures, property rights, mechanisms for public choices. --True 3. Generally speaking, transition economies emerging from the former Soviet Union have done least well with transition, while those of Central and Eastern Europe have done the best. --True 4. Capitalism relies primarily on material incentives, while planned socialism and market socialism rely on both material and moral incentives. --True 5. Capitalism relies on a democratic process for public choice, whereas planned socialism relies on a dictatorial process. --False 6. In additions to the economic system itself, environmental factors and policies also affect economic outcomes. --True 7. Performance criteria used to evaluate economic outcomes include economic growth, income distribution (equity), economic efficiency, economic stability, and viability. --True 8. Growth of per capita GDP is most often used as a measure of economic growth, and inflation and unemployment rates are most often used as measures of economic stability. --True 9. It is generally understood that capitalist economies are more efficient than are planned socialist economies. --True 10. Although future growth estimates for transition economies vary widely, they are all positive and of a reasonable magnitude. --True 11. There is no evidence that capitalist economies are more viable than are planned socialist economies. --False 12. During the twentieth century, there were examples of transitions from capitalism to planned socialism, from planned socialism to market socialism, and from planned socialism to capitalism. --True 13. Economic transition from planned socialism to market capitalism requires a change in legal institutions, as well as in financial and economic institutions. --True 14. Capitalism is based on the foundation of private property ownership, economic freedom, and the primacy of markets as the mechanism of economic coordination. --True 15. In their writings, Marx, Engels, and Lenin dealt with the fundamental question of how scarce resources were to be allocated during the socialist phase. --True 16. The Austrian economists Mises and Hayek argued that rational economic decisions regarding resource allocation would be impossible because of the absence of market-determined prices. --True 17. The concept of material balances formulated by soviet economists in the 1920s focused on the need to determine and balance aggregate demand and supplies of basic industrial commodities without the use of markets. --True 18. The theory of planning stresses the formulation of a plan, but incentives often prevent the implementation of the plan. --True 19. Theoretically, one would expect more rapid economic growth, greater stability, greater efficiency, and a more equal distribution of income in planned socialism relative to market capitalism. --True 20. Market capitalism is a system that combines social ownership of capital with market allocation. --False 21. The most famous theoretical model of market socialism is the trial and error model proposed by Oskar Lange. --True 22. Critics of the Lange model point out problems with managerial incentives and monopoly behavior on the part of managers. --True 23. A labor-managed or participatory economy is based on the use of producer cooperatives. --False 24. In his 1944 book, The Road to Serfdom, F.A. Hayek argued that socialism (state ownership) and democracy were incompatible. --False 25. In comparison to the Anglo-Saxon model of capitalism, the European model calls for less state intervention in economic affairs. --False 26. The Asian model of capitalism concentrates on high rates of capital formation, often supported by the state. --True 27. Although the Fout Tigers of Asia experienced more than three decades of very high economic growth, economists do not all agree that the “Asian Miracle” will continue. --False 28. Studies indicate that the share of the private sector in U.S. economic activity has fallen steadily since 1939. --False 29. Unlike the case in Europe, in the U.S. more investment is financed by the issue of stocks and bonds than through bank financing. --True 30. Studies indicate that the U.S. economy has become more competitive over time. --False 31. A larger percentage of U.S. than European workers belong to labor unions, and U.S. unions have their own political party, in contrast to European unions. --True 32. One of the major intellectual changes in the last decades of the twentieth century is a rethinking of the role of the state in economic life. --True 33. In many ways, the European Union functions like the 50 states of the United States. --False 34. The U.S. labor market is much more highly regulated than are European labor markets. --False 35. In Europe, nationalization and privatization tend to cycle with changes in government. --False 36. French indicative planning forced businesses to follow the national plan in order to meet the objectives of the state. --True 37. The “Swedish model” of providing maximum income security was a major factor in causing Sweden’s GDP per capita to increase relative to that of other European countries and the U.S. after the 1960s and 1970s. --True 38. Although the U.S. suffered increases in its unemployment and inflation rates between the 1960-1970 period, Germany and France lowered their rates between the two periods. --True 39. Although Japan, Taiwan, and Hong Kong followed the Asian model, Singapore and South Korea did not. --False 40. After World War II, Japan’s high rate of economic growth was largely the result of high rates of investment financed by high rates of national savings. --True 41. Like the economic growth of Japan earlier, the high growth rates of the Four Tigers were led by high exports. --True 42. The World Bank classified Hong Kong, Singapore, and South Korea as the world’s most outward-oriented economies over the 1963-1985 period. --True 43. During the past twenty years, the most dramatic economic change has been the rise of Asia and the collapse of the Soviet Union. --True 44. Asian corporations tend to get their financing from banks that are closely related to the corporations themselves. --True 45. Tenure at Japanese firms is shorter than at U.S.firms. --True 46. Japan’s Ministry of International trade and industry was the pioneer of Asian industrial policy, which tends to be much more comprehensive than in the U.S. --True 47. The administrative-command economy was the mechanism for resource allocation in the former USSR between 1929 and World War II, but was abandoned in 1946. --False 48. Today, the U.S., with 5 percent of world population, produces 22 percent of world GDP; while Eastern Europe and the former Soviet Union, with 7 percent or world population, produce 6 percent of world GDP. --True 49. The economic planning agency in the USSR was Gosbank. --False 50. In practice, the planning process in the Soviet Union was so effective that the optimal plan was always chosen from among the set of consistent plans. --False 51. In the Soviet model of centralized socialism, a principal-agent problem was created by the information asymmetry that existed between enterprise managers and their superiors. --True 52. In the USSR, prices were changed frequently to equate supply and demand. --False 53. Economist Steve Hancke has found that for every 10 percent increase in economic freedom, GDP per capita rises between 7 and 14 percent. --True 54. Whereas prices played little, if any role in the allocation of most inputs in the Soviet Union, wage differentials were the primary mechanism of allocating labor. --True 55. The two major institutions of Soviet agriculture after 1928 were the kolkhoz and the sovkhoz. --False 56. China is the world’s most populous country, with about 1.2 billion citizens. --True 57. Although the Chinese economy resembled the administrative-command economy of the USSR prior to 1970, it now resembles market socialism. --True 58. The Great Leap Forward and the Cultural Revolution both caused interruption of economic growth in China. --True 59. The contract responsibility system introduced in China in the late 1970s effectively brought collectivization to an end. --True 60. During the past twenty years, privatization has been extended to small and medium-scale industry in China, but large-scale enterprises remain under state ownership. --False 61. China was able to finance about 40% of its capital formation in the 1990s with foreign direct investment. --True 62. Since 1980, China’s rate of economic growth has been among the highest in the world. --True 63. The high rate of economic growth in the world in the 1990s can be attributed, in part, to the expansion of economic freedom and property rights. --True 64. The major difference in the distribution of income in planned socialist and capitalist economies is due to the absence of private ownership of income-producing property under socialism. --True 65. Frederic Pryor found that economic fluctuations in planned socialist economies were significantly less pronounced than in capitalist economies. --True 66. Among the factors leading to the decline of the planned socialist economies are lack of technological progress, diminishing returns to capital, inefficiency, problems with incentives, and the complexity of planning. --True 67. Liberalization is the reduction of state controls and the introduction of markets. --True 68. Privatization has received major emphasis both in Eastern transition economies and in Western market economies. --True 69. The “J curve” has been the dominant pattern of economic performance in transition economies. --True 70. Economists believe that differences in initial conditions, policy measures, and environmental factors are important determinants of differences in economic performance among transition economies. --True 71. Other things being equal, transition economies with initial conditions more similar to market economies have had lower rates of economic growth during the transition. -- True 72. Other things being equal, economic growth of transition economies directly related to the degree of liberalization. --True 73. Poland used the “gradualist approach” to economic transition. --False 74. The Washington consensus was the basis for the big push approach to economic transition. --False 75. In the study of economic transition, complementarities refers to the notion that some elements of transition must be implemented simultaneously. --True 76. The most fundamental element in the identification of differing economic systems is property rights. --False 77. The replacement of state-owned firms by private firms did not begin until the transition era. --True 78. The role of government in the economy varied widely in capitalist countries, but not in socialist countries. --True 79. Mass privatization began during the 1980s. --False 80. The first stage of privatization is to identify properties to privatize. --False 81. The last stage of privatization is to restructure enterprises. --False 82. In practice, privatization has proven easier to achieve in small scale establishments than in the largest enterprises. --True 83. The two major approaches to privatization have been direct sale and the use of vouchers. --True 84. By 2000, Ukraine had a larger percentage of output produced in the private sector than did Hungary. --True 85. Restructuring means the changing of decision-making arrangements in privatized enterprises and organizations. --True 86. During the transition process, direct state control of the economy through an economic plan has to be replaced by a macroeconomic system of indirect influence. --True 87. The absence of macroeconomic institutions and frameworks caused little, if any, difficulty for the transition economies. --False 88. The policy environment of transition economies is much more simple than that of established capitalist market economies. --False 89. Poorly developed or poorly functioning banking and financial systems contributed to the collapse of investment in the early stages of economic transition in Russia and Eastern Europe. --True 90. Typically, savings increased sharply in the early stages of transition. --False 91. Macroeconomic balance requires that the sum of investment and private savings equals the sum of the government balance and the foreign balance. --True 92. In all of the transition economies, the government balance increased between 1990 and 2002. --True 93. The typical pattern of inflation in transition economies has been an increase in the early stages of transition, followed by a reduction in more recent years. --True 94. In nearly all transition economies, there have been large increases in the Gini coefficient for income inequality. --True 95. Between 1991 and 1996, ten transition countries became candidate members of the European Union, and all ten became members of the WTO and GATT. --False 96. While a convertible currency is a goal for all transition economies, it isn’t necessary in order for a country to engage in free trade with the rest of the world. --False 97. Aid to transition economies from the IMF has been primarily for domestic stabilization, whereas aid from World Bank has been primarily for long-term economic development. --True 98. As a group, transition economies have fared poorly in attracting foreign direct investment. --True 99. Although private-sector employment as a percentage of total employment varied widely among transition economies in the early stages of transition, in later stages there has been very little variation in relative private-sector employment. --True 100. In Russia, economic transition has been accompanied by rising death rates and falling birth rates. --True Read More