Download Review: Introduction

Review:
Introduction
1. Who would be the author of the following statement? "Self interest, tamed by sympathy and constrained by
economic rivalry, leads to a widespread prosperity known as 'universal opulence."
a. Karl Marx
b .John Maynard Keynes
c. Adam Smith d. Garibaldi Puccinelli
It is Adam Smith who wrote this as the argument in favor of the market system.
2. This growth in Europe's average income, as measured by GDP per capita, took off in the late 1700s and left much of
the rest of the world far behind. One of the explanations of the dramatic growth has to do with the appearance of an
economic system that fosters economic growth. That economic system was ____.
a.
b.
c.
d.
command
capitalism
tradition
communism
The boom accompanied the arrival of capitalism, and the biggest proponent of the system was Adam Smith who
published The Wealth of Nations in 1776.
3. ____ are "to the market economy what red cells are to the human body - they both direct vital life-giving resources
to the right place at the right time, with little interference or direction."
a. property rights
b. laws
c. prices
d. manors
The answer is prices - they are what guide us in our decisions.
4. "All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple
system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of
justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into
competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the
attempting to perform which no human wisdom or knowledge could ever be sufficient; the duty of superintending the
industry of private people, and of directing it towards the employments most suitable to the interest of society." This is
a quote taken of a proponent of what type of economic system?
a. command
b. tradition
c. market
d. fundamentalist
This is Adam Smith's quote - the "father" of the market system.
5. I was asked by a student what was more important in 1776 - Adam Smith’s book The Wealth of Nations or the
Declaration of Independence? That is a tough question since both were significant events that changed the future of the
world. What I am certain of is that neither Smith’s capitalism nor the Declaration’s democracy provided the framework
for utopia. Both have their plusses and minuses, and among the BIG plusses you would find that Smith presented the
outlines of an economic system that would generate _____ for the first time?
a. Economic stability – the end of business cycles
b. Economic harmony – a general agreement on goals
c. Economic equality – the end of inequality
d. Economic growth – a rapid increase in the rate of economic growth
The dominant characteristic of the capitalist system is economic growth. There is no guarantee of any of the others - in
fact, capitalism tends to contribute to inequities and it does tend to exhibit instability.
6. One of my favorite images was a satellite view of a peninsula that showed the effect an economic system can have
on economic growth. The photo was of ___ and it clearly demonstrated the limitations of a ____ economic system.
a. Vietnam / tradition
b. Korea / command
c.
d.
e.
Poland / capitalism
Iberia / capitalism
India / command
The photo showed the enormous gap in economic activity between North and South Korea which was evidence of the
difficulties of a command society.
7. The evidence suggests that today’s students – that is you – are not that great with history. In the early 1990s there
was talk about the “end of history.” The talk about this was rooted in economics, or more precisely, in the outcome of
an ongoing battle of competing economic systems. What was the event that prompted this view?
a. the rise of the Middle East
b. the decline of the Soviet Union
c. the decline of Africa
d. the rise of Eastern Europe
The battle was between communism and capitalism – and the collapse of the Berlin Wall was seen as evidence that
capitalism had won the war.
8. In the US we have seen a long-running "battle" for the hearts and minds of the American people between proponents
of competing ideologies. That battle has been accurately described as one in which the “ _____ mistake is to think that
there is a program or policy to alleviate every problem in the world, the _______ flaw is to be vigilant against
concentrations of power in government only – not in the private sector.”
a. liberal
Marxist
b. institutionalist
liberal
c. conservative
liberal
d. liberal
conservative
The liberals believe in government as a force for good, and conservatives do not
9. A study of the US economy reveals that there have been a few economic 'crises' that have prompted a shift in the
balance of power among the competing ideological groups. The Great Depression of the 30's and the stagflation of the
70's represent two such crises. The Great Depression of the 1930s ushered into power which of the following
ideological groups.
a. conservative
b. institutionalists
c. liberals
d. radicals
The Great Depression ushered in Keynesians who believed the government could manage aggregate demand
10. “The world runs on individuals pursuing their self interests. The great achievements of civilization have not come
from government bureaus. Einstein didn't construct his theory under order from a bureaucrat. Henry Ford didn't
revolutionize the automobile industry that way.” This is a statement most likely made by a _______.
a.
b.
c.
d.
Liberal
Marxist
Conservative
Institutionlist
This is clearly a statement made by a conservative because it is not supportive of the government.
11. Which of the following is a positive statement?
a. We should subsidize college loans
b. Fracking should be expanded
c. Tax revenues in RI will increase if we lower the sales tax
d. RI should extend unemployment benefits to the long-term unemployed
e. You should turn your cell phone off
The only statement that can be verified by looking at the data would be c. This may not turn out to be true, but we
could collect data and prove whether or not it is true.