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Unformatted text preview: Economics 107 Midterm Examination Pagel ,, _-.;,w_' _ February 14, 2005 r" {This exam has 9 pages]. 1. WARNING: If you make an erasure on your Scantron, you run the risk that the optical scanner - which is very sensitive - will score your answer incorrectly. For obvious reasons, the optical scanner‘s grading will be taken as final. So don't make erasures. [lIint: score your answers on this examination , and then transfer them to your Scantron SSE-ES [or E] when you have completed at] your work.] 2. li'you have spoiled a Scantron, there are a few ones available in the room for 25 cents. 3. Keep your examination and check your answers which will be posted on the Website after class. I. An economic system is a system of human behavior that resolves the four problems of 1] what to produce, of 2} how to produce what is produced, at 3] when to produce what is produced, and of 4} who gets Iwhat of what has been produced. While Leone-mic systems have been around for milennia, they 1Were first identified as such by: 3- Aristotle. .. J}. St. Thomas Acquinas. “e. Sir Thomas Mun. d. Thomas Hobbes. 5 {$1411 awesome.- 2. The first eeonomies paradigm, according to Joseph Schumpeter [and Prof M.[ was produced by: a. Kantilva. h. Gnan Zhung. c. Illn Khaldun. d. Xenophon. W 3. River valley civilizations started emerging ahoul fifllil] years ago in I'l-‘lesupntarnia, But apparently it took until the life time of the following persons Jaruunll dill} Iii-Jill before we get analytical thinking about economic issues [although such. thinking was not identifed as “economic” thinking at the lime, or course. f: 1.x.‘tristotie, Kantilya, and the followers of Guan Zhong. I b. Chenggis and Kubilai Khan. c. ain'errdcli and lhn Khaldnn. d. Diogenes of Sinope and Zeno of Citium. e. All of the above. 4. Professor Murphy argued that we should not be surprised that followers ol‘ Guam Zhong authored some uscfnlc analysis of What we new call “economic issues“ in T" century B.t'.'. Qi because: a. lChina has always been intellectually more advanced that comparable civilizations. b. Q1 had recently eonquered all DI" China and brought wise men from all over the globe to decide how to run this giant empire. e. as Karl “'itt‘logel has pointed out it! «Oriental Bespotism, Gnan Zhong was Master of the Emperor's Walerworks and had to think about how to allocate water to the whole oI'Qi. d: after the introduction of settled agrielllture and the domestication of animals, more complex societies and economic systems emerged in the great river valleys of Peru and at the ‘r'ang 'l‘se, 1|fellow liti'lr'er1 Nile, Indus, Tigris and Euphrates. Eventually someone would attempt to analyze this increased complexity. e. All oi the above. .toman jns gentiunt [law of nations] emerged; page 2 .se as the Roman empire expanded Roman legalists faced the problem of harmonizing a large number of sagai systems of many con uered ‘ s. eeause the Roman governmental structure favored this. A. praetnr urbanus Iwas responsible [or regularly codilying the laws by which foreigners would he governed. Wk.- 5 .2 because a community of iurisprudentgs - or legal scholars grew up who advised the Senate andtor the Emperor and “"1 'e'I this community institutionalized the thinking about decisions coming out of the growing code of laws. J was.) “arise of the above. _. a e. None of the above. " ' 15. [liver time ancient economies greur more complex as theyr developed economically and as their foreign trade grew, but exactly hon:I complex theyr were has been I. matter ol‘considerabie debate. Some ot‘ the positions of schoiars who Iwere involved in the debate went: 15‘s“ If: a. Greek economic tile was giggle and small—scale. lt 1was largely based on the ethos. b. eennemie life of the fifth century BIT. was a complex as the European sixteenth century. e. economic life was never indeEndent - production and exchange was embedded in other institutions and attitudes. fdfihll of the above. e. None ot' the above. 'T. Baekhouse contends that the 12 century Renaissance (Le. a rising demand fortearning} was a consequence, L) H t" perhaps, of: a. rising prosperity. h. conflicts between emerging powers {notably Church and State]. c. the loosening of the feudal system and the emergence of a middle class. :1. Prof M. says we also Wgate whet-Ferihe rising prosperity was due to a major decrease in transport costs due to advances in marine technology. More prosperity would certainly permit the endowment olthe new institutions oflearltlng as well as presenting problems to the scholastics as to whether the source of new wealth was sinful or not" will of the above. eter Ahelard and Thomas of Cho‘nham. [in stem Magnus and Thomas AEEL c. William of Aurerre and Aristotle. d. Nicole Uresme and Jean Le lion. e. None of the above. ydecortling to Backllouie the major figures in scholastic economies are: P i I . l- _ _r't'o.-r.1I'L-r J 9. Aeeording to Backllouse the break up ofthe medieval order led to slgnificant shifts in the economic balance of Europe. a. Independent city states declined. b. Capital cities like London grew most rapidly. e. Other cities even declined-me. for example, declined in importance relative to London. Paris and An'isterdam. d. Countries bordering on the North Sea enjoyed increased prosperity while the Mediterranean declined. {All oftltc above. '— iifi't’a'r --. It}. Pro’l M. said that Machiavelli is similar to Malthus and Mars. because: a. all people whose names begin with M are malcontents. [This is known as Murphy‘s Law.] ' ' .. ~ I: all three had rebellious personalities. ’5/They are remembered more for their hold arguments than for their more subtle and nuanced arguments. Machiavelli actually did not discard all moral standards in judging political behavior in favor of “Machiavellian” Inote how a misconception about his thought has got into our languagei behavior despite what he said in it Principe. d. All of the above. e. None of the above- l [. The Balance of Payments balances overali because: a. double entry bookkeeping is used. b. hecause governments fudge statistics to make them balance. Even Iwith perfect statistics they wouldn't balance overalL c. demand necfisarily equals suppiy. /d:/persons and governments cannot buy foreign products and make gifts to foreigners and make foreign investments unless they earn, borrow or are given the necessary foreign currency to an that. e. None of the above. Page 3 12.. The distinction between current transactions and capital transactions in the Balance of Payments depends on: a. "whether a particular transaction involves an Lilli. Etransfer of ownership] or not. “b. whether a particular transaction wilt occur this year or sent year. c. whether a particular transaction is initiated by a foreigner or by the citizen of a particular country. d. whether a particular transaction is initiated by a private individual or by a corporate entity. e. all of the above. 13- One of the following is a unilateral transfer. which. one? a. Monsieur Legrange from Paris visits Disneyland and purchases a ticket. ,hfi/Madamc Lagrange sends her sister. in Whittier, $51) in Euros for Christmas. c. Madcmiselle Legrllage sends her boyfriend studying Economics Ill'l' at UCLA a copy of Paris Soir. d. The chauffeur of Monsieur Lagrange orders a spare part for the Legrange family Lexus from l|:'_'iarsot'i Toyota, in Carson, California. e. Ail ofthe above. 14. The fact that there are “flat” entries as well as “grass” entries in the Balance of Payments means that: a. governments have something to hide and are pulling the wool over our eyes. b. gross entries are clf entries |in other words carriage, insurance. and freight has been paid] whereas net entries are fob entries lit-leaning costs are only included only up to the point that a commodity has been loaded on a ship or other means of transportation] c. we are just going to have to convert net entries in PPP [purchasing Pl'ltn't er parity| prices to get to gross prices. /Jd:’for some types of traded items we shalt not know the total volume of the item traded. ' c. All of the above. I 5. Tot: own stock in Harlan and Wolff in Belfast, Northern Ireland and get a check for Sill} English pound. This is: a. an import of an [UL] and witl appear on the Capital Account as an export. b. an export of an. [GLI- and will appear on the Capital Account as an import. c. actually won’t appear on the Balance of Payments but will appear in the Northern irish Balance of Payments. ,dfzrceordcd an the American Current Account as an earning on an investment and will appear on the export side of the Balance. c. None of the above. {z Viki; If country A makes a Direct investment in Country B: karthis will show up on the capital account of lCountry A as an import. '/ "' it. this will show up on the capital account ofCountt-y A as an export. f ,ef'ihis will show up on the current account of Country A as an import. d.thls will show up on the current account of Country A as an export. c. this will not show up on the Balance of Payments otCountry B. '-|f.- ', 1'; -' _ 1?. Domestic availability [DA] is: {fa/equal to GNP + imports - exports. if a country has an import surplus1 DA is greater than GDP. b. is a met'calltiiist term for the available surplus domestically available for export. c. is it mercaatllisl term for the unempioyed available for cmpioyment in export industries.1 .2 ti. is always less than the GNP. ,1 'r’i'f' c. is always greater than the GDP. “Ii-ffut' '_- ““I' ..'-." 39.7.1 Mic oi Final-.1. I Female-a r' If Ills-Ll. :Lrllr'fg' fiwarqa pee ' u heirs: 4's he 'vtL fine tor " o Virtth fu'thott‘l' in"; ("new - Eon "r L. r _ J.“- r_ -.,._ lf'lllr1.{.|-. _r r J, _J A." iii. Some or the reasons why bullionists wanted lrtlpol'ls of gold were: Page 4 a. ram imports mode-1 “a sum or we Etihooi n nun : 34-4: t. it t. h. monarchs by owning mints could debase currencies in times of emergency. L- ndcmq [1er c. “money quickens trade". ' u t if; a; or rt. that having more gold enabled the switch from [using our language and concepts] a natural to a money economy: gill.“ ol' the above. r 19. Mun might be viewed as making Mercantillst thinking a tad more enlightened because: gym/he argued that exporting gold to India was OK as this help-ed Britain overall to have an'import surplus. “id'j'infil (1' " n. he made a strong pitch for governments to leave business to business and stop worrying about the 30?. o It; 1; 4;; "lot “ n. he argued monarchs should promote the natural liberties of all citizens of a country. I I m A Er: I. m d. he was the first person to argue for the removal of all tarifis. {Egg-hue of the above. :F‘ 76”? fie 1w" " Ear L II]. To mercantilist thinkers a Balance of Payments was u‘t'attorable"r if: a. was very small, and diminishing overtime. R . it produced an export surplus. c. it produced an Import surplus. d- it enabled the purchase of iuaury items for the rich. c. it enabled the pursuit of coolneyelical policy. dyes-ion r :5“: ti- ten—w ’r-h' Winii 9th 1:. Sir Thomas Mun influenced European thought on foreign trade for many decades. He did thlfit _.. -”_ oi: despite the fact that he was clearly involved In special pleading for the East India Company. ' - I b. by thoroughly rejecting mercantilisen. c. by introducing the first systematic use ol‘ statistics into mercantilist literature. d. by arguing that export surpluses would not last as they would disappear due to the emulation ol'other nations. _ c. none of the above. ' 22. Some persons have argued there was a Mercantilist paradigm but Prof M. argued that this does not make sense as: a. there was considerable variance in the views of Mercantilist writers. |-. J ' _I {ti 1‘“ .- I b. there was not a sulficient body of developed thinking to make mercantilist thought scientific. “'“fi If x ' ""1" My“: c. we should when discussing scientific topics, stick to definition of a paradigm that Kuhn uses. H- 5 " '- : =‘-."- FD l-"t 2"". /dfali of file above. {.3 .’-.".'~ if - tile. {Lu $3.1 " e. none of the aboyeII | ~ .:._/-_-1.-_.,-':._t_"-t .,-- 23. Nowton‘s revolution in physics had direct influence on the development ofeconomics. ~ ._ _ a. Home as a young person formed the ambition to produce a Newtonian revolution in the “moral sciences.‘ 3‘ ' T n L 11. Smith was not only deeply influenced by Home and Ilunte’s circle of friends in Edinburgh but had written about and I'- -'1r:i.tt!r.' rr'i lectured on science. He was a strong admirer of Newton. 1 L J a. e. Smith’s “natural system of llherty" in the social sphere is similar to Newton‘s system of the Universe. ..—. d. Both Home and Smith thought in terms of gravity. For Smith, market prices “gravitate” towards natural prices. For -*-' -"':l- a Home saw gold internationally finding a natural level like water. Also for Home there was a moral attraction between humans “ arising from the interests and passions of "ten" akin to the physical attraction generated by gravitational forces. .XMI of the above. Note: I'll give you this one as ofre-eirr'e. (in reviewing the questions after I typed them up. “inert this question but I dirt not go over Hume's pSfibflogICEI beliefs in cioss. anr are no: in your recs. 14. In the intellectual revolution in Europe during the seventeenth and eighteenth century, the first major successful . attack on Platonism was by: iii-1?? ‘ .a”. John Locke who argued that far from having innate ideas at birth, humans were born with a tubule rose Jempty slatei “inf.th ’ on which Nature wrote by way of our experiences, and our reflections on our experiences. 'Ph‘l'tuin. h. Spinoza who argued that the Ideal Republic was fascistic. c. Machiavelli who argued that Plato was overly concerned with ethics and economic efficiency. 11 Iill‘ttesnay who argued that Plato failed to understand the yinues of foreign trade. e. None of the above. 25. Francois Quesnay liIfiS‘tlv-ITM] was physician to Madame de Pompadon'r and 1749 and the Page 5 French King in 1755. He wrote dissertations on suppuration. gangrene and fevers. [True facts i didn‘t have time to tell you in class. So you are learning something else on this exam'.| Some commentators leg. Schumpeter! speculate because Willilm Harvey’s “STE-1657] discovery of the circulation at blood was still fresh in the European conversation [more true factsl, Quesnay was led: to see that a. healthy circulation of money throughout the whole world would prevent the disease of mercantilisrn. .étn see circulation oi‘cnmmodities and expenditures in I"L'E.tat."' [The State]. It: to invent social Security systems for the French. Harmony—3 d. to invent medical economics. CI.“ Jill-kin 1‘ all}. h T: e. none of the above. it film-11lifi: .{tl- “__I.'_-Hl_ .. 2ft. Prodnit Na was a Physiocratic nation: ll” a. and is not out of line with Aristotle‘s metaphor of productivity: an apple tree is productive - it bears an apple. Craftsmen making a table merely change the form of the materials going into the table. . . Pu ti ' ' Mt :- b. And was the surplus over costs In agncultnral production. 1 u r- t. '5 the French for Net Material Prodnct. - 1* mi of h t’- mitt Ail“ and {bl' ' 'S‘UH. nix: «Jr ~_ .' Ii}- e. all ot' the ahove. ' IT. The Physloerats believed in. a single tax, l‘impilt unique,I on landowners: _"Ph -_,_._ . , ,i. .- _afi1eiie’ving that only agriculture produced a surplus with this surplus being largely an unearned one due to the .. ___ .{ ll _. _ _ 5: 'j productivity ofNatnre. 5n the tax was a fair one. i by ' '_:_ I j“- b. heeause they were Marxist revolutionaries and wanted to over throw the landowning tlass. : I _-I . fl '. 1:. Statement b is an example of anachronistic thinking. Marx wasn‘t even born yet. The Phyisoerats were primitive anarchists whose brains had been rotted by drinking too much French wine, and sea. It. because when you eoosldered the internal money circulation of France onlyr the landowners hall- much money, and so sheer expediency required that only landowners be taxed. c. because I'latn had advocated that. 23. Economic or preeeonotnie thinking is much affected hy what the state of economic Nature is that is thought about at any point in time. So Physiocratic thinking reflected the [acts that: a. a major part at the French GNP originated in agriculture. I "'I. b. France did not have a large volume of International trade. hill c. France‘s internal arrangements had been. much afl'ec1ed by mercantilist regulation which under Colbert had reached a highly detailed I'ot‘ttt— d. the French system of tar farming was highly inefilcient and corrupt and surely needed changing. _, e. All of the above. 19‘. One of the advantages of promoting manufactura to Home was that this; ’_ a. would give Great Britain a long and lasting comparative advantage in manufactured products. '- I '1 fi'would give Great Britain a labor remove in wartime. Labor in manuiacturing industries could be diverted to the armed forces or to production ot'commuditifli needed to prosecute a war. it. would lead to a permanent export surplus and a build up of the gold needed to finance British output. IL would insullte Britain from changes in the balance of payments. I phi-3t." of the above. . h. 3'". Hume‘s dictum is important a! it underlies the positivet'normative distinction that contemporary social sciences including Economies uses. Generalizing broadly. we can represent it. essentially, as saying: _ a. no scientist can believe in religion. I'll: l d h. we have to be totally skeptical about everything. 't. '- -'I' 't .- if. c. we should not attempt to predict about the tuture. ' L / . fd. moral judgments are not relevant to explaining the world of observable realityII and empirical facts cannot provide us with our moral heiiei's. 2. none of the above. 3]. David Hume defined his “degree of assurance” by: *iI-’}'i."-'t' TEA 5'5?“ "'r-“v'fiii-L Page ii a. the root mean square deviation. Empty-[ply up; minim. .9:er b. the covariance of a on y, divided by the variance of z. '- ' yfie following. Assume an event |p| can occur or not. Deduct the number of times p did not occur from the times that it did. [It you divide the result by the number of experiment you have a probabilityl. d. the number of falsification: of a preposition. e. using Locke's “degrees of assent." a_ hip]; Dingoes 31.54: :‘5655 32. David Hume would say a proposition described a fact it: '3: 'st': ‘11:)”: a. everybody you asked about the proposition said it was true. in/aii previous trials or experiments had had one particular outcome. Any time you drop lead in water, it sinks. it is a fact that lead sinks in water. Being a sceptic, and believing only in the evidence of our present senses. he stilt had a problem finding epistemological support for this proposition when it dealt with future droppings of lead in future water. c. it was listed in the French Encyclopedia that the Physiocrats had produced. Hume had an Intense admiration for French intellectuals. d. All of the above. e. None of the above. _. 33. Hume’s dilemma was: . a. that as he made a clear distinction between what we now call “positive” and “normative” statements, he, just like Adam Smith, found himself unable to even make a single normative statement. it Ethics .- could not be grounded in matters of fact, flten no ethicai statement could be justified. [that due to his scepticism, he to Illli not iillli at: espistemological basis for statements about future I outcomes even when such tJIIIEDIEI'IE dealt wlth the realm of the positive. c. that as he was a Whig, he could not get a Chair in a Scottish University. Duty Tories could occupy pmicasoriai chairs in Scotland. And he wanted a Chair and didn’t want to be a Tory. Tough. d. that he believed in having an impofi surplus but he had not figured out how paper money affected thc balance of payme...
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