how and why should states intervene in the market economy?
...
in what ways do economic policies reflect the relative power of different groups in a society?
...
how important are globalization and international organizations in determining the economic policies of individual countries?
...
why have some states intervened in the market economy more than others?
...
market economy (pg.197)
economic system in which individuals and firms exchange goods and services in a largely unfettered manner
capitalism (pg.198)
combination of a market economy with private property rights
command economy (pg.199)
economic system in which most prices, property and production are directly controlled by the state
essential role of states (pg.199)
-providing security
-establishing and enforcing property and contract rights
-creating and controlling currency
-most essential roles involve providing public goods
beneficial role of states (pg.200)
-state provision of
-infrastructure, education, health care
-prevention or regulation of monopolies
-intervention to correct market failure
politically generated roles (pg.203)
taken on because populace demands them, such as:
- improved working conditions
-policies to redistribute income
-environmental protection
when the market fails:
market failure (pg.201)
phenomenon that occurs when markets fail to preform efficiently or they fail to preform according to other widely held social values; often caused by externalities, high risk or imperfect information
public goods (pg.199)
goods or services that cannot or will not be provided via the market because their costs are too high or their benefits are too diffuse
externality (pg.201)
cost or benefit of the production process that is not fully included in the price of the final market transaction when the product is sold
monopoly (pg.202)
the control of the entire supply of a valued good or service by one economic actor
natural monopolies (pg.203)
control of the entire supply of valued goods or services by one economic actor in a sector of the economy in which competition would raise costs and reduce efficiency
keynesianism vs. monetarism (pg.207)
-john maynard keynes: fiscal policy to revive demand during economic downturn
-milton friedman: management of money supply through interest rates; limited government
development economics vs. neoliberalism (pg.208(pg.
-comparative advantage: gains through trade by focusing on goods that are produced efficiently
-import-substitution industrialization: trade protectionism to grow industries
keynesianism (pg.205)
-governments can manage the business cycles of capitalism via active fiscal policy, including deficit spending when necessary
-Fiscal policy: government budgetary policy
-deficit spending: government spending more than is collected in revenue
monetarism (pg.206)
-only monetary policy can affect economic well-being in capitalist economies
-monetary policy: amount of money a government prints and puts into circulation and the basic interest rates the government sets
-rejects Keynesian policy
-argues for a reduced r
development economics (pg.238)
-considered how state could intervene in economy to stimulate rapid industrialization and growth
-managed capitalism for developing countries
-import-substitution industrialization
-ISI initially successful
-most developing countries pursued with support
neoliberalism (pg.207)
-development theory, argues that developing countries should reduce the role of government and open themselves to global trade to allow the market to allocate resources to maximize efficiency and thereby economic growth
-monetarist-inspired model embraced
globalization(pg.216)
-rapid increase in the flow of economic activity, technology and communications around the globe and the increased sharing of cultural symbols, political ideas and movements across countries
is globalization really caused by technological advance or are these conscious government policies encouraging it?
...
case study: the united states (pg.225)
-economic model: laissez faire
-economic policy: fluctuating between monetarists and Keynesian
-globalization effects: manufacturing job loss; financial sector gain
-economic milestones: great depression and new deal; 1970s stagflation;
-great recession:
case study: germany (pg.232)
-economic model: social market economy
-economic policy: monetarist
-globalization effects: neoliberal reforms
-economic milestones: reunification; growing unemployment; costs of social spending
-great recession: slowing growth: european leader
case study: japan (pg.237)
-economic model: the developmental state
-economic policy: Keynesian; more monetarist since 1990 crisis
-globalization effects: decline of developmental states ability to influence economy
-economic milestones: 1990 collapse and decade of stagnation and d
case study: mexico (pg.243)
-economic model: ISI initially; shift to neoliberal in 1980s-1990s
-economic policy: Keynesian to neoliberal
-globalization effects: NAFTA and dependence on the united states
-economic milestones: debt crises of 1982 and 1994
-great recession: mirrors US
case study: nigeria (pg.247)
-economic model: ISI; slow shift to neoliberal from 1983
-economic policy: focused on oil revenue only
-economic milestones: rising and falling oil prices; debt crisis; grand corruption
-globalization effects: oil dependency
-great recession: no recession
Goods and services that cannot or will not be provided by the market because their costs are too high or their benefits too diffuse are called:
public goods
Monetarism was first championed by:
milton friedman
Which of the following category of states would have been most likely to adopt Import-Substitution Industrialization?
modernizing authoritarian
Which of the following is an essential function of the state in the market?
A. Providing national and personal security
B. Protecting property and contract rights
C. Providing a currency
D. All of the above
(answer D)
Monetary policy as instituted in the United States under President Reagan aimed at lowering
A. Inflation
B. Debt
C. Taxes
D. All of the above
(answer A)
Which of the following is the most noticeable effect of NAFTA on Mexico's economy?
shifts towards exporting more products
In comparison to German labor unions, Japanese unions are:
weaker
In the 1990s, one of Japan's largest economic problems was:
B. dramatically decreased economic growth.
Economic reform in Japan has been complicated by:
A. Japanese companies moving production abroad.
B. low levels of individual savings.
C. a weak bureaucracy.
D. All of the above.
(answer A)
When Nigeria gained independence in 1960, its primary exports were _________; by the mid-1970s, ______________ dominated its economy.
agricultural; oil
Government entities with monopoly control over the domestic and international marketing of key crops in Nigeria led to:
A. inflated revenue for farmers.
B. decreased revenue for the government.
C. high implicit taxes on farmers.
D. all of the above.
(answer c)
An economic system in which individuals and firms exchange goods and services in a largely unfettered manner is a:
market economy
The cost of pollution produced by a factory is an example of:
negative externality
Stagflation is a period in which:
A. There is high unemployment in the market.
B. There is a high inflation rate in the market.
C. High debt.
D. A and B but not necessarily C.
(answer d)
The primary school of thought opposing Keynesian views of when, why, and how the state should guide the economy is known as:
monetarism
Policies advocated by Keynesian economists include all of the following EXCEPT:
A. deficit spending.
B. smoothing out the business cycle.
C. measures to achieve full employment.
D. reducing the amount of money in circulation.
(answer d)
Fiscal policy refers to the:
. amount of money a government prints and puts into circulation.
B. interest rates the government sets.
C. government's budgetary policy.
D. All of the above.
(answer c)
Market Economy and Capitalism differ because:
A. Capitalism requires the government to provide public goods while market economy doesn't.
B. Capitalism practices deficit spending while market economy doesn't.
C. Market economy does not require private property and capitalism does.
D. There is no diff
The prescriptions of neoliberalism include:
A. privatization.
B. reducing government spending.
C. removing restrictions on free trade.
D. All of the above.
(answer d)
Structural adjustment programs:
A. are based on monetarist ideas.
B. are based on Keynesian ideas.
C. were freely chosen by many developing countries.
D. were incorporated into import substitution industrialization.
(answer a)
The idea of globalization as a key issue in international political economy took off in the:
1990s
Which of the following countries pioneered the social market economy?
germany
The development of the welfare state in Germany began in order to:
A. preempt the socialist threat.
B. help workers who had suffered during Germany's rapid industrialization.
C. keep labor cheap.
D. All of the above.
(answer d)
Structural Adjustment Policies were successful in:
A. sub-Saharan Africa.
B. Chile.
C. Russia.
D. India.
(answer b)
codetermination (pg.234)
in germany unions are represented on the supervisory boards of all firms of more than 2000 employees
comparative advantage (pg.208)
theory of trade that argues that economic efficiency and well-being will be maximized if each country uses its resources to produce whatever it produces relatively well compared to other countries and then trades what it had produced with other countries
developmental state (pg.238)
a state that seeks to create national strength by taking an active and conscious role in the development of specific sectors of the economy
import-substitution industrialization (ISI) (pg.208)
development policy popular in the 1950s-1970s that uses trade policy, monetary policy, and currency rates to encourage the creation of new industries to produce goods domestically that the country imported in the past
Keynesian theory (pg.205)
named for british economist john maynard keynes who argued that governments can reduce the "boom and bust" cycles of capitalism via active fiscal policy, including deficit spending when necessary
privatize (pg.210)
sell off public assets to the public sector
social market economy (pg.232)
in germany, post war economic system that combines a highly productive market economy with an extensive and generous welfare state and usually active involvement of both business and labor associations in setting and implementing economic policy
Structural adjustment programs (SAPs) (pg.210)
development programs created by the world bank and international monetary fund beginning in the 1980s; based on neoliberalism