Ch.2 Inequality And Capitalism Full Test Bank

Multiple Choice: Chapter 2

1. For the purposes of the text, to what is Heiner referring to as the “Great Recession”?
   1. The severe economic downturn of the 1930s.
   2. The steady economic decline of the middle class since the 1980s.
   3. The economic downturn of 2007–2009, and its lingering effects.
   4. None of the above.
2. In what economic system are factories, railways, trucking systems, and so on publicly owned and operated?
   1. capitalism
   2. communism
   3. socialism
   4. fair market
3. In what economic system are factories, railways, trucking systems, and so on owned by private individuals or corporations?
   1. capitalism
   2. communism
   3. socialism
   4. fair market
4. Which of the following tends to be true in Western European socialist societies?
   1. Leaders are elected democratically.
   2. The nation owns critical resources and services (e.g., education, banking, and mining).
   3. The nation’s spending includes welfare spending (e.g., retirement, healthcare, and education).
   4. All of the above.
   5. All of the above except for a.
5. How does the United States compare to the rest of the world in terms of economic equality?
   1. Income distribution in the United States is far more equal than in other industrialized nations.
   2. Income distribution in the United States is about the same as in other industrialized nations.
   3. Income distribution in the United States is far lower than in other industrialized nations.
6. CEOs of corporations tend to earn many times more than the income of their employees. In 2012, that ratio in the United States was ____ to one, in Japan ____ to one, and in the United Kingdom ____ to one.
   1. 354, 67, 84
   2. 300, 295, 312
   3. 10, 22, 35
   4. 50, 75, 82
7. In terms of income inequality, which nations are closest in comparison to the United States?
   1. Mexico, Guatemala, and other Latin American countries.
   2. The United Kingdom, Norway, France, and other European countries.
   3. Russia, Latvia, and other eastern European countries.
   4. Japan, China, and other industrialized Asian countries.
8. What does Heiner identify as an important contributor to the Great Recession?
   1. Irresponsible lower/working classes buying houses they could not afford.
   2. Failure of overseas markets.
   3. Widespread investment in the subprime mortgage market.
   4. None of the above.
9. Although the United States corporate tax rate is ____%, large corporations like General Electric employ nearly a thousand individuals in the tax department to look for loopholes, breaks, and so on, resulting in an actual tax rate of just ____%.
   1. 50%, 30%
   2. 45%, 15%
   3. 25%, 20%
   4. 35%, 2%
10. Which of the following is true of discretionary spending, which stimulates the economy?
    1. Money concentrated in the hands of the wealthy is spread further because there is more of it being spent.
    2. Money concentrated in the hands of the poor and working class does not stimulate the economy because too much of it is spent on irresponsible habits or in illegal markets (such as drugs or gambling).
    3. Money concentrated in the hands of the poor, working class, and middle class will be widely spent because there are more people in these categories, buying more things.
    4. None of the above.
11. The primary responsibility of modern corporations is
    1. to make a profit for shareholders.
    2. to maintain a positive relationship with loyal employees.
    3. to be a good neighbor in the communities where they are based.
    4. none of the above.
12. How does the United States compare to European nations in terms of unemployment?
    1. We treat our unemployed approximately the same.
    2. The United States treats its unemployed better than European nations.
    3. Unemployed Europeans enjoy a larger unemployment check (relative to their prior salary) and more generous welfare benefits.
    4. None of the above.
13. As cellular phones have become more affordable and more common, fewer people have landline telephone service to their homes. Let’s pretend that landline telephone providers had gone out of business (instead of branching out, as they have). The disintegration of one business because of lack of competition is known as
    1. poor business practices.
    2. lack of creativity.
    3. monopoly.
    4. creative destruction.
14. Approximately how does the United States “score” in terms of the quality of its infrastructure (schools, bridges, dams, roadways, etc.)?
    1. outstanding
    2. above average
    3. average
    4. below average
15. Heiner explains two forms of poverty: _________________ poverty means that people can’t afford to buy the basic necessities of life (food, clothing, etc). _____________ poverty, on the other hand, means that people can’t afford to buy what others in the same society can normally afford to buy (cell phones, cars, etc).
    1. Absolute, Relative
    2. Absolute, First world
    3. Relative, Partial
    4. Relative, Absolute

True/False: Chapter 2

1. True or False: In the 1990s, the economic success of the wealthy classes was reflected in economic improvement for the middle and lower classes, thus proving the adage: “A rising tide raises all boats.”
2. True or False: The United States is a purely capitalist society.
3. True or False: The United States essentially has a one-party political system: capitalist.
4. True or False: The United States has the highest rates of income and wealth inequality, with the most money concentrated in the fewest hands than any democratic nation.
5. True or False: Large corporations are responsible for over 60% of private sector jobs created.

Short answer: Chapter 2

1. Explain the rationale behind “trickle-down economics.” What has been the outcome in the United States because of the application of this economic strategy?
2. Explain the multiple ways that large US corporations go about paying little to no income taxes.
3. Discuss the changes in income and wealth inequality in the United States from the 1940s to the present day.