political science: chapter 5

how and why should states intervene in the market economy?
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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 informationpublic 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 diffuseexternality (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 soldmonopoly (pg.202)the control of the entire supply of a valued good or service by one economic actornatural 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 efficiencykeynesianism 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 governmentdevelopment 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 industrieskeynesianism (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 revenuemonetarism (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 role for government in the economydevelopment 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 of west and world bank from 1950s-1970sneoliberalism (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 by world bank in 1980. -partly based on success of "east asian miracle" countries -relied on structural adjustment programs to end government restrictions on free trade, privatize state-owned industry, reduce deficits -IMF and world bank imposed in much of postcolonial worldglobalization(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 countriesis 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: origins; high unemployment and debt; relatively good recoverycase 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 leadercase 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 deflation -great recession: renewed recession after brief growth; political upheaval and promises of bold reformcase 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 economycase 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 because of oil pricesGoods 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 goodsMonetarism was first championed by:milton friedmanWhich of the following category of states would have been most likely to adopt Import-Substitution Industrialization?modernizing authoritarianWhich 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 loweringA. 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 productsIn comparison to German labor unions, Japanese unions are:weakerIn 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; oilGovernment 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 economyThe cost of pollution produced by a factory is an example of:negative externalityStagflation 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:monetarismPolicies 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 difference; the two terms mean the same thing. (answer c)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:1990sWhich of the following countries pioneered the social market economy?germanyThe 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 employeescomparative 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 for goods it does not producedevelopmental 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 economyimport-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 pastKeynesian 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 necessaryprivatize (pg.210)sell off public assets to the public sectorsocial 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 policyStructural adjustment programs (SAPs) (pg.210)development programs created by the world bank and international monetary fund beginning in the 1980s; based on neoliberalism