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Exam 2: Understanding Economics and How It Affects Business

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Question 81

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The foundation of the U.S. economic system is based on:

A) Capitalism.
B) The ideas of Thomas Malthus.
C) Equality.
D) The saying, "from each according to ability, to each according to need."

E) None of the above
F) All of the above

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Question 82

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Productivity of workers in the U.S. is helped by the use of better machinery.

A) True
B) False

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Question 83

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Sarah owns a hair styling salon. She needs to update her shop with new customer chairs and work stations. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately determine that updating her shop would not increase or decrease her financial position.

The PowerHouse Utility Company recently built a nuclear power plant in a southern state and started competing against BXY Utility Company that has served customers in that region for 65 years. Due to deregulation, consumers now have a choice among utility companies in this area. Although PowerHouse has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall.

Brain drain has occurred in many socialistic nations because:

Thomas Malthus believed that people in most countries would never be able to achieve high standards of living unless the problems of overpopulation were addressed.

The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the:

Mini-Case Gig Abite is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Frinezia. Gig became discouraged by the high tax rates in Frinezia, so he immigrated to the United States eleven years ago. Soon after moving to the U.S., Gig again started his own business, which he named Giganeers Consulting. The company struggled at first, and almost went under midway through its second year. However, Gig never lost faith, the company survived, and it soon developed a growing reputation for quality work and dependable service. Giganeers began experiencing sustained growth early in its fourth year. In fact, Gig hired additional employees over the next few years to keep up with the increasing workload. His company, which started with only Gig and 2 other full time workers, now provides jobs for 43 full-time employees as well as many part time workers. Despite these past successes, some clouds are on the horizon. The company recently suffered its first drop in business since its very early years. Gig is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The news anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Gig is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track. -Gig recently heard a radio report that the Fed will try to help get the U.S. economy back on track. If the Fed takes action, Gig would likely see:

Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market.

Which of the following statements most accurately identifies a limitation of the free-market economic system?

Thomas Malthus believed that overpopulation was a major cause of poverty.

The freedom of people to decide where they want to work and live, and what they want to buy or sell are basic capitalist rights under:

Under capitalism, the government prohibits people and businesses from competing with each other.

In a free market economic system, the mechanism of is the key determinant used to signal to producers what to produce and how much to produce.

Over the years, the government of Montivia has focused on implementing programs that promote equality. On the short-term, though, Montivia legislators are concerned about the very slow rate of growth that has plagued its national economy. In order to address this problem, the government is likely to:

is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product.

John complained to his buddy, Frank, that prices have increased a lot over the past year. Frank disagreed, saying that the prices of some goods have gone up a bit, but other prices have declined, noting that you can get some good buys on houses right now. Frank feels that the average price of consumer goods hasn't changed. Frank and John can refer to the to learn how government economists currently view the price situation.

Larry and Moe are having an argument. Larry believes that over the past year, the economy is experiencing rapid inflation, while Moe says that the economy actually experienced disinflation during this period. The easiest way for Larry and Moe to settle their argument is to look at GDP figures for the past year.

unemployment refers to persons who purposefully quit their jobs and have not yet found a new job.

During the recession of 2008-2009, the administrations of Presidents George W. Bush and Barack Obama flooded several banking, financial services, and insurance firms with government funds in exchange (at least temporarily) for government ownership rights. The unprecedented move signaled the government's concern that the global banking system might collapse if these firms ended up in bankruptcy. The decision for active government involvement in the operations of these firms demonstrates: