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Exam 2: Understanding Economics and How It Affects Business

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Question 81

Multiple Choice

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Economics is the study of how a society ________.

A) invests wisely in the stock market.
B) employs resources to produce goods and services and distribute them among competing groups and individuals.
C) employs statistical techniques to make predictions about the evolution of society over the long run.
D) governs itself for the good of its citizens.

E) A) and B)
F) None of the above

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Question 82

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GDP figures do not include the value of illegal activities.

A) True
B) False

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Question 83

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Which of the following statements provides the most accurate comparison of socialism and communism?

Brain drain is the loss of the best and brightest people from their home countries to other countries.

According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business could control a market for a particular good or service.

A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed.

The chair of the Federal Reserve Bank spoke to the American public. The message she conveyed is that Fed economists are worried about inflation and believe the best course of action would be to slow the economy. Which of the following policies is the Fed most likely to pursue?

Inflation refers to a general rise in the prices of goods and services over time.

Mariska left her home country to become a nanny for a family in a suburb of San Diego, California. One of the benefits of her new job is she can attend the community college near her family's home. However, when she arrived, she experienced the differences from a predominately socialist nation and a capitalist nation. Mariska noted that public transportation in California was limited and expensive, making it difficult to get to school. For a negligible fee, the government in her home country provided public transportation for everyone. Mariska's home country's economic system was more characteristic of socialism.

A major benefit of socialism is the

________ policy refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending.

Which of the following statements about the Federal Reserve Bank (the Fed) is most accurate?

Most countries throughout the world can be classified as either purely capitalist or purely socialist.

The point of intersection between the supply and demand curves is called the stress point.

Fiscal policy involves increases or decreases in

Deflation means prices are declining and is an indication that economic conditions are deteriorating.

Studies about the effects of population growth on the economy are part of macroeconomics.

The consumer price index (CPI) measures what is happening to prices at the wholesale level.

A typical demand curve shows that

The PowerPlus Utility Company recently built a nuclear power plant in a southern state and started competing against Electricity City 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 PowerPlus has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall.