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Exam 2: Understanding Economics and How It Affects Business

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Question 1

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Sam is a recent college graduate with a lot of "firsts": First professional job,first new car,first apartment,and first time making all of his own financial decisions.As he works on his monthly budget,he can't help but wonder why he is barely "making ends meet." Each month,it takes his entire paycheck to pay his rent,his car payment,and buy food.Last month,he told his parents,"I'm sure I had more money when I was a starving student!" You recently learned about key economic indicators in your business class.You inform Sam that his problems are caused by severe deflation and lack of demand for products and services.

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B) False

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Question 2

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An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers.He is examining a microeconomic situation.

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B) False

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Socialists believe that the primary economic function of the government is to promote rapid economic growth.

Adam Smith believed the self-interest of businesspeople would lead them to create needed goods,services,and jobs.

The prime minister of the nation of Urbania has called for Urbania's legislature to enact new legislation designed to shift his country away from socialism toward a more capitalistic system.The Prime Minister acknowledges that such a radical change will entail some hardships,and that some citizens will be unhappy with the changes.The most likely source of dissatisfaction with a move toward capitalism is:

Jake considers himself to be a follower of Thomas Malthus.Which of the following statements would Jake be most likely to make?

The total value of final goods and services produced within a nation's borders in a given year is known as that nation's:

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.

Lance owns Lance Lawns Irrigation Systems,LLC,a company that installs and maintains underground lawn irrigation systems.Business is down due to new housing starts being negatively impacted by a deep recession.To make things worse,his bank called yesterday to inform him that his credit limit interest fee of 12.5%) will be cut from $30,000 per year to $15,000 per year,unless he is willing to pay a higher interest rate of 20%.As Lance drives to the first job this morning,he knows that his last task of the day will be to reduce the hours for his two employees.He can't afford to work employees eight hours per day,with only a $15,000 line of credit.Which of the following strategies will help Lance's situation?

As the term "global" become "local",and as we see more opportunities to compete in the global market,

Socialism and communism are both variations of a free-market economy.

Which of the following would be a topic emphasized in a macroeconomics course?

Reality Entertainment,Inc is a major producer of reality TV programming.The company faces fierce competition from three other major producers of similar shows.Together,Reality Entertainment and its three rivals control almost the entire reality TV programming.Their market environment is called:

Macroeconomics looks at long run economic problems while microeconomics examines short run economic problems.

The CPI measures the pace of inflation or deflation.

Adam Smith believed that since businesspeople are motivated to improve their own prosperity,their actions are unlikely to benefit society as a whole.

Countries that wish to avoid shortages and surpluses of goods should adopt a communist system.

In one of his weekly broadcasts,the Federal Reserve Chairman remarked that inflation had begun to tick upward.However,unemployment in the U.S was still quite high and economic growth had slowed.With short-term interest rates close to 0 zero) ,the Chair did not visualize that ____________ policy would be able to do anything for the high unemployment problem.He felt that _______ policy would be more useful for bolstering employment,but that would require local and state governments and the federal government to provide tax breaks for corporations?

In a mixed economy,the government's goal is to grow the economy and maintain some measure of social equality.

Three important economic indicators of the United States are the unemployment rate,the price indices,and the: