Exam 2: Understanding Economics and How It Affects Business

The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all.

Your professor showed you an Internet video of the chair of the Federal Reserve Bank speaking to the American public. The message he is conveying indicates 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?

The greed of businesspeople represents one of the greatest dangers to the operation of a free market system.

The Federal Reserve Board is responsible for controlling the money supply.

The nation of Florentina is in the midst of a serious economic downturn. The nation's GDP has declined steadily for over five years and is now at its lowest level in over fifty years. Florentina's unemployment rate is at an all time high and the nation's CPI is falling. Florentina's economic condition is referred to as a:

Under a capitalistic system, decisions such as what goods and services to produce, what to charge, and how much to import or export are made by:

In command economies, the government plays a major role in deciding which goods are produced and who will get them.

Both socialism and communism are variations of:

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

Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves.

exists when a large number of firms produce goods that are similar but are perceived by buyers as being different.

One of the benefits of a free market is that:

A major benefit of socialism is the:

An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time.

Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition.

Monetary policy is directly under the control of the U.S. Department of the Treasury.

Under capitalism:

The markets for laundry detergents, soft drinks, and automobiles are dominated by just a few sellers. Economists would classify these markets as examples of:

In the United States, laws prohibit the creation of most types of monopolies.

unemployment refers to loss of jobs due to a recession or a similar downturn in the economy.