Exam 2: Understanding Economics and How It Affects Business

As you're checking out the online edition of your local newspaper, you quickly scan a report in the business section that says government spending will again exceed tax revenues in the current year. What does this mean for the economy?

Some wages, tax brackets, interest rates, and government benefits are based on the CPI.

Under capitalism,

Which of the following statements would a follower of Adam Smith most likely make?

Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services, and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economics benefits for many. This idea was called the

Sasha is a well-educated entrepreneur who operated a small business in her home country of Evensplitia. At the encouragement of American relatives, Sasha recently immigrated to the United States and applied for citizenship. "In Evensplitia, tax rates were very high," Sasha complained. "The government used my taxes to finance all sorts of social programs to help the less fortunate. While I want to help, it has really undermined the profit incentive of individuals such as me. I feel those high taxes have stunted economic growth." Sasha's comments illustrate the reason many socialist countries are experiencing a(n)

Due to the fundamental rights afforded to us by a free-market capitalistic system, people are more willing to take calculated risks.

Discuss the views of economist Adam Smith. How does the "invisible hand" philosophy suggested by Smith benefit society as a whole?

In capitalist countries, the government decides what to produce and how the goods and services will be produced.

A(n) ________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period.

A young couple living in rural west-central Missouri heard about the closing of a local grocery store. Although a small operation, it served a small community that would now have to travel another 20 miles to the nearest grocery store. With help from a local realtor and banker, the couple purchased the store, remodeled it, and reopened it. As new storeowners, they had to carefully watch cash flow. As their customer base began to grow, they began offering hot food, and hired others to help with the operation. The economic benefit created in this story is called:

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

Keynesian economic theory suggests

State capitalism is the combination of freer markets and some government control.

The presence of competition in free markets

The main goal of resource development is to find ways to

A simple supply curve shows a relationship between the

Economics was called the "Dismal Science" by Thomas Carlyle because

A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople.

In a free market economic system, the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor-quality products at high prices.