Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Economics is the study of how a society ________.

Accepted Answer

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. 
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.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  Under socialism, the government owns most businesses, while under communism the church owns most businesses. 
B)  Both socialism and communism strive to achieve a more equal distribution of income and wealth, but under communism, the government takes greater control. 
C)  Socialism strives for an equal distribution of income but communism wants income to go primarily to those who own and operate private businesses. 
D)  Communism believes that the government should always strive to balance its budget, while socialism accepts deficit spending as the price of achieving true equality. 
A)  Under socialism, the government owns most businesses, while under communism the church owns most businesses. 
B)  Both socialism and communism strive to achieve a more equal distribution of income and wealth, but under communism, the government takes greater control. 
C)  Socialism strives for an equal distribution of income but communism wants income to go primarily to those who own and operate private businesses. 
D)  Communism believes that the government should always strive to balance its budget, while socialism accepts deficit spending as the price of achieving true equality.

Question 6

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.

Accepted Answer

A) True 
 B)False

Question 7

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?

Accepted Answer

A)  Increase taxes 
B)  Decrease interest rates 
C)  Restrict the money supply and increase interest rates 
D)  Devalue the dollar on international currency exchanges 
A)  Increase taxes 
B)  Decrease interest rates 
C)  Restrict the money supply and increase interest rates 
D)  Devalue the dollar on international currency exchanges

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Fiscal policy involves increases or decreases in

Accepted Answer

A)  the money supply. 
B)  interest rates. 
C)  government spending and taxes. 
D)  exports and imports. 
A)  the money supply. 
B)  interest rates. 
C)  government spending and taxes. 
D)  exports and imports.

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A)  Monetary 
B)  Incomes 
C)  Fiscal 
D)  Cyclical 
A)  Monetary 
B)  Incomes 
C)  Fiscal 
D)  Cyclical

Question 13

A major benefit of socialism is the

Accepted Answer

A)  ability to stimulate rapid economic growth. 
B)  ability to keep taxes low. 
C)  emphasis on social equality. 
D)  emphasis on private enterprise instead of public ownership. 
A)  ability to stimulate rapid economic growth. 
B)  ability to keep taxes low. 
C)  emphasis on social equality. 
D)  emphasis on private enterprise instead of public ownership.

Question 14

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

Accepted Answer

A)  The Fed is an agency of the U.S. Treasury Department that has the responsibility of collecting tax receipts for the IRS. 
B)  The Fed manages the U.S. money supply and interest rates. 
C)  The Fed is the primary government agency involved in carrying out our nation's fiscal policies. 
D)  The Fed is the agency of the government that ensures the U.S. maintains enough gold reserves to pay any foreign debts that result from international trade. 
A)  The Fed is an agency of the U.S. Treasury Department that has the responsibility of collecting tax receipts for the IRS. 
B)  The Fed manages the U.S. money supply and interest rates. 
C)  The Fed is the primary government agency involved in carrying out our nation's fiscal policies. 
D)  The Fed is the agency of the government that ensures the U.S. maintains enough gold reserves to pay any foreign debts that result from international trade.

Question 15

GDP figures do not include the value of illegal activities.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

A typical demand curve shows that

Accepted Answer

A)  as people earn higher wages, they buy more of a specific good. 
B)  as supply increases, the amount purchased decreases. 
C)  people tend to buy more of a good than they really want. 
D)  people tend to buy more of a good when its price decreases. 
A)  as people earn higher wages, they buy more of a specific good. 
B)  as supply increases, the amount purchased decreases. 
C)  people tend to buy more of a good than they really want. 
D)  people tend to buy more of a good when its price decreases.

Question 20

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.

Accepted Answer

A) True 
 B)False

Exam 2: Understanding Economics and How It Affects Business

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

Economics is the study of how a society ________.

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

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

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

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?

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

Fiscal policy involves increases or decreases in

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.

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

A major benefit of socialism is the

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

GDP figures do not include the value of illegal activities.

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

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

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

A typical demand curve shows that

Taking Risks and Making Profits Within the Dynamic Business Environment

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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