Question 1

Which of the following statements about government deficit spending is most accurate?

Accepted Answer

A)  The federal government violates the law by running deficits because the U.S. Constitution requires the government to balance its budget each year. 
B)  Although the government used to run big deficits, it has consistently run surpluses since the late 1980s. 
C)  The government has used deficit spending to lower the national debt. 
D)  One reason the government has a hard time reducing deficits is that there is a great deal of pressure on the government to expand its spending each year. 
A)  The federal government violates the law by running deficits because the U.S. Constitution requires the government to balance its budget each year. 
B)  Although the government used to run big deficits, it has consistently run surpluses since the late 1980s. 
C)  The government has used deficit spending to lower the national debt. 
D)  One reason the government has a hard time reducing deficits is that there is a great deal of pressure on the government to expand its spending each year.

Question 2

Brain drain has occurred in many socialistic nations because

Accepted Answer

A)  socialism encourages an unequal distribution of income, leaving many without medical and social services. 
B)  the government does little to protect the natural environment. 
C)  workers tend to have to work longer hours and receive fewer benefits under socialism. 
D)  tax rates on well-respected professionals such as doctors tend to be very high. 
A)  socialism encourages an unequal distribution of income, leaving many without medical and social services. 
B)  the government does little to protect the natural environment. 
C)  workers tend to have to work longer hours and receive fewer benefits under socialism. 
D)  tax rates on well-respected professionals such as doctors tend to be very high.

Question 3

Workers in nations who are strong proponents of communism work much harder and longer hours.

Accepted Answer

A) True 
 B)False

Question 4

Reality, Inc. is a major producer of reality television shows. The company faces fierce competition from three other major producers of similar shows. Together, Reality, Inc. and its three rivals control almost all of reality television. Their market environment is called

Accepted Answer

A)  an oligopoly. 
B)  a duopoly. 
C)  monopolistic competition. 
D)  a quasi-monopoly. 
A)  an oligopoly. 
B)  a duopoly. 
C)  monopolistic competition. 
D)  a quasi-monopoly.

Question 5

Adam Smith's research focused on determining the best way to distribute a fixed amount of resources, rather than on how to create more wealth.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks.

Accepted Answer

A) True 
 B)False

Question 8

The measure used to report price changes at the wholesale level is the

Accepted Answer

A)  gross domestic product (GDP). 
B)  consumer price index (CPI). 
C)  gross output (GO). 
D)  producer price index (PPI). 
A)  gross domestic product (GDP). 
B)  consumer price index (CPI). 
C)  gross output (GO). 
D)  producer price index (PPI).

Question 9

It is understandable that productivity is rising faster in the service sector because service businesses have newer technologies than the manufacturing sector and fewer laborers.

Accepted Answer

A) True 
 B)False

Question 10

A free market is one in which decisions about what to produce and in what quantities are made by

Accepted Answer

A)  the Fed. 
B)  the president. 
C)  the market. 
D)  Congress. 
A)  the Fed. 
B)  the president. 
C)  the market. 
D)  Congress.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Global economics and politics have significant influence on businesses in the United States.

Accepted Answer

A) True 
 B)False

Question 13

The size of the national debt increases when the federal government runs a deficit.

Accepted Answer

A) True 
 B)False

Question 14

We use indicators such as the gross domestic product (GDP), the interest rate, and the price indexes to measure the health of our economy.

Accepted Answer

A) True 
 B)False

Question 15

When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a

Accepted Answer

A)  Federal Reserve allowance. 
B)  GDP deflator. 
C)  balance of payments deficit. 
D)  national deficit. 
A)  Federal Reserve allowance. 
B)  GDP deflator. 
C)  balance of payments deficit. 
D)  national deficit.

Question 16

If a shortage exists for a good in a free-market economy, the

Accepted Answer

A)  price of the good will rise. 
B)  price of the good will fall. 
C)  government will order suppliers to increase the production of that good. 
D)  government must establish a rationing system to make sure that the good is fairly distributed. 
A)  price of the good will rise. 
B)  price of the good will fall. 
C)  government will order suppliers to increase the production of that good. 
D)  government must establish a rationing system to make sure that the good is fairly distributed.

Question 17

140. The government of Ativa has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that Ativa is experiencing disinflation.

Accepted Answer

A) True 
 B)False

Question 18

Glittering Gems is a popular fashion jewelery company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the tarnish-free finish that is applied to every earring, necklace, and ring. Due to the fact that its industry faces monopolistic competition, the company knows that it must continue to differentiate itself from the competition.

Accepted Answer

A) True 
 B)False

Question 19

Economist Thomas Malthus believed that ________ would limit economic progress.

Accepted Answer

A)  depletion of gold reserves 
B)  overpopulation 
C)  the tendency of governments to levy high tax rates 
D)  the inability of workers in developed nations to compete against cheap foreign labor 
A)  depletion of gold reserves 
B)  overpopulation 
C)  the tendency of governments to levy high tax rates 
D)  the inability of workers in developed nations to compete against cheap foreign labor

Question 20

________ exists when the entire supply of a good is controlled by a single seller.

Accepted Answer

A)  Perfect competition 
B)  Oligopoly 
C)  Pure capitalism 
D)  A monopoly 
A)  Perfect competition 
B)  Oligopoly 
C)  Pure capitalism 
D)  A monopoly

Exam 2: Understanding Economics and How It Affects Business

Which of the following statements about government deficit spending is most accurate?

Brain drain has occurred in many socialistic nations because

Workers in nations who are strong proponents of communism work much harder and longer hours.

Reality, Inc. is a major producer of reality television shows. The company faces fierce competition from three other major producers of similar shows. Together, Reality, Inc. and its three rivals control almost all of reality television. Their market environment is called

Adam Smith's research focused on determining the best way to distribute a fixed amount of resources, rather than on how to create more wealth.

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

To be classified as unemployed, a person must be at least 16 years old and trying to find a job within the past four weeks.

The measure used to report price changes at the wholesale level is the

It is understandable that productivity is rising faster in the service sector because service businesses have newer technologies than the manufacturing sector and fewer laborers.

A free market is one in which decisions about what to produce and in what quantities are made by

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

Global economics and politics have significant influence on businesses in the United States.

The size of the national debt increases when the federal government runs a deficit.

We use indicators such as the gross domestic product (GDP), the interest rate, and the price indexes to measure the health of our economy.

When the federal government's collection of tax revenues is less than what it spends in a given year, it results in a

If a shortage exists for a good in a free-market economy, the

140. The government of Ativa has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that Ativa is experiencing disinflation.

Economist Thomas Malthus believed that ________ would limit economic progress.

________ exists when the entire supply of a good is controlled by a single seller.

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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