Exam 2: Understanding Economics and How It Affects Business

Which of the following people would tend to favor a communist economy?

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 would control a market for a particular good or service.

__________ is a condition in which the price increases are slowing.

A basic right under capitalism is the right of businesses to receive government funding.

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

Jorge Martinez is a well-educated entrepreneur who operated a small business in his home country of Fiorentina. At the encouragement of his American relatives, Jorge recently immigrated to the United States and applied for U.S. citizenship. "In Fiorentina, tax rates were very high," Jorge complained. "The government used the taxes I paid to finance all sorts of social programs to help the less fortunate. While this is a noble goal, it has really undermined the profit incentive of individuals such as me. I really feel that these high taxes have stifled economic growth." Jorge's comments illustrate the reason many socialist countries are experiencing a(n):

High tax rates in socialist countries is a major reason these nations have experienced a brain drain.

Core inflation figures omit healthcare prices, but not energy prices.

One reason the CPI is monitored very closely by government, businesses, and workers is that:

Colin just landed a job working for a major online gaming company in Silicon Valley. In a lot of ways, this is his dream job come true - the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is out of sight! Back at the hotel, he logs on to the Bureau of Labor Statistics to try to get a better picture of why the cost of housing is so high in this region of the U.S. Which factors may be causing the rise in the price of housing?

To jump-start the economy, the Fed is likely to lower interest rates, in order to encourage individuals and businesses to spend money.

Which of the following strategies may have a net effect on inflation?

Which of the following statements about capitalism is the most accurate?

At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell.

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

One of the most significant problems faced by communist nations is:

A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and energy.

Under capitalism, the government prohibits people and businesses from competing with each other.

In recent years, countries with communist economic and political systems have:

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 __________.