Question 1

A rising GDP, rising unemployment rate, and rising inflation rate signify a healthy economy.

Accepted Answer

A) True 
 B)False

Question 2

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 want to achieve a more equal distribution of income and wealth, but under communism, the government takes more control over people's lives. 
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 want to achieve a more equal distribution of income and wealth, but under communism, the government takes more control over people's lives. 
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 3

Free-market capitalism has made it more difficult for individuals to gain wealth.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

Adam Smith believed in a free-market sys

Question 5

Today, the economic systems of most nations could most accurately be classified as:

Accepted Answer

A)  pure capitalism. 
B)  pure socialism. 
C)  command economies. 
D)  mixed economies. 
A)  pure capitalism. 
B)  pure socialism. 
C)  command economies. 
D)  mixed economies.

Question 6

In the past, socialist nations have realized that some of the government-run businesses do not grow as quickly as businesses that operate for a profit.

Accepted Answer

A) True 
 B)False

Question 7

_________ is the name of a free-market economic system in which most of the factors of production and distribution - such as land, factories, railroads, and stores - are owned by individuals.

Accepted Answer

A)  Socialism 
B)  Capitalism 
C)  Communism 
D)  Marginalism 
A)  Socialism 
B)  Capitalism 
C)  Communism 
D)  Marginalism

Question 8

Explain the significance of "price" in a free-market economic system.

Accepted Answer

In a free-market economy, the mechanism

Question 9

One of the greatest concerns associated with capitalism is that:

Accepted Answer

A)  it is not very successful at creating wealth. 
B)  some businesspeople may let greed guide their behavior. 
C)  the amount of economic freedom enjoyed by consumers is very limited. 
D)  producers are unlikely to supply the goods and services that consumers value the most. 
A)  it is not very successful at creating wealth. 
B)  some businesspeople may let greed guide their behavior. 
C)  the amount of economic freedom enjoyed by consumers is very limited. 
D)  producers are unlikely to supply the goods and services that consumers value the most.

Question 10

In the long run, the market price tends to adjust toward the equilibrium point.

Accepted Answer

A) True 
 B)False

Question 11

A collapse in Buldovia's banking system eventually led to companies unable to borrow money to run their businesses. Firms terminated employees. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as _______.

Accepted Answer

A)  disinflation. 
B)  deflation. 
C)  contra inflation. 
D)  overproduction. 
A)  disinflation. 
B)  deflation. 
C)  contra inflation. 
D)  overproduction.

Question 12

Glamour Gal is a popular cosmetics company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the shadow-free finish that it produces on almost any skin type. 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 13

Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed.

Accepted Answer

A) True 
 B)False

Question 14

Productivity of workers in the U.S. is helped by the use of better machinery.

Accepted Answer

A) True 
 B)False

Question 15

For many years, Congressman Ricardo Perez has called for more government regulation of business. "After all," the Congressman said recently, "businesspeople are out to make a profit, not to create jobs or serve their customers. The government must pass more laws to require businesses to take the interests of consumers and workers into account." From these comments, it is clear that Congressman Perez:

Accepted Answer

A)  agrees with the ideas of Thomas Malthus. 
B)  does not accept the "invisible hand" idea brought forth by Adam Smith. 
C)  is unaware of the fact that most businesses in the United States are owned by the government. 
D)  does not realize that government regulation is already the main determinant of business decisions in capitalist economies. 
A)  agrees with the ideas of Thomas Malthus. 
B)  does not accept the "invisible hand" idea brought forth by Adam Smith. 
C)  is unaware of the fact that most businesses in the United States are owned by the government. 
D)  does not realize that government regulation is already the main determinant of business decisions in capitalist economies.

Question 16

Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market.

Accepted Answer

A) True 
 B)False

Question 17

Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation.

Accepted Answer

A) True 
 B)False

Question 18

Senator Spendital made a speech deploring the continuous deficits in the federal budget. He is proposing an increase in tax rates to raise more revenue for the government and thus gradually reduce the size of the national debt over a period of several years. The strategy Senator Spendital is proposing is a common type of monetary policy.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

Economics was known as the "Dismal Science" because:

Accepted Answer

A)  too many people would result in food shortages and shortages of other resources. 
B)  it was a very complex area of study based on mathematics. 
C)  the world population was growing slower than expected in the 1700s, leading economists to call it a dismal period of time. 
D)  there were too many old people and not enough young people to care for them. 
A)  too many people would result in food shortages and shortages of other resources. 
B)  it was a very complex area of study based on mathematics. 
C)  the world population was growing slower than expected in the 1700s, leading economists to call it a dismal period of time. 
D)  there were too many old people and not enough young people to care for them.

Exam 2: Understanding Economics and How It Affects Business

A rising GDP, rising unemployment rate, and rising inflation rate signify a healthy economy.

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

Free-market capitalism has made it more difficult for individuals to gain wealth.

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

Today, the economic systems of most nations could most accurately be classified as:

In the past, socialist nations have realized that some of the government-run businesses do not grow as quickly as businesses that operate for a profit.

_________ is the name of a free-market economic system in which most of the factors of production and distribution - such as land, factories, railroads, and stores - are owned by individuals.

Explain the significance of "price" in a free-market economic system.

One of the greatest concerns associated with capitalism is that:

In the long run, the market price tends to adjust toward the equilibrium point.

A collapse in Buldovia's banking system eventually led to companies unable to borrow money to run their businesses. Firms terminated employees. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as _______.

Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed.

Productivity of workers in the U.S. is helped by the use of better machinery.

Under the basic principle of supply, as the price goes down, manufacturers and suppliers of a product tend to supply less of the product to the market.

Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation.

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

Economics was known as the "Dismal Science" because:

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 Union and 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

Managing the Marketing Mix: Product, Price, Place and Promotion

Extension: Working Within the Legal Environment

Extension: Using Technology to Manage Information

Extension: Managing Risk

Extension: Managing Personal Finances

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