Exam 2: Understanding Economics and How It Affects Business

A command economic system is characterized by:

Any output produced by U.S. firms is included in the value of U.S. GDP, even if the output was produced in a foreign country.

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

GDP figures do not include the value of illegal activities.

In the newspaper this morning, you read about the downfall of a multi-national entertainment business, and a report that the company's CEO enjoyed a 9% increase in his salary during the same year that the company's profits were down 35%. As you read further, you learn that the company's board of directors approved undeserved salary increases. Clearly, this is an example of how inequality and greed can infiltrate the free-market economic system.

The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that:

Economist Thomas Malthus believed that ______________ would limit economic progress.

Most communist countries today are suffering from severe economic problems.

Which of the following statements about productivity in the service sector of the U.S. economy is most accurate?

Katie owns a nail salon. She needs to update her shop with new customer massage chairs and work stations for her technicians. If the Fed were to lower interest rates by 1.5 percentage points, at the same time that the government increased the tax rate by 1.5%, she could immediately determine that updating her shop would not increase or decrease her financial position.

Which of the following statements most accurately identifies a limitation of the free-market economic system?

One of the benefits of a free market is that:

Governments that were predominantly capitalist are moving toward socialism, while governments that were predominantly socialist are moving toward capitalism.

Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

Fourteen years ago, Sergio noticed that a lot of people who bought personal computers did not know much about how to use them and frequently suffered system crashes and other aggravations. He decided he could earn a nice profit by starting a consulting business to help other people overcome their computer woes. Although the business struggled at first, it has experienced a good deal of success for the past five years. Sergio has many satisfied customers, and the business has grown to the point where he now employs several workers. Sergio's experience is an example of:

In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future.

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 re-opened 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:

In the U.S., the __________ has the role of managing the money supply and interest rates.

Economics is the study of how a society _________________.

The national deficit is the difference between our nation's exports and its imports.