Question 1

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 2

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.
Level of Learning 1: Knowledge of key terms

Accepted Answer

A) True 
 B)False

Question 3

Roland is a nation with an economic system that closely approximates pure capitalism.While Roland's economy is likely to generate a great deal of wealth,it may do a poor job of providing an acceptable level of income for the elderly or disabled.
Level of Learning 3: Application of principles

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) Enjoyed periods of great prosperity. 
B) Experienced severe economic depression. 
C) Placed even more importance on individual ownership of businesses. 
D) Grown very slowly,but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe. 
A) Enjoyed periods of great prosperity. 
B) Experienced severe economic depression. 
C) Placed even more importance on individual ownership of businesses. 
D) Grown very slowly,but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe.

Question 5

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

Accepted Answer

A) In capitalist economies,most resources are owned by the government. 
B) A strength of capitalism is its ability to deal with environmental problems. 
C) Capitalism is characterized by unequal distribution of wealth and income. 
D) A drawback of capitalism is that people have little freedom to pursue their own goals. 
A) In capitalist economies,most resources are owned by the government. 
B) A strength of capitalism is its ability to deal with environmental problems. 
C) Capitalism is characterized by unequal distribution of wealth and income. 
D) A drawback of capitalism is that people have little freedom to pursue their own goals.

Question 6

Monica notices that just a few big companies produce the vast majority of soft drinks.She would be correct in describing the soft drink industry as an oligopoly.
Level of Learning 3: Application of principles

Accepted Answer

A) True 
 B)False

Question 7

When the government runs a continual budget deficit,it increases the:

Accepted Answer

A) National debt. 
B) Balance of payments deficit. 
C) Federal capital account. 
D) Money supply. 
A) National debt. 
B) Balance of payments deficit. 
C) Federal capital account. 
D) Money supply.

Question 8

Mini-Case
Gig Abite is a bright,hard-working engineer who once owned a successful engineering consulting firm in his native country of Frinezia.Gig became discouraged by the high tax rates in Frinezia,so he immigrated to the United States eleven years ago.Soon after moving to the U.S. ,Gig again started his own business,which he named Giganeers Consulting.The company struggled at first,and almost went under midway through its second year.However,Gig never lost faith,the company survived,and it soon developed a growing reputation for quality work and dependable service.Giganeers began experiencing sustained growth early in its fourth year.In fact,Gig hired additional employees over the next few years to keep up with the increasing workload.His company,which started with only Gig and 2 other full time workers,now provides jobs for 43 full-time employees as well as many part time workers.
Despite these past successes,some clouds are on the horizon.The company recently suffered its first drop in business since its very early years.Gig is convinced that the problem is not with his company,but rather due to a downturn in the U.S.economy.He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S.declined over the last quarter.The news anchor went on to state that many economists believe that this downward trend is likely to continue for several more months.Gig is concerned that he will have to lay off some of his employees if the economy doesn't improve.He hopes that the government does something soon to put the economy back on track.
-Gig started Giganeers to earn a profit,but by working hard and increasing his market share,he was able to create jobs for others.This is an example of the ______________ concept.

Accepted Answer

A) circular flow 
B) invisible hand 
C) equitable income 
D) social dividend 
A) circular flow 
B) invisible hand 
C) equitable income 
D) social dividend

Question 9

Some wages,tax brackets,interest rates,and government benefits are based on the CPI.
Level of Learning 1: Knowledge of key terms

Accepted Answer

A) True 
 B)False

Question 10

Senator Gong Lee is alarmed at the state of the economy.Unemployment is high and GDP is low.Senator Lee has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy.The actions called for by Senator Lee are examples of:

Accepted Answer

A) Monetary policy. 
B) Fiscal policy. 
C) Discretionary income policy. 
D) Social investment policy. 
A) Monetary policy. 
B) Fiscal policy. 
C) Discretionary income policy. 
D) Social investment policy.

Question 11

The government of Velovia made progress in its efforts to bring rapid inflation under control.Although prices are still rising,the rate of increase has slowed considerably.This suggests that Velovia is experiencing disinflation.
Level of Learning 3: Application of principles

Accepted Answer

A) True 
 B)False

Question 12

Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services.
Level of Learning 1: Knowledge of key terms

Accepted Answer

A) True 
 B)False

Question 13

The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work.
Level of Learning 2: Understanding of concepts and principles

Accepted Answer

A) True 
 B)False

Question 14

During the economic crisis of 2008-2010,Presidents George W.Bush and Barack Obama increased government spending by $2 trillion,in order to revive the ailing economy.Their strategy followed the economic theory known as:

Accepted Answer

A) Malfusian 
B) Bernankeism 
C) Keynesian 
D) Greenspanian 
A) Malfusian 
B) Bernankeism 
C) Keynesian 
D) Greenspanian

Question 15

Deflation means prices are declining.
Level of Learning 1: Knowledge of key terms

Accepted Answer

A) True 
 B)False

Question 16

The most fundamental of all rights in capitalism is the right to private property.
Level of Learning 1: Knowledge of key terms

Accepted Answer

A) True 
 B)False

Question 17

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 18

In the service sector of the economy,the influx of machinery such as computers increases output per worker,but does little to improve the quality of services.
Level of Learning 1: Knowledge of key terms

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements would a follower of Adam Smith be most likely to make?

Accepted Answer

A) The federal government should use its ability to spend and tax to guide the decisions of businesses and consumers. 
B) Market economies are flawed because they put too much emphasis on economic growth and not enough on environmental problems. 
C) Overpopulation is the main danger confronting modern economies. 
D) If people are given the freedom to follow their own interests,theoretically their efforts will lead to economic growth that benefits society as a whole. 
A) The federal government should use its ability to spend and tax to guide the decisions of businesses and consumers. 
B) Market economies are flawed because they put too much emphasis on economic growth and not enough on environmental problems. 
C) Overpopulation is the main danger confronting modern economies. 
D) If people are given the freedom to follow their own interests,theoretically their efforts will lead to economic growth that benefits society as a whole.

Question 20

A(n)_____________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period.

Accepted Answer

A) demand 
B) supply 
C) utility 
D) equilibrium 
A) demand 
B) supply 
C) utility 
D) equilibrium

Exam 2: Understanding How Economics Affects Business

Fiscal policy involves increases or decreases in:

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. Level of Learning 1: Knowledge of key terms

Roland is a nation with an economic system that closely approximates pure capitalism.While Roland's economy is likely to generate a great deal of wealth,it may do a poor job of providing an acceptable level of income for the elderly or disabled. Level of Learning 3: Application of principles

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

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

Monica notices that just a few big companies produce the vast majority of soft drinks.She would be correct in describing the soft drink industry as an oligopoly. Level of Learning 3: Application of principles

When the government runs a continual budget deficit,it increases the:

Some wages,tax brackets,interest rates,and government benefits are based on the CPI. Level of Learning 1: Knowledge of key terms

Senator Gong Lee is alarmed at the state of the economy.Unemployment is high and GDP is low.Senator Lee has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy.The actions called for by Senator Lee are examples of:

The government of Velovia made progress in its efforts to bring rapid inflation under control.Although prices are still rising,the rate of increase has slowed considerably.This suggests that Velovia is experiencing disinflation. Level of Learning 3: Application of principles

Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services. Level of Learning 1: Knowledge of key terms

The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work. Level of Learning 2: Understanding of concepts and principles

During the economic crisis of 2008-2010,Presidents George W.Bush and Barack Obama increased government spending by $2 trillion,in order to revive the ailing economy.Their strategy followed the economic theory known as:

Deflation means prices are declining. Level of Learning 1: Knowledge of key terms

The most fundamental of all rights in capitalism is the right to private property. Level of Learning 1: Knowledge of key terms

A major benefit of socialism is the:

In the service sector of the economy,the influx of machinery such as computers increases output per worker,but does little to improve the quality of services. Level of Learning 1: Knowledge of key terms

Which of the following statements would a follower of Adam Smith be most likely to make?

A(n)_____________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period.

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

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

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

Bonus A: Using Technology to Manage Information

Bonus B: Managing Risk

Bonus C: Managing Your Personal Finances

Appendix: Working Within the Legal Environment

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