Deck 5: Economic Systems

Question 1

In Lubenir, a country in South America, its citizens can own capital, make decisions about how to use it, and reap the returns or losses of their business activities. Given this information, it can be said that Lubenir has a _____.

A) mercantilist economy
B) traditional economy
C) command-based economy
D) market-based economy

Answer 1

D

Question 2

_____ allows international businesses to predict the level of discretionary income consumers are likely to have in a country and is a rough first attempt to measure the potential opportunity.

A) Net domestic product per capita
B) Net national income per capita
C) Gross national income per capita
D) Gross domestic product per capita

Answer 2

D

Question 3

_____ generally refers to a resource that can serve to generate wealth, such as factories, equipment, investment accounts, software, land, and education.

A) An embargo
B) A tariff
C) Capital
D) Arbitrage

Answer 3

C

Question 4

Titus Inc., a Canadian car manufacturer, is planning to start its operations in Kalaus, a country in Eastern Europe, and Gimovia, a country in South America. Kalaus is a small nation, whereas Gimovia is triple the size of Kalaus in terms of geographic area. Before starting its operations in the two countries, Titus wants to compare the output of both the countries and measure the potential opportunities in both countries. Which of the following measures can Titus use for this purpose?

A) Net domestic product per capita
B) Net national income per capita
C) Gross national income per capita
D) Gross domestic product per capita

Question 5

Liskos, a country in South America, has a command-based economy. It wants to increase the supply and efficiency of its labor force. Which of the following techniques can it use to achieve this?

A) It can encourage people to work more hours.
B) It can decrease the retirement age of its citizens.
C) It can try to achieve a high Gini coefficient.
D) It can increase the reserve requirement.

Question 6

In Diberin, a country in Western Europe, instead of the government, private owners control factors of trade and production. Given this information, it can be said that Diberin follows _____.

A) capitalism
B) socialism
C) communism
D) mercantilism

Question 7

Cumulus Inc., an American consumer electronics company, is planning to start its operations in Kilnedia, a country in West Asia. To determine the output of Kilnedia, Cumulus wants to measure the value of finished goods and services produced within Kilnedia's borders by domestic and foreign companies. Given the information, it can be said that Cumulus is most likely to determine the _____ of Kilnedia.

A) Human Development Index
B) Consumer Price Index
C) purchasing power parity
D) gross domestic product

Question 8

Lavender Inc., an American apparel company, is planning to start its operations in Borihia, a country in South America. Sharon, a manager in the company, feels that the company should assess the strength of Borihia's economy before investing there. Which of the following measures can help Lavender Inc. in determining Borihia's economy?

A) Cross price elasticity
B) Customer retention rate
C) Output per person
D) A credit score

Question 9

The process of building businesses and manufacturing on a large scale is known as _____.

A) deregulation
B) privatization
C) industrialization
D) subsidization

Question 10

Unlike in capitalist states, in authoritarian states, _____.

A) individuals can generate personal wealth from their capital
B) the government determines where investments should be made
C) individuals have property rights
D) private owners control factors of trade and production

Question 11

Unlike capitalism, communism:

A) gives individuals the right to decide how to use their capital.
B) is governed by a single person.
C) calls for the workers themselves to organize the economy.
D) operates under market forces.

Question 12

In contrast to capitalist states, in authoritarian states, _____.

A) the government allocates production tasks to workers
B) individuals can generate personal wealth from their capital
C) individuals have property rights
D) private owners control factors of trade and production

Question 13

_____ is also known as a market-based economy because it is regulated by the market forces of supply and demand.

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

Question 14

Ashton, an economics professor at the University of California, believes that gross domestic product (GDP) focuses on domestic production. Which of the following statements supports his beliefs?

A) GDP takes into consideration where the output is produced.
B) GDP takes into consideration who owns the asset producing the output.
C) GDP determines the output that domestic companies make abroad.
D) GDP determines who is benefiting from a country's production.

Question 15

Kirmia, a country in Eastern Europe, has a market-based economy. It wants to increase the total output of its goods and services. In which of the following ways can it increase its output?

A) By maintaining a high Gini coefficient
B) By quantitative easing
C) By increasing the supply and efficiency of labor
D) By increasing the reserve requirement

Question 16

_____ is a measure of the efficiency with which labor and capital are utilized together.

A) The Human Development Index
B) The Gini coefficient
C) Purchasing power parity
D) Total factor productivity

Question 17

Sikesa, a country in Eastern Europe, has a market-based economy. It is likely that:

A) the citizens of Sikesa cannot generate personal wealth from capital.
B) common law determines decisions regarding investment, production, and distribution in Sikesa.
C) factors of trade and production in Sikesa are controlled by the state rather than private owners.
D) individuals and businesses in Sikesa determine how much they privately consume and invest in the economy.

Question 18

Dean, a manager at Oxygen Inc., believes that a country's economic growth is a key proxy for the health of the country's economy. Which of the following statements supports his belief?

A) Communist countries experience more economic growth than capitalist countries.
B) Economic growth compares the costs of common products and services in a country in terms of its currency.
C) Economic growth typically translates into a rough measure of opportunity in a country.
D) Economic growth has a positive influence on the environment as it leads to reduced pollution.

Question 19

Unlike market-based systems, command-based systems:

A) give individuals the right to generate personal wealth from their capital.
B) encourage businesses to determine how much they privately consume and invest in the economy.
C) value the individual above the collective.
D) allocate investment, production, and consumption based on a central plan.

Question 20

A country can increase the output of its goods and services by:

A) maintaining a high Gini coefficient.
B) quantitative easing.
C) increasing total factor productivity.
D) increasing the reserve requirement.

Question 21

_____ adds net income from foreign assets owned by nationals and subtracts net payments to foreign owners.

A) Gross national product
B) Net national product
C) Net national income
D) Gross national income

Question 22

_____ = private consumption + gross investment + government spending + net exports.

A) Gross domestic income
B) Gross national income
C) Gross national product
D) Gross domestic product

Question 23

Chiresia, a country in Southeast Asia, is experiencing a decline in gross domestic product (GDP) growth rate. Which of the following is most likely a reason for its slow economic growth?

A) Adoption of a floating exchange rate
B) Increase in large discretionary purchases
C) Decline in private consumption and investment
D) Deregulation of industries

Question 24

The central bank of Lithutia charges an interest rate of 2 percent from the country's commercial banks to borrow money. In this scenario, the interest rate is called the _____.

A) premium rate
B) discount rate
C) exchange rate
D) tax rate

Question 25

The government of Hidoria, a country in Eastern Europe, has increased its spending by causing a budget deficit. The increased government spending has benefitted construction firms in Hidoria. In this scenario, the government's action illustrates the use of _____.

A) monetary policy
B) fiscal policy
C) an open door policy
D) a commercial policy

Question 26

For two consecutive quarters in 2016, the gross domestic product of Hinseria, a country in West Africa, decreased. During these two quarters, the country's output shrank, and the general well-being of its citizens declined. This scenario is an example of _____.

A) deregulation
B) subsidization
C) a recession
D) a monopoly

Question 27

_____ is a good measure for international businesses that sell goods and services focused on factors of production such as manufacturing plants and equipment as well as education and training.

A) Net export
B) Gross investment
C) Government spending
D) Private consumption

Question 28

Dawson Inc. is an American smartphone manufacturer. It recently started its operations in Janikia, a country in South America. Its main focus is on selling its smartphones to consumers in Janikia. Which of the following factors of gross domestic product (GDP) can help Dawson determine the likely demand for its smartphones in Janikia?

A) Private consumption
B) Gross investment
C) Government spending
D) Industry regulation

Question 29

The government of Jacobania, a country in West Asia, has lowered the reserve requirement in the country. It can be said that:

A) the availability of credit for businesses in Jacobania will reduce.
B) Jacobania's banks can lend funds to businesses to fuel spending and investment.
C) Jacobania's banks can keep more money in reserve.
D) the total value of loans that Jacobania's banks can make will be restricted.

Question 30

In 1999, Vilosia, a country in South America, experienced a severe, sustained period of economic contraction. This scenario is an example of _____.

A) deregulation
B) subsidization
C) a depression
D) a monopoly

Question 31

Kendall, an economics professor at the University of Florida, believes that a person who delays entering the workforce in favor of getting additional education won't be directly boosting his or her country's gross domestic product (GDP), but he or she will be building the foundation for a better life in the future. Which of the following statements supports her beliefs?

A) A country's GDP ranks countries into tiers of human development.
B) A country's GDP fails to determine the value of finished goods and services produced within its borders.
C) A country's GDP does not measure the well-being of its citizens.
D) A country's GDP tells us who is benefiting from the country's production.

Question 32

The government of Ligesia, a country in South America, has lowered its taxes by 25 percent. Consequently, the discretionary income of its citizens has increased, which in turn has increased their private spending. In the given scenario, the government of Ligesia has used _____.

A) fiscal policy
B) monetary policy
C) an open door policy
D) a commercial policy

Question 33

Unlike fiscal policy, monetary policy:

A) must be initiated by the president or by Congress in the United States.
B) includes taxation and spending actions, such as increasing government spending or encouraging private spending.
C) consists of government actions intended to spark or diminish consumption.
D) consists of manipulations in the interest rates, banking rules, and the volume of currency in a country.

Question 34

Pixel Inc., an Australian software development company, is planning to start its operations in Fidlansk, a country in South America. Before starting its operations in Fidlansk, it wants to determine the Human Development Index (HDI) of Fidlansk. HDI will help Pixel:

A) focus on the presence or absence of opportunity in Fidlansk.
B) determine the level of output per person in Fidlansk.
C) customize its products for each customer segment in Fidlansk.
D) focus on selling goods and services to consumers in Fidlansk.

Question 35

The total value of final goods and services provided by a country is its _____.

A) gross national product
B) net national product
C) net national income
D) gross national income

Question 36

Before starting its operations in Viscosia, a country in South America, Kite Inc., an American consumer electronics company, wants to assess the overall well-being of Viscosia. The factors that Kite is considering are health, education, and economics of Viscosia. Which of the following measures can help Kite in this scenario?

A) The Human Development Index
B) The purchasing power parity
C) The Gini coefficient
D) The Consumer Price Index

Question 37

The government of Meditania, a country in Eastern Europe, has raised the reserve requirement in the country. It can be said that:

A) the availability of credit for businesses in Meditania will increase.
B) Meditania's banks can lend funds to businesses to fuel spending and investment.
C) Meditania's banks will keep less money in reserve.
D) the total value of loans that Meditania's banks can make will be restricted.

Question 38

Unlike monetary policy, fiscal policy:

A) does not include taxation and government spending.
B) is the tool of the Federal Reserve Bank, or the Fed in the United States.
C) is initiated by the president or by Congress in the United States.
D) consists of manipulations in the interest rates, banking rules, and the volume of currency in a country.

Question 39

Unlike gross domestic product (GDP), gross national product (GNP):

A) does not consider the net payment outflows of a country.
B) counts the output that domestic companies make abroad.
C) measures the well-being of people in a country.
D) fails to reveal who is benefiting from a country's production.

Question 40

Which of the following factors is considered in the Human Development Index?

A) Purchasing power parity
B) Reserve requirement
C) Inflation rate
D) Per capita income

Question 41

Finodia, a country in South America has a high Gini coefficient. It can be said that:

A) Finodia's wealth is not concentrated in the hands of one person.
B) the owners of the factors of production in Finodia are likely to have significantly less spending power.
C) the buying power of everyone in Finodia will not increase to the same degree when output increases.
D) international companies that sell goods and services to average consumers will have increased opportunities in Finodia.

Question 42

It has been argued that gross domestic product (GDP) and gross national product (GNP) are far from perfect measures of a country's overall prosperity. Evaluate this argument.

Question 43

Do you think a country with high levels of inflation can be a less attractive investment opportunity? Give reasons to support your answer.

Question 44

Do you think unpacking a country's gross domestic product (GDP) leads us to a better understanding of opportunity for international companies? Give reasons to support your answer.

Question 45

The general price of goods and services is rising in Tikeris, a country in Western Europe. Given this information, it can be said that Tikeris is experiencing _____.

A) privatization
B) deregulation
C) deflation
D) inflation

Question 46

To fund budget shortfalls, the government of Sineria, a country in South Asia, has started printing more money. Consequently, the supply of money has increased in the economy without corresponding increases in output quantity. This, in turn, has caused prices to rise as more money chases the same number of goods and services. This scenario most likely exemplifies _____.

A) commodification
B) privatization
C) deregulation
D) hyperinflation

Question 47

Klaus is a dictator who rules Nixedia, a country in Eastern Europe. All the wealth in the country is owned by Klaus. Given this information, it can be said that Nixedia has a Gini coefficient of _____.

A) zero
B) one
C) hundred
D) fifty

Question 48

_____ are actions by a central bank to buy or sell government bonds, corporate bonds, or equities.

A) Open market operations
B) Pricing controls
C) Targeted registered offerings
D) Orderly marketing agreements

Question 49

Gross domestic product (GDP) that has been adjusted to account for the effect of inflation is known as _____.

A) the GDP deflator
B) real GDP
C) nominal GDP
D) per capita GDP

Question 50

In practice, inflation is measured by looking at the _____.

A) Producer Price Index
B) Consumer Price Index
C) purchasing power parity
D) Gini coefficient

Question 51

Gross domestic product (GDP) that has not been adjusted to take inflation into account is called _____.

A) the GDP deflator
B) real GDP
C) nominal GDP
D) per capita GDP

Question 52

Do you think it is possible for gross domestic product (GDP) to increase without an increase in the value of output? Give reasons to support your answer.

Question 53

It has been argued that the Gini coefficient is an important indicator of well-being and equality. Evaluate this argument.

Question 54

In Kesberil, a country in Western Europe, there is equal distribution of wealth. Every resident of the country has the same income level. Given this information, it can be said that Kesberil has a Gini coefficient of _____.

A) zero
B) one
C) hundred
D) fifty

Question 55

The general price of goods and services is declining in Kimeril, a country in South America. Given this information, it can be said that Kimeril is experiencing _____.

A) privatization
B) deregulation
C) deflation
D) inflation

Question 56

The _____ tracks the price of a specific set of consumer goods across time, watching for general price increases or decreases.

A) Producer Price Index
B) Consumer Price Index
C) purchasing power parity
D) Gini coefficient

Question 57

Jehovis, Arcamik, Riberia, and Finsik are countries in Eastern Europe. In these countries, electronic goods move freely across national borders without the friction of trade barriers, transportation costs, or perishability. These goods carry the same monetary value in all these countries. This scenario illustrates _____.

A) the law of one price
B) deregulation
C) privatization
D) a floating exchange rate

Question 58

Lubenis and Govedia are two countries in Eastern Europe. A similar type of corn is sold in both these countries. The price of corn in Lubenis is cheaper than the price of corn in Govedia. This means that the consumers in Lubenis can get more corn for the same amount of money than consumers in Govedia can. Given the scenario, it can be said that Lubenis's _____ is higher than that of Govedia.

A) inflation rate
B) purchasing power parity
C) Human Development Index
D) gross national product

Question 59

The central bank of Kilberis, a country in Western Europe, prints money and uses it to buy government bonds, corporate bonds, and equities. Consequently, the amount of money in the economy has increased. The government expects that the increased amount of money in the economy will flow to banks that will lend it to consumers and investors, increasing consumption and investment and thus economic growth. This scenario is an example of _____.

A) privatization
B) deregulation
C) quantitative easing
D) dual pricing

Question 60

Do you think inflation leads to a loss of the value of assets? Give reasons to support your answer.