Deck 2: Economics: The Framework for Business

Question 1

In most nations, the unemployment rate includes only individuals over the age of 21 who were involuntarily laid off or terminated from their previous jobs.

Answer 1

False

Question 2

The discount rate is the interest rate the Fed charges on its loans to commercial banks.

Answer 2

True

Question 3

Microeconomics focuses on:

A)the employment rate in a country.
B)individual businesses.
C)the gross domestic product of a country.
D)taxation policies.

Answer 3

B

Question 4

The Fed requires that all of its member banks hold funds called "reserves," equal to a stated percentage of the deposits held by their customers. This percentage is called the reserve requirement.

Question 5

The debt ceiling is:

A)the maximum amount Congress lets the government borrow.
B)the shortfall that occurs when expenses are higher than revenue over a given period of time.
C)the overage that occurs when revenue is higher than expenses over a given period of time.
D)the total amount of money within the national economy.

Question 6

Countries that adopted communism in the 1900s-most notably the former Soviet Union, China, Cuba, North Korea, and Vietnam-thrived and prospered more than all the other countries in the worlD)

Question 7

The sum of all the money borrowed by the government over the years and not yet repaid is the _____.

A)trade gap
B)subprime loan
C)federal debt
D)monetary devaluation

Question 8

Macroeconomics focuses on:

A)the major issues facing the national economy that do not affect individuals.
B)the smaller economic units such as individual consumers and individual businesses operatingwithin an economy.
C)the major issues facing the national economy that may seem abstract but directly affect an individual's day-to-day life.
D)the economics of private companies.

Question 9

Identify a true statement about subprime mortgage loans.

A)They are given to people with a high credit score.
B)They are less attractive to lenders because they provide a lower return than any other form of investment.
C)They are usually issued to people who have a high ability to repay the money they borrow.
D)They are lent to borrowers with high debt-to-income ratios.

Question 10

If spending is lower than revenue, the government incurs a budget deficit and must borrow money to cover the shortfall.

Question 11

Gross Domestic Product measures the total value of all final goods and services produced within a nation's physical boundaries over a given period of time.

Question 12

Which of the following statements is true of microeconomics?

A)It includes the monitoring of national, regional, and global economies.
B)It primarily focuses on smaller economic units.
C)It is the study of a country's overall economic dynamics.
D)It excludes the study of families.

Question 13

In the context of fiscal strategies, most economists agree that higher taxes can boost the economy by leaving more money with the government to spend during an economic crisis.

Question 14

The amount of input divided by the amount of output equals productivity.

Question 15

An economy is one that includes a financial system and excludes a social system.

Question 16

Gross Domestic Product (GDP)tends to overstate the amount of output produced by a nation's economy.

Question 17

The $700 billion economic bailout plan following the subprime mortgage crisis of 2008 was called the _____.

A)American Recovery and Reinvestment Act
B)Troubled Assets Relief Program
C)Clayton Antitrust Act
D)NCUA Corporate Stabilization Program

Question 18

Identify a true statement about macroeconomics.

A)It focusses primarily on monitoring the activities of individual businesses.
B)It hardly affects the day-to-day lives of people.
C)It is the study of a country's overall economic dynamics.
D)It has little or no influence on variables such as jobs and taxes.

Question 19

When the Fed reduces the discount rate, banks can obtain funds at a lower cost and use these funds to make more loans to their own customers.

Question 20

Macroeconomics is primarily engaged in the study of:

A)smaller business units in a locality.
B)employment rates in a country.
C)individual consumers.
D)households and families in a region.

Question 21

Which of the following tools does the Fed use to help protect depositors who may want to withdraw their money without notice?

A)Discount rate
B)Interest rate
C)Open market operation
D)Reserve requirement

Question 22

Countries that adopted communist economics most likely developed:

A)individualism and narcissistic values among people.
B)an excessive number of privately-owned businesses.
C)a free market system for services.
D)crippling shortages and surpluses.

Question 23

Which of the following is a negative feature of socialist economic systems?

A)Excessive private ownership of healthcare and utilities
B)Absence of any tax structure
C)Inefficiencies and corruption
D)Lack of government ownership of key enterprises

Question 24

_____ refers to the quantity of products that producers are willing to offer for sale at different market prices.

A)Supply
B)Demand
C)Ration
D)Rebate

Question 25

The two key phases of a business cycle are:

A)stagflation and hyperinflation.
B)depression and contraction.
C)contraction and expansion.
D)recession and deflation.

Question 26

Denise is a hard worker, but she has always had differences with her boss, AngelA)Angela has recently become more demanding and is often unwilling to provide clarification on project requirements. After too many long working days with little or no job satisfaction, Denise walked into Angela's office and submitted her resignation. Denise knows that her résumé is strong and feels confident she will find another joB)Denise is now facing _____ unemployment.

A)seasonal
B)structural
C)frictional
D)cyclical

Question 27

Which of the following is a function of the Fed?

A)It creates a budget, or a financial plan, for the national economy every year.
B)It performs banking services for commercial banks in districts in which it operates.
C)It calculates the expected spending for the federal government every year.
D)It outlines expected revenue that is due from the collection of taxes and fees.

Question 28

Anne is a manager at a store that sells clothes and accessories for both men and women. She notices that the jeans priced at $120 aren't selling very well. She wants to increase the sales of these jeans before the onset of the next season. She learns that there is direct relationship between the price and the sales of the clothes at her store. The approach Anne should take to achieve this is to _____.

A)keep the prices the same but move the jeans to another section of the store
B)lower the price of the jeans so that demand will increase
C)raise the price of the jeans to make them seem more exclusive
D)put jeans that are priced even higher next to the $120 jeans

Question 29

Identify a true statement about types of money supply.

A)The M1 money supply includes market accounts and certificates of deposit.
B)The M1 money supply includes all currency plus checking accounts and traveler's checks.
C)The M2 money supply excludes all of M1 supply except certificates of deposit, which last typically less than one year.
D)The M2 money supply excludes paper bills and metal coins.

Question 30

Identify the tool that the Fed most frequently uses to expand and contract the money supply in the economy.

A)Open market operations
B)Discount rate changes
C)Reserve requirement changes
D)Interest rate charges

Question 31

When tax revenue is higher than government expenditures, the government incurs a _____.

A)private debt
B)trade gap
C)budget surplus
D)fiscal deficit

Question 32

Identify a true statement about the Fed

A)The Fed is headed by a fifteen-member Board of Governors.
B)The Fed manages the monetary policy of the United States.
C)The Federal Reserve Banks are owned by the federal government.
D)The Fed drastically increases the money supply when prices begin to rise.

Question 33

Monopolistic competition is a market structure:

A)with many competitors selling differentiated products.
B)with only a handful of competitors selling similar products.
C)with many competitors selling virtually identical products.
D)with just a single producer completely dominating the industry.

Question 34

The economic system of the United States is called _____.

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

Question 35

Which of the following is a true feature of capitalist economies?

A)Individuals and businesses are restricted from buying and selling machines and buildings.
B)Businesses have the right to keep after-tax profit and spend it however they see fit.
C)Government has absolute power in controlling the economy.
D)All enterprises are owned by the public, under the direction of a strong central government.

Question 36

A capitalist system depends on fair competition among businesses to:

A)be consistent with the goals of socialism.
B)buy and sell government securities.
C)guarantee that every individual business earns profits.
D)drive higher quality and lower prices.

Question 37

In a particular state, many commercial banks struggle to lend money to the borrowers due to lack of money supply. The Fed buys securities from these banks and this creates a smooth flow of money for the banks to conduct their transactions. In this case, which of the following tools has the Fed most likely used to control the money supply?

A)Open market operations
B)Discount rate changes
C)Reserve requirement changes
D)Interest rate charges

Question 38

Identify a true statement about oligopoly.

A)It is a market structure that has many competitors selling virtually identical products.
B)Firms in an oligopoly market structure typically avoid price competition.
C)Agriculture exemplifies an oligopoly market structure.
D)It has a single producer completely dominating the industry, leaving no room for competitors.

Question 39

The economy of Suielevia is under severe financial distress. Over the last few months, the economy has gradually picked up and the employment levels are slowly rising back to the normal levels. The consumers are also beginning to engage in regular buying activities. In this case, the economy of Suielevia is currently in the _____ phase of its business cycle.

A)recovery
B)deflation
C)inflation
D)hyperinflation

Question 40

Identify a true statement about the economy of the United States.

A)The economy of the United States is one of the most market-oriented economies in the world.
B)The economy of the United States is one of the most market-oriented economies in the world.
C)The economy of the United States is an extreme form of planned economy.
D)In the U.S. economy, the government is prevented from creating any regulations that intervene in the free market.

Question 41

_________ refers to a period of falling average prices across the economy.

A)Recovery
B)Inflation
C)Expansion
D)Deflation

Question 42

_____ measures the change over time in weighted-average wholesale prices, or the prices that businesses pay each other for goods and services.
a.Consumer price index (CPI)
b.House price index
c.Producer price index (PPI)
d.Gross domestic product index

Question 43

_________ is a market structure with just a single producer completely dominating the industry.

A)Oligopoly
B)Monopoly
C)Monopolistic competition
D)Pure competition

Question 44

The sum of all the money borrowed by the government over the years and not yet repaid is the _________.

A)fiscal debt
B)subprime loan
C)federal debt
D)monetary debt

Question 45

Describe the four degrees of competition with examples.

Question 46

_________ is a period of robust economic growth and high employment.

A)Expansion
B)Recovery
C)Disinflation
D)Contraction

Question 47

Define and describe productivity.

Question 48

Explain the various changes in the rate of price in an economy.

Question 49

What is a business cycle? Describe the different phases of a business cycle in a changing economy.

Question 50

Define the two categories of planned economies and illustrate the differences and similarities between them.

Question 51

_________ refers to Federal Reserve decisions that shape the economy by influencing interest rates and the supply of money.

A)Fiscal policy
B)Monetary policy
C)Revenue policy
D)Deficit policy