Deck 7: Economic Environment

Question 1

The ratio of output of capital to input of resources is called productivity.

Answer 1

False

Question 2

Fiscal policy involves making adjustments to government expenditures and taxes to stimulate or slow down economic activity.

Answer 2

True

Question 3

In India, many investments into the region have been lost due to a lack of skilled labour.

Answer 3

False

Question 4

Fonterra, the New Zealand-based multinational dairy-products business that is ranked the number-one milk processor in the world by volume, estimates that the growth of the market for dairy products in Europe, North America and Australasia to 2020 will be less than 1 percent per annum.

Question 5

The percentage of export earnings used to pay employees is known as the debt-service ratio.

Question 6

Economic policy in Australia has four main stabilisation goals: low inflation; low unemployment; positive economic growth; and balance of international payments and receipts.

Question 7

The Human Development Index is a composite index based on three measures: life expectancy at birth, educational attainment, and literacy and academic proficiency.

Question 8

The Reserve Bank of Australia, as an authority independent of the national government in policy matters, has as one of its prime responsibilities:

A) stability of the currency of Australia.
B) income and price surveillance.
C) reduction of the nation's debt.
D) increases in the nation's income.

Question 9

The debt-service ratio refers to the:

A) ratio of debt to interest.
B) percentage of debt to equity.
C) ratio of output produced to the labour and capital inputs used.
D) percentage of export earnings used to pay interest on debt.

Question 10

The term 'social capability' describes ______________ factors that influence economic _________________.

A) economic; stability
B) labour; development
C) performance; growth
D) intangible; performance

Question 11

The long-run benefits of doing business in a country are a function of the size of the market as well as the:

A) size of the country and its location in relation to other markets.
B) present wealth and degree of technology uptake.
C) purchasing power of consumers and future wealth of consumers.
D) stability of government and economic growth potential.

Question 12

It may be more costly to do business in a relatively undeveloped economy because of the:

A) unskilled and uneducated labour force.
B) lack of infrastructure and supporting businesses.
C) laws and policies placed on international businesses.
D) distance between head office and operations.

Question 13

A mixed economy has elements of both a ________________ economy and a _______________ economy.

A) stable; growing
B) micro; macro
C) market; command
D) free; autocratic

Question 14

The following indicators are characteristic of economic instability:

A) decreasing interest rates, downturn in foreign investment and increase in offshore production.
B) high inflation rates, rising interest rates and volatile foreign exchange rates.
C) disinvestment, intervention by political bodies and falling interest rates.
D) increase in real GDP, volatile interest rates and falling imports.

Question 15

Any balance of payments summary statement consists of the following three main accounts:

A) financial, transaction and borrowing.
B) services, exports and imports.
C) capital, balance and fiscal.
D) current, capital and financial.

Question 16

Different countries have dramatically different levels of economic development. One common measure of economic development is:

A) gross national income per head of population (GNI).
B) gross domestic product (GDP).
C) gross income distribution (GID).
D) gross asset product (GAP).

Question 17

A __________________ economy is an economic system in which the allocation of resources, including the determination of what goods and services should be produced and in what quantity, is planned by the government.

A) market
B) command
C) mixed
D) progressive

Question 18

_________________ is a factor that drives the development of an economy and the type of economic system.

A) Philosophy
B) Geography
C) Sociology
D) Cosmology

Question 19

Economic performance is determined also by the nature of a country's ____________________ system.

A) legal
B) employment
C) trade
D) economic

Question 20

Of the 14 significant obstacles reported concerning economic performance, the main four in order of importance are:

A) policy uncertainty; macroeconomic instability; tax rate; corruption.
B) macroeconomic instability; tax rate; corruption; consumer price index.
C) tax rate; corruption; consumer price index; human development index.
D) consumer price index; human development index; policy rulings; tax system.

Question 21

Indicators of economic instability include high inflation rates, rising interest rates and ________________.

A) uncertainty
B) changes in government
C) volatile foreign exchange rates
D) fluctuating employment levels

Question 22

The number of command economies has decreased since:

A) the global recession in 2009.
B) the rise in terrorism.
C) the formation of the European Union.
D) the demise of Communism in the late 1980s.

Question 23

The purchasing power parity (PPP) allows for a more direct comparison of ______________________ in different countries.

A) purchasing power
B) population wealth
C) life expectancy
D) living standards

Question 24

A market economy creates greater incentives for _________________ than either a planned or a mixed economy.

A) investment
B) innovation
C) employment
D) manufacturing

Question 25

Which of the following is not one of the key reasons for the spread of democracy worldwide?

A) The spread of democracy has been unchallenged worldwide.
B) In many countries, the economic advances of the past 25 years have led to the emergence of increasingly prosperous middle and working classes, which have pushed for democratic reforms.
C) There has been a spread of new information and of communications technologies.
D) Many totalitarian regimes have failed to deliver economic progress to most of their populations.

Question 26

Deregulation of prices and markets is often met with significant political opposition in which of the following areas?

A) Small and medium-sized concerns
B) Patents and research
C) Employment conditions and wages
D) Education and training

Question 27

Which of the following refers to the transfer of the ownership of state property into the hands of private individuals?

A) Privatisation
B) Simplification
C) Deregulation
D) Socialism

Question 28

Monetary policy is a form of _________________ policy that uses changes in ________________ and money supply to stabilise the economy.

A) microeconomic; taxes
B) macroeconomic; interest rates
C) international; investment
D) national; growth rates

Question 29

The tendency of economies to move in sequence through phases of expansion and contraction of economic activity in a somewhat regular pattern is referred to as a:

A) business rotation.
B) growth and decline cycle.
C) cyclical growth.
D) business cycle.

Question 30

A widespread downturn in activity, usually indicated by successive periods of negative economic growth, is referred to as a:

A) purchasing power parity.
B) business cycle.
C) recession.
D) global crisis.