Deck 2: Economics: the Framework for Business

Question 1

In the context of monetary policy, if the Fed decreases the reserve requirement, _____.

A)there will be more loans available
B)the availability of credit will decrease
C)banks must hold more funds
D)interest rates will increase

Answer 1

A

Question 2

A drawback of communism, which was adopted by some countries in the 1900s, was the inability of people to make basic choices such as where to work or what to buy.

Answer 2

True

Question 3

In the context of monetary policy, when the Fed reduces the discount rate, banks will have to obtain funds at a higher cost.

Answer 3

False

Question 4

In the context of federal debt, if spending is lower than revenue, the government incurs a budget deficit.

Question 5

In the context of monetary policy, the Fed is most likely to reduce the discount rate during:

A)inflations.
B)periods of investment recovery.
C)periods of low money supply.
D)recessions.

Question 6

Normander Corp. is a large media corporation that owns all the media outlets in Liecheben and a few news agencies internationally. Any new media company that tries to establish itself in Liecheben soon runs out of business because of the overpowering presence of Normander Corp. This scenario exemplifies _____.

A)pure competition
B)monopoly
C)monopolistic competition
D)oligopoly

Question 7

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

Question 8

The United States goes through a period of recession because of the continuous decrease in the nation's gross domestic product. The Fed intervenes and improves the situation by reducing the discount rate. This move by the Fed will result in:

A)banks obtaining funds at a lower cost.
B)a rise in the interest rates of bank loans.
C)individuals getting discouraged to borrow money and spend it.
D)a drop in the availability of loans to consumers.

Question 9

The consumer market basket of goods and services, in which the consumer price index (CPI) measures the change in weighted-average price over time, is created by the U.S. Bureau of Labor Statistics.

Question 10

Gross Domestic Product (GDP) levels tend to be somewhat understated, since they don't include any illegal activities, which can represent a significant portion of some countries' production.

Question 11

Deflation refers to a period of falling average prices across an economy, which is a sign of economic trouble that goes hand-in-hand with very high unemployment.

Question 12

Ronnie works on a part-time basis for a company that provides home repair and maintenance services. Ronnie is specialized in handling the central heating systems in homes and is therefore needed to be at work only during the winter. Other than that, he is mostly unemployed for the rest of the year. In this scenario, the form of unemployment faced by Ronnie is _____.

A)seasonal unemployment
B)structural unemployment
C)periodical unemployment
D)cyclical unemployment

Question 13

During a period of inflation in the United States, the Federal Reserve sells treasury bonds. Buyers of these bonds write checks to the Fed, and the Fed cashes these checks from banks. Given this information, the banks will most likely:

A)increase the loan amount.
B)increase the discount rate.
C)cut back on the loans they make.
D)cut back on the discount rate.

Question 14

Socialist economies tend to have high taxes, which are designed to distribute wealth more evenly through society.

Question 15

Reserve requirement is a rule of the Fed which requires that all of its member banks hold funds which are more than the stated percentage of the deposits held by their customers.

Question 16

The Fed:

A)decreases the money supply when the economy contracts.
B)performs banking services for commercial banks in districts where it operates.
C)calculates the expected expenditure for the federal government every year.
D)outlines expected revenue that is due from the collection of taxes and fees.

Question 17

The economic situation in Lanceberg, an African country, slowly picks up after a severe financial downturn. Over a period of 12 months, businesses begin to expand and employment levels begin to rise. The markets in the country are also vitalized as consumers begin to engage in normal buying behavior. In this scenario, the economy of Lanceberg is currently in the _____.

A)recovery phase
B)relapse phase
C)contraction phase
D)inflation phase

Question 18

Socialism is an economic system that encourages privatization and believes that all enterprises should be publicly owned.

Question 19

Gross Domestic Product (GDP) measures the total value of all the imports and exports of a nation on a quarterly basis.

Question 20

In the context of monetary policy, _____ is a rule set by the Fed, which specifies the minimum amount of funds a bank must hold, expressed as a percentage of the bank's deposits.

A)full-reserve banking
B)the statutory framework
C)the reserve requirement
D)statutory liquidity ratio

Question 21

The government of the South Asian nation of Albana is unable to maintain the electronics business effectively because of slack in management and lack of skilled employees. It sells the business to a company called Ramington Electricals. The company has no association with the government and operates on its own terms. The sale of the government-owned electronics business to Ramington Electricals is an example of _____.

A)privatization
B)globalization
C)a joint venture
D)a coalition

Question 22

Which of the following is a negative factor that affects socialist economic systems?

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

Question 23

The country of Ukanturk has been facing an economic downturn for two consecutive years. To revive the financial condition of the country, its government tries to influence the economy through taxation and spending decisions. These measures are designed to encourage growth and increase employment. In this scenario, the government of Ukanturk is implementing its _____.

A)monetary policy
B)fiscal policy
C)investment policy
D)supply-side policy

Question 24

Brontsky & Co., a member bank of the Fed, receives a notice from the Fed that notifies that it must hold funds equal to 15% of the deposits held by its customers. In this scenario, the 15% is the _____.

A)capital adequacy ratio
B)capital requirement
C)reserve requirement
D)statutory liquidity ratio

Question 25

During an especially difficult year of weakening financial conditions, the government of Geriva, a European nation, borrows money to meet its legal obligations. However, once the borrowed amount reaches a certain limit, the government is not allowed to borrow more money. This is because the government has hit the _____.

A)fiscal cliff
B)reserve requirement
C)debt ceiling
D)price ceiling

Question 26

The Board of Governors of the Federal Reserve holds a meeting to discuss its concern over the decreasing gross domestic product of the country. All members agree that the situation can be brought under control and the economy can be stimulated if they use the discount rate as a tool. In this scenario, the Fed is most likely to:

A)reduce the discount rate.
B)maintain the existing discount rate.
C)increase the discount rate.
D)slash the discount rate altogether.

Question 27

Real gross domestic product (GDP) measures the total value of final goods and services produced within a nation's physical boundaries over a given period of time, adjusted for:

A)a loss of workforce.
B)recession.
C)inflation.
D)a rise in unemployment.

Question 28

In the context of the fundamental principles of a free market system, the _____ is associated with the point at which the quantity demanded of a product equals the quantity supplied.

A)fiscal price
B)intermediate price
C)parity price
D)equilibrium price

Question 29

A newly appointed government in the United States requests Congress to raise the amount of money that the government can borrow. This borrowed money is intended to be used to cover the costs of the major policies that it plans to implement. In this scenario, the government has asked the Congress to hike its _____.

A)discount rate
B)fiscal cliff
C)debt ceiling
D)down payment

Question 30

New Tapan, an African country, invested resources in the defense sector, and as a result, its budget deficit grew. To decrease the budget deficit, the government cut down its expenditures in several other sectors and imposed higher taxes. In this scenario, the measures implemented by the government of New Tapan most likely created _____.

A)the fiscal cliff
B)a reserve requirement
C)the debt ceiling
D)an earmark

Question 31

_____ are market structures with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones.

A)Monopolies
B)Oligopolies
C)Pure competitions
D)Natural monopolies

Question 32

Larry is part of the Board of Governors that manages U.S. monetary policy. He has been elected by the President to serve a single 14-year term. In addition to setting the monetary policy, he is responsible for extending banking services to commercial banks. In this scenario, Larry is most likely part of the _____.

A)Federal Reserve
B)Department of Commerce
C)Bureau of Economic Analysis
D)U.S.Treasury

Question 33

The government in the town of Rodenham has granted exclusive rights to a few telecommunications companies to operate in specific geographic areas. The companies have to provide their services in the areas allotted to them, and no company is allowed to extend its services to the areas allotted to its competitors. This system has been put in place because it would be inconvenient for each company to build its own infrastructure in all areas. The given scenario exemplifies:

A)pure competition.
B)a natural monopoly.
C)monopolistic competition.
D)an oligopoly.

Question 34

Macroeconomics involves the study of:

A)spatial changes in the population of a country.
B)the gross domestic product of a country.
C)the competitive aspects of identical products.
D)family incomes in a given region.

Question 35

During a period of grave financial crisis in the United States, Congress is pressurized to raise the limit on the maximum amount of money the government can borrow. Congress increases the limit on the condition that it will implement sharp tax hikes and across-the-board spending cuts to compensate for the raise and to ensure that the overall budget deficit decreases. In this scenario, the measures implemented by Congress will most likely create:

A)the fiscal cliff.
B)a reserve requirement.
C)the debt ceiling.
D)an earmark.

Question 36

In the context of open market operations, when inflation is a concern, the Fed sells securities to buyers who write checks to the Fed to pay for securities they bought, and the Fed withdraws these funds from banks. With fewer funds, _____.

A)credit becomes tighter
B)banks increase the number of loans they make
C)the money supply increases
D)the inflationary pressures in the economy heat up

Question 37

Following a contraction in the economy, the government of Geri, a South American country, decides to increase the money supply in the country. The government wants to first tally the M1 form of money supply. In this context, the government will most likely use _____ to tally the M1 form of money supply.

A)bonds and certificates of deposit
B)money market accounts
C)savings accounts
D)metal coins and paper bills

Question 38

__________is a form of unemployment that involves layoffs during recessions.

A)Cyclical
B)Isochronal
C)Periodical
D)Seasonal

Question 39

In the context of fundamental principles of a free market system, which of the following statements is true of a supply curve?

A)It shows the relationship between price and quantity from a supplier standpoint.
B)It refers to the point where the supply of products starts exceeding demand due to excessive production.
C)It shows the relationship between price and quantity from a buyer standpoint.
D)It refers to the point where the supply of products is no longer possible due to exhaustion of resources.

Question 40

The funds of Lutsan City Bank decreased after the Federal Reserve cashed the checks that it received after selling government securities. As a result, the bank had to cut back on its loan offerings as it did not have sufficient funds to provide loans. This scenario exemplifies _____.

A)open market operations
B)market monetarism
C)reflation
D)articles of incorporation

Question 41

The controversial $700 billion economic bailout plan passed by Congress in early October 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 42

A capitalist system depends on fair competition among businesses to:

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

Question 43

In the context of open market operations, when inflation is a concern, the Federal Reserve _____ government securities.

A)buys
B)borrows
C)sells
D)withholds

Question 44

The economic system of the East Asian nation of Xinzen calls for public ownership of all businesses. The government has complete control over the market, and individuals do not have individual rights and the freedom to make choices. In this scenario, the economic system followed by Xinzen is _____.

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

Question 45

Which of the following is a difference between inflation and deflation?

A)The Federal Reserve buys government securities when inflation is a concern, whereas the Federal Reserve sells government securities when deflation is a concern.
B)Inflation increases the unemployment rate, whereas deflation decreases the unemployment rate.
C)A high level of inflation is bad for the economy, whereas a high level of deflation signifies a healthy economy.
D)Inflation is a period of rising average prices across the economy, whereas deflation is a period of falling average prices across the economy.

Question 46

In the context of monetary policy, when the economy is weak, the Fed:

A)withdraws funds from banks.
B)asks banks to cut back on the loans they make.
C)helps reduce inflationary pressures in the economy.
D)buys government securities on the open market.

Question 47

Which of the following tools is most frequently used by the Fed to expand and contract the money supply in the economy?

A)Open market operations
B)Credit default swaps
C)Endowment mortgages
D)Steering taxes

Question 48

In a business cycle, the__________is the transition period between contraction and expansion.

A)recession
B)recovery
C)disinflation
D)deflation

Question 49

The U.S. government uses the consumer price index (CPI) and the producer price index (PPI) to evaluate:

A)budget surplus.
B)discount rates.
C)productivity.
D)inflation.

Question 50

The country of Trevanvia goes through a period of recession, which leaves a large number of people unemployed due to extensive layoffs by companies. The companies use the strategy of job termination to cut down their costs and reduce their output as the people are now more cautious with their spending. In the given scenario, the layoffs that take place exemplify _____.

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

Question 51

In the context of fundamental principles of a free market system, which of the following statements is true of a demand curve?

A)It shows the relationship between price and quantity from a producer standpoint.
B)It refers to the point where the supply of products starts exceeding demand due to excessive production.
C)It shows the relationship between price and quantity from a customer standpoint.
D)It refers to the point where the supply of products is no longer possible due to exhaustion of resources.

Question 52

When Congress agreed to raise the debt ceiling during the economic meltdown in the United States in 2011, it temporarily averted a shutdown crisis, but the deal they reached to do so created the _____.

A)risk-return relationship
B)fiscal cliff
C)bottom-up budgeting
D)niche barrier

Question 53

A(n) _____ is a structure for allocating limited resources.

A)dynamical system
B)credit system
C)economic system
D)accounting system

Question 54

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

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

Question 55

The government of Laslow, an Asian nation, earned more revenue than its total expenditure in the last fiscal year. Given this information, the government of Laslow incurred a _____.

A)revenue backlog
B)revenue deficit
C)debt brake
D)budget surplus

Question 56

Glasvania, a European country, experiences a period of economic downturn that results in high unemployment. With most of its citizens out of work and having limited money to spend, the country's economy is dictated by low sales. Given the situation, all buyers are compelled to reduce their prices by a large margin. This scenario exemplifies _____.

A)stagflation
B)inflation
C)deflation
D)disinflation

Question 57

Ancusia, an East Asian country, was plagued by war and corruption for several years. This led to poor economic conditions, and the government was compelled to borrow funds from other nations. Because of the slow economic growth in the country, the government could repay only 15% of its debts. In this scenario, the amount that the government is yet to repay is known as _____.

A)the federal debt
B)a budget surplus
C)the debt brake
D)a revenue deficit

Question 58

Identify a true statement about the Federal Reserve.

A)It is headed by a 15-member Board of Governors.
B)It manages the monetary policy of the United States.
C)It is restricted from performing banking services for commercial banks.
D)It operates under immense political pressure.

Question 59

Giovani, a baker, makes exactly 20 loaves of brown bread each day. These loaves of bread are delivered to the 20 individuals who have placed an order with him. The quantity associated with such a demand and supply pattern is called _____.

A)a vector quantity
B)the reserve requirement quantity
C)the equilibrium quantity
D)a latent quantity

Question 60

Which of the following statements best defines the producer price index (PPI)?

A)It measures the change over time in the prices that businesses pay each other for goods and services.
B)It refers to the quantity of products that consumers are willing to buy at different market prices.
C)It measures the change in weighted-average price over time in a consumer market basket of goods.
D)It refers to a standard equation that is used to determine the resources needed to produce a certain quantity of goods.

Question 61

Troboli is a North American country. The total value of all final goods and services produced in Troboli in the last fiscal year was 3.3% more than the year before that. This growth placed Troboli in a better position compared with most of its allies. In this scenario, the total value of all final goods and services through which the economic condition of Troboli was assessed is known as _____.

A)net present value
B)gross domestic product
C)profit margin
D)windfall profit

Question 62

Loger's, a high-end apparel company in Bruslon, an Asian country, cuts back on production as consumers start turning to basic products such as food because of the economic downturn in the country. The company also lays off many of its employees to further cut down expenses. In this scenario, Loger's has implemented these cost-cutting measures to accommodate the phase of _____ in Bruslon.

A)economic recovery
B)economic contraction
C)economic integration
D)economic expansion

Question 63

Microeconomics focuses on:

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

Question 64

In a business cycle, the__________is a period of robust economic growth and high employment.

A)expansion
B)recovery
C)disinflation
D)contraction

Question 65

In the context of the fundamental principles of a free market system, which of the following statements is true of the equilibrium price?

A)Market prices adjust toward the point where the supply curve and the demand curve intersect.
B)The break-even point denotes the profit margin that a seller makes over the cost price of a product.
C)It is the point at which the final cost of production equals the price of the raw materials used for a product.
D)It refers to a situation where the cost price of a product is equal to its selling price.

Question 66

Which of the following is a difference between the supply curve and the demand curve?

A)The supply curve maps price on the y-axis, whereas the demand curve maps quantity on the y-axis.
B)Unlike the demand curve, the supply curve for most goods and services slopes downward as it moves to the right.
C)The supply curve maps quantity on the x-axis, whereas the demand curve maps price on the x-axis.
D)Unlike the supply curve, the demand curve for most goods and services slopes downward as it moves to the right.

Question 67

The economic system of the United States is called _____.

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

Question 68

The cosmetics industry in the district of Dunkenburg has many competing companies that sell personal care products. However, each company manufactures products that correspond to different income groups. The products are also different in terms of their uses. Which of the following market structures is existent in the cosmetics industry in Dunkenburg?

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

Question 69

In 1982, the total expenditure of the government of Kargenia, a European country, exceeded its revenue by a substantial amount. This forced the government of Kargenia to borrow funds to meet its legal obligations. In this scenario, the government of Kargenia incurred a _____ in 1982.

A)revenue deficit
B)budget deficit
C)debt brake
D)revenue backlog

Question 70

Rochester, an Asian country, follows an economic system that facilitates private ownership. The country's economy is based on economic freedom and fair competition. Given this information, the economic system followed by Rochester is _____.

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

Question 71

The West Asian country of Quinland is experiencing an economic downturn because of a decrease in its gross domestic product for two consecutive quarters. In this scenario, Quinland is most likely facing an _____.

A)economic recession
B)economic expansion
C)economic depression
D)economic integration

Question 72

In the context of planned economies, countries that adopted communism most likely developed:

A)individualism and narcissistic values among people.
B)a plethora of choices regarding jobs and buying options.
C)a free market system for services.
D)crippling shortages and surpluses.

Question 73

The district of Dansas in Nerito, a European country, is a major producer of walnuts. All producers in the district sell packaged walnuts. The market structure is flexible enough for producers to enter and leave the market as and when they wish, but no single producer has control over the prices of the product. Which of the following market structures is existent in Dansas?

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

Question 74

Olivia is a part-time worker at a jam-producing company in her village. Her job entails plucking and cleaning grapefruits. Because grapefruits grow only in winter, Olivia is unemployed for most part of the year. The given scenario exemplifies _____.

A)seasonal unemployment
B)frictional unemployment
C)classical unemployment
D)cyclical unemployment

Question 75

Which of the following is a similarity between socialism and communism?

A)They both allow freedom in work choices for the people.
B)They are both strongly involved with the government.
C)They both allow free market systems.
D)They both have low taxation policies.

Question 76

Prior to formulating its annual budget, the government of the Asian country of Florenesia employs a number of individuals to look into the overall productivity of the country. These individuals are responsible for studying the economy in terms of goods and services, revising some of the taxation policies, and gauging the employment rate. Given this information, these individuals are studying _____.

A)heterodox economics
B)managerial economics
C)microeconomics
D)macroeconomics

Question 77

Keltica, a country in Asia, enjoyed a period of great economic boom in the 1980s. The country had robust economic growth, high employment, and abundant business investments during this period. In the context of the business cycle, the economy of Keltica was in _____ during the 1980s.

A)a depression
B)the contraction phase
C)a recession
D)the expansion phase

Question 78

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

A)repository
B)stockpile
C)supply
D)cache

Question 79

The _____ was an $825 billion economic stimulus package, passed by Congress, designed to turn the economy by cutting taxes, building infrastructure, and investing in green energy.

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

Question 80

A giant telecommunications company that was previously owned by the government of Sunzabia, a European country, is sold to an independent industrialist to ensure that the company is handled in a more efficient way. This scenario exemplifies _____.

A)privatization
B)globalization
C)a joint venture
D)a coalition