Deck 2: How Economic Issues Affect Business

Question 1

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

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

Answer 1

C

Question 2

Both socialism and communism are variations of:

A)competitive economies.
B)free-market economies.
C)plutocratic systems.
D)command economies.

Answer 2

D

Question 3

In recent years,productivity in the goods-producing sector of the Canadian economy has been:

A)falling very rapidly.
B)relatively stable.
C)falling slowly.
D)rising.

Answer 3

D

Question 4

In most large cities there are a large number of bakeries.These bakeries produce similar,but not identical,products.Some bakeries claim to have the best cheesecakes in town,while others brag about their cookies or specialty breads.The bakery market in a large city is an example of:

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

Question 5

A typical demand curve shows that:

A)as people earn more income,they buy more of a good.
B)people tend to buy more of a good when its price decreases.
C)people tend to buy more of a good than they really want.
D)as supply increases,the amount purchased decreases.

Question 6

Peter Principal is the prime minister of the nation of Urbania.Peter has called for Urbania's legislature to enact new legislation designed to shift his economy away from socialism toward a more capitalistic system.Peter has acknowledged that such a radical change will entail some hardships,and that some citizens will be unhappy with the changes in the economy.The most likely source of unhappiness associated with a move toward capitalism is:

A)people will have less economic freedom.
B)the distribution of wealth will become less equal.
C)less wealth will be created.
D)tax rates will have to increase.

Question 7

A(n)exists when the entire supply of a good is controlled by a single seller.

A)monopoly
B)perfect competition
C)pure capitalism
D)oligopoly

Question 8

Almost every discussion about a country's economy is based on gross domestic product.GDP is the:

A)total output of goods and services in a given period divided by the total hours of labour required to provide them
B)general well-being of a society in terms of political freedom
C)amount of goods and services people can buy with the money they have
D)total value of goods and services produced in a country in a given year

Question 9

If a shortage exists for a good in a free-market economy,the:

A)government must establish a rationing system to make sure that the good is fairly distributed.
B)price of the good will fall.
C)price of the good will rise.
D)government will order suppliers to increase the production of that good.

Question 10

Which of the following would be a topic emphasized in a macroeconomics course?

A)How a firm decides the price it will charge for one of its products.
B)How a consumer chooses which goods to buy.
C)The determinants of the wage rate for a certain type of labour.
D)Factors that determine how fast a nation's economy is growing.

Question 11

Three of the major indicators of the economic condition of Canada are the gross domestic product (GDP),the price indices,and the:

A)unemployment rate.
B)debt to equity ratio (DER).
C)index of capital formation.
D)gross resource utilization index (GRUI).

Question 12

Which of the following statements provides the most accurate comparison of socialism and communism?

A)Under socialism the government owns most businesses,while under communism the church owns most businesses.
B)Communism believes that the government should always strive to balance its budget,while socialism accepts deficit spending as the price of achieving true equality.
C)Socialism strives for an equal distribution of income but communism wants income to go primarily to those who own and operate private businesses.
D)Both socialism and communism want to achieve a more equal distribution of income and wealth,but under communism the government takes more control over people's lives.

Question 13

When the supply curve and demand curve for a particular good are on a single graph,the point at which the two curves intersect identifies the:

A)total amount of labour that will be employed in that market.
B)amount of time it takes to bring together the buyers and sellers of the good.
C)equilibrium price of the good.
D)total profit earned by producers.

Question 14

In recent years,countries with communist economic systems have:

A)experienced severe economic depression.
B)grown very slowly,but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe.
C)produced goods sufficient for their own people and for export.
D)enjoyed a period of great prosperity.

Question 15

One reason the CPI is followed very closely by the government,businesses,and workers is that:

A)it is the best measure of worker productivity in the service sector.
B)it indicates whether we are running a budget surplus or a deficit.
C)some wages,interest rates,tax rates,and government benefits are tied to changes in the value of the CPI.
D)the gross national product is computed from the reported increases in the CPI.

Question 16

Economics is the study of how:

A)to invest wisely in the stock market.
B)sophisticated statistical techniques can be used to make predictions about the evolution of society over the long run.
C)to employ resources to produce goods and services and distribute them among competing groups and individuals.
D)people govern themselves in a democratic society.

Question 17

is a condition in which the average level of prices is actually falling.

A)Stagflation
B)Deflation
C)De-inflation
D)Disinflation

Question 18

Communism is an economic system in which:

A)all or most of the productive resources are owned by private businesses.
B)the government and private citizens own equal shares of the economic resources.
C)the government makes most of the major economic decisions.
D)individual consumers make all economic decisions.

Question 19

The system that has provided more opportunities for poor people to work their way out of poverty is known as what?

A)Socialism
B)Communism
C)Free-market capitalism
D)Monopolistic competition

Question 20

The index measures changes in the prices of goods and services such as food,housing,and apparel.

A)producer price
B)market price
C)wholesale price
D)consumer price

Question 21

Which of the following people would tend to favour a socialist economy?

A)Dann wants to live in a country with low marginal tax rates.
B)Liz wants to live in a country with limited government regulation.
C)Robin wants to live in a country that encourages rapid economic growth.
D)Dwayne prefers to live in a country that promotes social equality.

Question 22

The presence of competition in free markets:

A)typically results in better quality and lower prices.
B)is rare,since most markets eventually evolve into monopolies.
C)is undesirable because it results in unnecessary duplication of efforts.
D)is undesirable,because one big firm can usually produce goods more efficiently than a large number of small firms.

Question 23

Some regions of China do not allow their citizens to practices certain religions,change jobs,or move to another town.This is an example of:

A)capitalism
B)socialism
C)communism
D)free-market

Question 24

John complained to his buddy,Frank,that the prices of all the goods he and his family buy have increased a lot over the past year.Frank disagreed,saying that the prices of some goods have gone up a bit,but other prices have declined.Frank feels that the average price of consumer goods hasn't changed very much.In order to resolve their disagreement,John and Frank should look at recent figures for the:

A)PPI
B)GDP
C)MEW
D)CPI

Question 25

is characterized by a large number of firms selling products that appear to be identical.

A)Perfect competition
B)Monopolistic competition
C)Microeconomic competition
D)Oligopoly

Question 26

When the economy is weak,government revenues in Canada

A)rise
B)slowly rise
C)stay steady
D)decline

Question 27

A command system is characterized by:

A)reliance on the government to determine what is produced and who gets the output.
B)freedom of choice and freedom of competition.
C)reliance on the forces of supply and demand to determine what is produced.
D)an extremely rapid rate of economic growth.

Question 28

The rise and fall of the economy is referred to as the concept of:

A)recession
B)depression
C)business cycles
D)recovery

Question 29

Kathleen manages a manufacturing plant for ScanRite,Inc. ,a producer of scanners and other input devices connected to computers.About six months ago,Kathleen asked an assistant to keep track of both work hours and output at her plant.She has compared these figures,and has found that even though the number of workers (and the hours they worked)remained relatively steady over the past six months,the plant's output increased significantly.This indicates that:

A)ScanRite prices have increased faster than the wages it pays to its workers.
B)Kathleen should hire more workers.
C)the productivity of workers at the ScanRite plant has increased.
D)the ScanRite plant must have sold off some of its excess inventory.

Question 30

When prices are free to adjust over time,the market price of a good tends to:

A)fall below the equilibrium price in the long run.
B)have no specific relationship to the equilibrium price.
C)equal the equilibrium price in the long run.
D)rise above the equilibrium price in the long run.

Question 31

A is a very severe recession that is usually accompanied by a decline in the average level of prices.

A)retraction
B)depression
C)dissolution
D)stagflation

Question 32

The markets for laundry detergents,soft drinks,and automobiles all are dominated by just a few sellers.Economists would classify these markets as examples of:

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

Question 33

looks at the behaviour of individual people and organizations in specific markets.

A)Finite economics
B)Microeconomics
C)Nanoeconomics
D)Macroeconomics

Question 34

A major benefit of socialism is assumed to be its:

A)emphasis on low tax rates.
B)ability to create strong incentives to work hard.
C)emphasis on social equality.
D)ability to stimulate rapid economic growth.

Question 35

Two or more consecutive quarters of GDP decline is known as a .

A)seasonal
B)depression
C)recession
D)frictional

Question 36

One of the most significant problems faced by communist economies is:

A)persistent shortages of basic goods such as food and clothing.
B)a great inequality in the distribution of wealth and income.
C)severe inflationary pressures due to rapid economic growth.
D)too little government regulation of economic activity.

Question 37

Fourteen years ago,Murray noticed that a lot of people who bought personal computers really did not know much about how to use them and frequently suffered system crashes and other aggravations.He decided he could earn a nice profit by starting a consulting business to help other people overcome their computer woes.Although the business struggled at first,it has been quite successful for the last five years.Murray has many satisfied customers,and the business has grown to the point where he now employs several workers.According to Adam Smith,Murray's experience is an example of:

A)the multiplier principle.
B)freedom.
C)the principle of comparative advantage.
D)socialism at work.

Question 38

A typical supply curve shows that an increase in the price of a good will cause the quantity supplied to:

A)remain constant.
B)fluctuate randomly around its equilibrium value.
C)increase.
D)decrease.

Question 39

Jorge Martinez is a hard working entrepreneur who operated a successful business in his home country of Margintina for many years.Recently,however,he immigrated to Canada and applied for Canadian citizenship."In Margintina,tax rates were very high," Jorge complained."The government used the taxes I paid to finance all sorts of social programs to help the less fortunate.While this is a noble goal,it has really undermined the profit incentive of individuals such as myself.I really feel that these high taxes have stifled economic growth." Jorge's comments illustrate the reason many socialist countries are experiencing a(n):

A)depression.
B)brain drain.
C)antitrust problem.
D)budget surplus.

Question 40

The nation of Nadiria is in the midst of a terrible economic downturn.The nation's GDP has been declining steadily for over five years and is now at its lowest level in over fifty years.Nadiria's unemployment rate is at an all-time high and the nation's CPI is falling.Nadiria is experiencing a ________

A)balance of trade deficit.
B)period of retraction.
C)period of stagflation.
D)period of depression.

Question 41

Which of the following statements most accurately identifies a serious limitation of the free-market economic system?

A)Free-market economies have been unable to create wealth as rapidly as other types of economic systems.
B)Free-market economies offer little opportunity for the poor to work their way out of poverty.
C)Free-market economies result in a very unequal distribution of wealth.
D)Free-market economies often are plagued by shortages of needed consumer goods.

Question 42

The four basic types of employment are frictional,structural,seasonal,and:

A)industrial.
B)cyclical.
C)traditional.
D)procedural.

Question 43

Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses,because business people would make a profit by providing the goods,services and ideas that others in the economy wanted.This was called the:

A)kinked demand theory.
B)demand accelerator.
C)invisible hand.
D)spending multiplier.

Question 44

The quantity of a good or service that manufacturers or owners are willing to sell at different prices during a specific time period is known as the:

A)utility of that product.
B)elasticity of that product.
C)demand for that product.
D)supply of that product.

Question 45

A supply curve typically _______

A)Decreases from right to left.
B)Rises from right to left.
C)Rises from left to right.
D)Decreases from left to right.

Question 46

A major trend in the world today is that:

A)governments in countries with capitalist economies are paying less attention to environmental concerns and issues involving social equality.
B)governments in socialist economies are increasing their use of social programs and relying on higher tax rates to finance these programs.
C)free-market economies are moving more toward socialism and socialist economies are moving more toward capitalism.
D)productivity in the service sector is increasing much more rapidly than productivity in agriculture and manufacturing.

Question 47

Which of the following results would be the clearest indication that an economy was experiencing deflation?

A)a decrease in the unemployment rate
B)an increase in the PPI
C)a decrease in the CPI
D)a decrease in GDP

Question 48

A typical supply curve shows a relationship between the:

A)amount of time required to produce a good and the relevant production costs.
B)amount of a good a firm produces and the total profit it earns.
C)amount of labour a firm hires and the amount of output it can produce.
D)price of a good and the quantity sellers would be willing to offer for sale.

Question 49

Free-market capitalism has brought prosperity as well as .

A)lower demand
B)monopolies
C)higher prices
D)inequality

Question 50

The market price of apples is currently rising.In a free-market economy,the most likely explanation of this price change is that:

A)there is a shortage in the market for apples.
B)the supply of money has decreased.
C)the equilibrium price is lower than the market price.
D)the government has decided to set a higher price so that the firms in the market make an adequate profit.

Question 51

In an effort to promote rapid growth,the government of Goldinia has kept taxes low,done little to regulate business activities,and implemented only modest social programs.The government is now facing political pressure to do more to clean up the environment and reduce the inequalities of income and wealth.Which of the following statements is most accurate? Goldinia's government is currently taking:

A)a predominately socialist approach to achieving economic goals,but the current pressures it faces suggest it is likely to adopt a more capitalist approach in the future.
B)a purely capitalist approach to achieve its economic goals,and is likely to continue doing so in the future.
C)a predominately capitalist approach toward achieving economic goals,but the current pressures it faces suggest it is likely to adopt a more socialist approach in the future.
D)a purely socialist approach to achieve its economics goals,and is likely to continue doing so in the future.

Question 52

The nation of Tryland has seen the total value of the goods and services it produces increase rapidly over the past year.This would show up most clearly as a:

A)decline in the number of workers who are structurally unemployed.
B)rise in Tryland's CPI.
C)rise in Tryland's unemployment rate.
D)rise in Tryland's GDP.

Question 53

The total value of final goods and services produced within a nation's borders in a given year is known as that nation's:

A)aggregate production quota.
B)index of aggregate economic output.
C)aggregate domestic output.
D)gross domestic product.

Question 54

One of the greatest concerns associated with capitalism is that:

A)producers are unlikely to supply the goods and services that consumers value the most.
B)it is not very successful at creating wealth.
C)the amount of economic freedom enjoyed by consumers is very limited.
D)some businesspeople may let greed guide their behaviour.

Question 55

Samir,a friend of yours,has called for more government regulation of business."After all",he says,"businesspeople are out to make a profit,not to create jobs or serve their customers.The government must pass more laws to require businesses to take the interests of consumers and workers into account".From these comments,it is clear that Samir:

A)is unaware of the fact that most businesses in Canada are actually owned by the government.
B)agrees with the ideas of Adam Smith.
C)does not realize that government regulation is already the main determinant of business decisions in capitalist economies.
D)does not accept the philosophy behind Adam Smith.

Question 56

Today,the economic systems of most nations could most accurately be classified as:

A)pure socialism.
B)command economies.
C)pure capitalism.
D)mixed economies.

Question 57

A collapse in the national banking system of Lasia has resulted in a condition where prices are declining.This condition is known as:

A)disinflation.
B)contra inflation.
C)overproduction.
D)deflation.

Question 58

One of the dangers of free markets is that some people will let dictate how they act.

A)demand
B)supply
C)prices
D)greed

Question 59

The economic system that has led to wealth creation in most of the world is known as:

A)free-trade
B)socialism
C)communism
D)capitalism

Question 60

A(n)exists when a large number of firms produce goods that are similar but are perceived by buyers as being different.

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

Question 61

The study of how to increase resources is known as what?

A)Macroeconomics
B)Resource economics
C)Microeconomics
D)Resource development

Question 62

A supply curve indicates the relationship between ___ and the quantity supplied.

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

Question 63

According to Adam Smith,the best way for the government to encourage the creation of jobs and the production of the products most wanted by consumers would be to:

A)allow entrepreneurs a great deal of personal freedom.
B)impose high taxes on individuals,and use the revenue to subsidize businesses to encourage them to produce the maximum rate of output.
C)take over the operation of all firms in major industries,such as telecommunications,transportation,and energy,and operate these firms as non-profit organizations.
D)allow private ownership of businesses,but make use of extensive regulation to force businesses to behave in a socially desirable way.

Question 64

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.

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

Question 65

The reason why many socialist countries have experienced brain drain is that:

A)socialism encourages a very unequal distribution of income.
B)tax rates on talented individuals tend to be very high.
C)the government does little to protect the natural environment.
D)workers tend to have to work longer hours and receive fewer benefits under socialism.

Question 66

Under capitalism:

A)the primary function of the government is to distribute wealth more evenly.
B)markets operate to carry out the decisions made by central planners.
C)utilities,health care,education,and other services are controlled by the government.
D)most of the means of production and distribution are privately owned and operated for profit.

Question 67

In capitalism,most decisions about what goods and services to produce are made by:

A)majority rule,with everyone receiving an equal vote.
B)a variety of government agencies.
C)a central planning board that consists of consumers,business executives,and employees.
D)business people.

Question 68

The Canadian economic system can be described as a:

A)communist economy.
B)socialist economy.
C)mixed economy.
D)capitalist economy.

Question 69

The is a statistic that is used to compute the pace of inflation or deflation.

A)index of leading indicators
B)index of inflationary trends
C)consumer price index
D)gross domestic product

Question 70

The government of Ruritania has implemented many programs that promote equality,but has become concerned about the very slow rate of growth that has plagued the national economy for many years.In order to address this problem,the government is likely to:

A)reduce taxes and cut back on some social programs.
B)avoid the use of fiscal policies and reduce the supply of money in circulation.
C)take control of more major industries.
D)make sure to balance its budget.

Question 71

In the nation of Equalia,many businesses are privately owned,but the government owns some of the basic businesses and has developed many social programs designed to promote social equality.Tax rates are high,and many educated people have left the country.The economy of Equalia would be considered an example of:

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

Question 72

Which of the following would be a topic emphasized in a microeconomics class?

A)How the government can use fiscal and monetary policies to stabilize the economy.
B)How a nation's GDP is computed.
C)How market conditions determine the price of a specific product.
D)The reasons why the unemployment rate for the economy is rising or falling.

Question 73

Under socialism:

A)a major goal of the government is to create incentives to encourage entrepreneurs to create jobs and economic growth.
B)the basic goal is to make sure that those that create wealth are allowed to keep that wealth.
C)a major goal of the government is to reduce the inequality in the distribution of wealth.
D)the most important goal of the government is to keep tax rates extremely low.

Question 74

Although it has been considered a capitalist economy in the past,for the past several years the economy of the nation of Suburbania has become more socialist in its characteristics.Which of the following trends is most likely to be associated with Suburbania's movement toward socialism?

A)increasing reliance on markets to determine economic outcomes
B)lower tax rates
C)a more equal distribution of wealth
D)more rapid economic growth

Question 75

The study of how society employs resources to produce goods and services and distribute them for consumption among various competing groups and individuals is known as:

A)marketing
B)economics
C)finance
D)human resource management

Question 76

A key assumption of socialism is that:

A)the most important economic function of government is to promote rapid economic growth.
B)tax rates should be kept as low as possible in order to give consumers the maximum possible purchasing power.
C)economic growth requires strict government control over population growth.
D)government ownership of some basic businesses is desirable because it helps achieve a more equal distribution of profits among the people.

Question 77

Over the recent past,Canadian governments have been privatizing a number of businesses,as growing public sentiment is that governments are not effective as business operators.This trend is an example of the growth of:

A)command economies
B)free trade
C)free-market economies
D)mixed economies

Question 78

An increase in means that a given number of workers can produce more output than before.

A)productivity
B)structural unemployment
C)CPI
D)GDP

Question 79

studies the operation of a nation's economy as a whole.

A)Microeconomics
B)Socioeconomics
C)Macroeconomics
D)Econometrics

Question 80

refers to a general rise in the price level of goods and services over time.

A)Recession
B)Escalation
C)Inflation
D)Acceleration